WorldRemit: Enabling quick money transfers

Sharon Kinyanjui, WorldRemit Head of East & Central Africa.

WorldRemit is a London-based start-up that focuses on enabling quick money transfers from migrant workers and immigrants living in developed countries back home. The firm has raised Sh17.5 billion in a Series D round of funding from TCV, Accel and Leapfrog. The business now covers 50 ‘send’ countries and 150 ‘receive’ countries. Sharon Kinyanjui talked to Financial Standard about its operations.

Following the spike of remittances from diaspora last year, how much of it has been a function of Treasury’s tax amnesty?

The tax amnesty was aimed at encouraging individuals living in Kenya with cash abroad to repatriate their wealth back into the domestic economy. In contrast, international remittance inflows are sent by Kenyans working and living abroad. The rise in remittances last year can be attributed to an active growing diaspora community. About three million Kenyans live abroad and the Central Bank estimates they sent home nearly Sh275 billion last year to support their loved ones and for investments. This means that more of the diaspora’s hard-earned money can be sent back home. For example, the average cost of sending Sh20,000 from the US to Kenya is 6.5 per cent. WorldRemit’s fees for sending the same is Sh99 or 0.5 per cent).

Does the money remitted remain in Kenya or goes, for example, to neighbouring countries?

According to the World Bank, Kenya sent Sh44.7 billion (£357 million) in outbound remittances in 2017, and top receiving countries included India, Uganda and Tanzania. However, the cost of sending money within sub-Saharan Africa remains very high – for example, the average cost of sending Sh20,000 from Kenya to Uganda is nearly 11.5 per cent. We are focussing on expanding money transfer service within Africa to lower costs. We launched South Africa as a sender country in January and plan to target East Africa for the next roll-out.

Which segments of the economy does the money sent home target?

We know that education is one of our customers’ most important reasons for sending money home and the money goes towards essentials such as school fees, uniforms and books. Our customers also often send remittances to their loved ones to celebrate special occasions. For example, a recent survey of our customers showed that, among those who send money to their moms and celebrate Mother’s Day, 80 per cent do so by sending their mom money.

Reports indicate that Kenya and Uganda both recorded 13 per cent annual growth in the value of remittances. Was it a regional phenomenon?

According to the World Bank, remittances to sub-Saharan Africa grew by almost 10 per cent to $46 billion in 2018, supported by strong economic conditions in high-income economies. This trend was reflected by a strong increase in WorldRemit transfers to East Africa as more members of the diaspora discovered the benefits of our fast, secure and low-cost digital remittance service. For example, WorldRemit transfers to Kenya grew by nearly 50 per cent while transfers to Ethiopia grew by 130 per cent.

Given President Trump’s anti-immigrant position, do you foresee a decline in remittances in the near-term?

In 2018, we secured licences in all 50 US states, enabling Kenyans across the country to access our money transfer service. We are seeing continued growth in our service from the US to Kenya, with remittance volumes increasing by nearly 70 per cent year-over-year. The strong performance of the US economy, low unemployment and renewed real wage growth will sustain healthy growth in outbound remittances.

As Kenya and China expand trade relations, has there been an increase in remittances?

Today, China is one of the biggest investors in infrastructure in Africa, with several projects in Kenya particularly in manufacturing, construction and hospitality. World Bank data suggests that remittances from China are growing from a low base, but it is difficult to get an accurate measurement. If ties between the two countries continue to strengthen, we can expect remittances from China to continue to grow.

Has demonetisation frozen regional inflows?

The majority of WorldRemit transfers to Kenya are cashless, with mobile money accounting for over 90 per cent of all transactions. We are seeing continued growth in our service from the US to Kenya, with remittance volumes increasing by nearly 70 per cent year-over-year.