Kenya Looks to Tap into Diaspora Remittances to Fund Key Gov't Projects

Kenya is looking to tap into money sent home by Kenyans abroad to fund projects under the government’s big four agenda.

To do this, the government is working on a plan that will see Kenyans in the diaspora invest directly in affordable housing, universal healthcare, manufacturing and food security among other projects. 

Further to this, the government is planning to issue a diaspora green bond in which citizens abroad can invest in various public projects. Kenyans living and working overseas are also encouraged to pump their funds to agribusiness, value addition as well as setting up of healthcare facilities such as cancer centers.

“For all these to be actualized, the government needs to put in place pro-diaspora policies to attract their assets,” Kenya Diaspora Alliance (KDA) chairman Shem Ochuodho told The East African.

Ochuodho projected that Kenyans in the diaspora can mobilize the funds required to construct the remaining section of the standard gauge railway (SGR) if the government came up with the right policies. At least $3.5 billion (Sh350 billion) is needed to complete SGR’s phase 2B from Suswa to Kisumu, which stalled after China declined to finance it.

Additionally, the government is looking to extend the maturity period of Treasury bonds as a way of encouraging Kenyans abroad to invest in government securities. 

In Kenya, treasury bonds are considered predictable and long-term sources of income, offering interest payments every six months. This is because the interest rate determined at auction remains for the full cycle of the bond.

Presently, three-quarters of all remittances from the diaspora are spent on food, education and medical services by families back home, meaning only 25 percent is invested in income-generating activities such as real estate, land, stocks, and savings.

“There is a lack of structured strategy for tapping remittances, that’s why people in the diaspora mainly invest in real estate,” added Ochuodho.

Last year, the diaspora sent home $2.7 billion (Sh280 billion), a new annual record, according to Central Bank of Kenya (CBK) data.

Remittances from the diaspora have remained Kenya’s leading source of foreign exchange since 2015, ahead of earning from tourism, tea, coffee and horticulture exports. In Africa, Kenya is the fourth-largest recipient of diaspora remittances behind Egypt, Nigeria, and Ghana.