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M-Pesa, saccos rival banks with Sh2.3bn remittances from diaspora

A customer at a Western Union outlet in Nairobi. Central Bank data shows Kenyans abroad are embracing M-Pesa and saccos money transfer services

A customer at a Western Union outlet in Nairobi. Central Bank data shows Kenyans abroad are embracing M-Pesa and saccos money transfer services

Kenyans in the diaspora circumvented the commercial banking system to send home more than Sh2.3 billion in the first three months of the year, highlighting the growing influence of alternative channels such as M-Pesa and sacco money transfer systems.

Data from the Central Bank of Kenya shows that Western Union (with Post Bank), M-Pesa and IRNET, a system of the saccos, remitted Sh824 million in March compared to Sh722 million in February and Sh767 million in January.

Diaspora remittances have become a new front for competition in the financial sector because it provides transactional commissions, foreign exchange earnings and cheap deposits for banks. New entrants are looking at spoiling the party for seasoned outlets.

CBK captured the amount of money sent by the channels in Europe through M-Pesa as Sh606 million in the three months to March.

There was no amount captured under the platform for other parts of the world, including North America which is the largest source of remittances though.

M-Pesa has partnered with global firms MoneyGram and Western Union which allow users of the two to send money directly to Safaricom subscribers.

Recently a UK-based money transfer firm, Skrill, also reported a partnership with Safaricom to have its users send money directly to its subscribers who can withdraw it through M-Pesa.

Saccos, through the IRNET system were used to remit more than Sh60 million in the three months.

Equity Bank retained the pole position of being the most used channel to remit money into the country with 12.5 per cent of the Sh10.1 billion total passing through the lender. Its dominance in the market is based on its wide sourcing of the diaspora funds.

It trails CfC Stanbic and Co-operative Bank in North America, which is the main market, but recovers the margin in Europe and the rest of the world underlining the advantage of its wide partnerships.

Other banks have, however, been pushing for a larger cake of the diaspora market cash with Family Bank growing its figures three fold in March to Sh510 million.

“We have a one-stop shop for all the diaspora products and have held various road shows abroad” said Family Bank relationship manager for diaspora banking Pauline Njuguna.

Islamic-based lender, First Community, has grown into a big player with transactions worth more than Sh465 million in the month of March.

Small-sized lender Chase Bank is among the top five most used banks. Other top channels include Co-operative Bank, CFC Stanbic, and KCB respectively.

Diaspora remittances last year rose by 10.2 per cent to Sh111 billion ($1.3 billion), attracting the interest of money transfer companies targeting transaction fees.

Remittances from Kenyans working abroad are the fourth-largest source of foreign exchange after revenue from tea, horticulture and tourism.

However, commissions charged by banks for the services have come under much scrutiny. A report by Overseas Development Institute released last month indicated that Africans were being charged an equivalent of 12 per cent of the money being remitted, almost double the global average.

The government is seeking to pass a diaspora policy paper, through the Ministry of Foreign Affairs, to push for lower fees.

The policy paper will pave the way for the creation of key institutions such as the National Diaspora Council of Kenya to harness the resources of about three million citizens living abroad, a majority of whom currently entrust their investments to relatives and friends.

The search for a policy guiding remittances of Kenyans living and working abroad has been on the cards in the past five years since the National Economic and Social Council broached the subject sometime in 2008.

Business daily

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