Why remittances to Kenya have remained resilient despite inflation

By Ivan Kanyali
Inflation is one of the most widely discussed subjects in the world today. The rising cost
of food, energy, and other commodities has had an adverse impact on the financial
stability of millions of households. Many families around the world have been compelled
to cut back on non-essential spending, tap into savings, or change their consumption
habits amid the rising cost of living.

Despite the impact of inflation on households’ finances, remittances, or money sent
back home by migrants living and working abroad, have remained resilient in Kenya.
Data from the Central Bank of Kenya (CBK) shows that for the first six months of 2022,
remittances to Kenya totalled USD $2.04 billion, a 16.5% jump from the USD $1.75
billion that was sent to Kenya in the first six months of 2021.

There are several reasons why remittances have remained resilient despite record
inflation. The first has to do with the main uses of diaspora remittances. Several surveys
by WorldRemit have shown that education is one of the main uses of money sent back
home by Kenyans living and working abroad.

The cost of education has in recent years gone up, with WorldRemit’s most recent
survey on the cost of education in August showing that families in Kenya can expect to
pay up to 1.75 times the average monthly salary on school supplies. The Covid-19
pandemic has also disrupted the school calendar in Kenya. Children are spending more
time in school to make up for lost time during the lockdowns. This has led to higher
consumption of school supplies and higher spending on education. These factors partly
explain why remittances have remained resilient.

The other reason why Kenyans in the diaspora continue sending money back home
despite the sharp rise in the cost of living is that remittances are a top priority for them –
and not just for them, but for migrants from other countries as well.

WorldRemit in July conducted a multi-country study to determine the effects of the
increased cost of living on migrants in the United States, United Kingdom and Australia.
One of the main findings was that migrants were willing to adjust daily spending habits
in order to sustain their ability to send money home to support loved ones. Of the 3,000
respondents who participated in the survey, 49% reported that they eat out less in order
to sustain remittances. A further 28% reported limiting social gatherings to save money
while 25% opted for public transportation rather than driving themselves, which has
become expensive in light of the increase in the cost of fuel.

The digitization of the financial services sector, which accelerated during the pandemic,
has also contributed to the resilience of remittances. Before digital remittances became
the norm, sending money back home involved queing at a bank, filling out cumbersome paperwork, and waiting for a day or more for the transaction to go through successfully.

Today, money can be sent securely online and via mobile apps at the tap of a button, a
trend that WorldRemit, as one of the pioneering digital remittances firms, has helped
entrench.

Diaspora remittances in Kenya represent one of the top sources of forex, rivaling
tourism, tea and horticultural exports. The resilience of diaspora remittances amid the
record surge in inflation has therefore provided crucial support to the economy at a time
when many currencies in Africa and around the world are depreciating against the US
dollar.

Kenyans in the diaspora are indeed unsung heroes. We need to recognize their heroic
contributions to the economic and social development of Kenya. Many of them stay for
months and even years without physically seeing their loved ones back home, yet the
connection is never lost but only grows stronger. We saw this at the height of the
pandemic when remittances to Kenya and the wider Sub-Saharan Africa region grew
despite the economic impact of lockdowns, defying predictions from institutions like the
World Bank that initially forecasted a slump in remittances. This resilience is yet again
on full display amid a record increase in the cost of living.

The writer is the Regional Manager, East Africa, WorldRemit