Economy
Saudi Arabia posts fastest growth in Kenya diaspora inflows
Monday October 02 2023
Large buildings in Saudi Arabia. Remittances from Saudi Arabia accounted for nearly two-thirds of the growth in diaspora inflows. PHOTO | SHUTTERSTOCK
Kenyans living and working in Saudi Arabia have leapfrogged those in the United States to become the biggest drivers of growth in cash wired back home, underlining the lingering effect of elevated inflationary pressures on household earnings in the world’s largest economy.
Remittances from the Middle East’s economic powerhouse accounted for nearly two-thirds of the growth in diaspora inflows for the first eight months of the year, the latest official data show.
This came in a period when total inflows from Kenyans abroad grew at their softest since 2010, dragged by a marginal fall from the US, which still controlled the lion’s share of the remittances.
Read: Saudi remittances up 68pc as Kenya eyes labour deal
Overall inflows from the diaspora increased a modest 3.43 percent, or $91.79 million (Sh13.61 billion, where $1 is equivalent to Sh148), in the review period to nearly $2.77 billion (Sh409.41 billion).
The slowdown largely mirrors the impact of lingering cost of living pressures — driven by energy, food, and rent prices — which have squeezed the disposable income of households in the US.
However, remittances from Saudi Arabia have continued to grow at the fastest pace amongst top global sources, according to the data tracked by the Central Bank of Kenya from formal sources such as banks and money transfer platforms.
Kenyans in the Middle East’s largest economy sent home $57.16 million (Sh8.46 billion), or 30.28 percent, more in the eight months through August to $245.95 million (Sh36.40 billion) compared with the flows in the same period last year.
Saudi Arabia, which has overtaken the UK to become the second largest source, contributed 62.27 percent of the $91.79 million growth in total flows, the data indicate.
The US, despite controlling 56.18 percent of the total remittances in the review period, posted 0.72 percent drop to $1.55 billion (Sh229.99 billion) with Kenyans there cutting remittances back home by Sh1.66 billion.
Inflation in the US rose to 3.7 percent in August from 3.2 percent a month earlier, marking the third consecutive month annualised cost of living measure increased after it had hit a two-year low.
Diaspora remittances have since 2015 remained the largest source of foreign cash flows into Kenya ahead of tourists, foreign direct investments (FDIs), and leading agricultural exports such as horticulture and tea.
Kenyans living abroad last year, for example, wired $4.03 billion back home compared with Sh268. 09 billion receipts from tourists, Sh163.12 billion earnings from tea exports, and an estimated $759 million (about Sh111.93 billion) foreign direct investments.
Kenya Diaspora Remittances Survey Report, commissioned by the CBK, suggested in December 2021 that the largest share of the remittances goes into supporting families at home to buy food and household goods.
Shem Ochuodho, the global chairman of Kenya Diaspora Alliance, maintained that incentives such as tax rebates – usually given to foreign investors – could see the bulk of cash go into direct investments back home.
The emergence of Saudi Arabia as the second biggest source of remittances has come when Kenyan authorities have signalled tighter registration rules for recruitment agencies in a bid to protect migrant domestic workers in the Middle East.
A considerable number of domestic workers in Saudi Arabia are reportedly battling pain and agony after fleeing joblessness in an economy struggling to create employment opportunities for their growing skilled youthful population.
Conservative estimates indicate about 200,000 Kenyans have secured employment in the Gulf country, 60 percent of whom are professionals in sectors such as healthcare, ICT, and construction.
“It is not all gloom as we hear. There are many opportunities. One of the things we have been debating on is that we don’t want a lot of Kenyans to go there as domestic workers. We have got a lot of people who have finished university in Kenya who can work in the ICT, motor industry et-cetera,” Secretary for Foreign and Diaspora Affairs Alfred Mutua said in January.
Read: Saudi Arabia overtakes UK in remittances
“We are about to sign a labour agreement with them [Saudi Arabia] so that we get more professionals to be allowed to go over there.”
Currently, most of the workers are recruited and connected to employers by agencies under the “kafala” system.
The system is used in the Gulf— including Saudi Arabia, Qatar, United Arab Emirates, Bahrain, Oman, Kuwait, and Lebanon — to monitor migrant workers largely in domestic and construction sectors.
It ties the legal status of foreign workers in those sectors to their employers, barring them from changing jobs or leaving the country without the approval of their bosses.
That is what has facilitated reportedly widespread abuses at the hands of some callous employers in the Gulf.
