Leveraging International Agreements for Diaspora Remittances in Kenya

In today’s globalized world, diaspora remittances hold great significance, especially for countries like Kenya. With an estimated 3 million Kenyans living abroad, the flow of remittances back home serves as a crucial lifeline for economic development and poverty alleviation.

Recent trends reveal a promising surge in remittance inflows, as reported by the Central Bank of Kenya, with a significant increase recorded in March 2024 compared to the previous year. The cumulative inflows for the 12 months to March 2024 totaled USD 4,380 million compared to USD 4,020 million in a similar period in 2023, an increase of 9.0 percent. The United States remained the largest source of remittances to Kenya, accounting for 56 percent in March 2024.

However, behind these positive numbers lurk persistent challenges faced by Kenyan migrants and their families—challenges that international agreements have the potential to address.

For instance, the Universal Postal Union’s (UPU) Postal Payment Services Agreement empowers postal operators to offer affordable and accessible remittance services globally. Similarly, regional initiatives like the African Continental Free Trade Area (AfCFTA) strive to promote financial integration and reduce cross-border transaction costs within the continent. These agreements not only reduce transaction costs but also contribute to broader economic integration and development objectives.

Kenya has not entered into any formal agreements specifically addressing diaspora remittances with other nations. However, Kenya has engaged in various international agreements and initiatives related to migration, development, and financial services that indirectly impact diaspora remittances. These agreements often focus on enhancing cooperation in areas such as trade, investment, and financial regulation, which can indirectly influence the flow and management of remittances.

There is the Bilateral Investment Treaties (BITs) where Kenya has signed with several countries to promote and protect foreign investment. While these treaties primarily focus on investment protection and promotion, they can create favorable conditions for diaspora investment and entrepreneurship, which may lead to increased remittance flows. Moreover, Kenya is a member of various Regional Economic Communities (RECs) such as the East African Community (EAC) and the Common Market for Eastern and Southern Africa (COMESA). These regional blocs aim to promote economic integration and cooperation among member states, which can facilitate cross-border trade, investment, and financial transactions, including remittances.

Kenya’s participation in international treaties and regional initiatives can significantly contribute to enhancing remittance flows and financial reintegration with the diaspora in several ways:

  1. Reducing Transaction Costs: By being a part of initiatives like the African Continental Free Trade Area, Kenya can work with other member states to decrease the cost of sending remittances. The AfCFTA aims to remove barriers to trade and investment across the continent, which can include the high fees associated with cross-border financial transactions. Lower remittance costs would potentially encourage more frequent and larger transfers from the diaspora.
  2. Enhancing Financial Inclusion: Regional groups such as the East African Community focus on economic integration, which can help in harmonizing financial regulations and services. This harmonization can lead to the creation of more inclusive financial systems where Kenyans in the diaspora can easily access various financial services, driving up engagement and remittance flows.
  3. Improving Financial Infrastructure: Engaging in regional initiatives can foster the development of better financial infrastructure, such as payment and settlement systems that can handle transactions more efficiently. This improved infrastructure can encourage remittances through official channels as it ensures security, speed, and reliability in money transfer processes.
  1. Creating Investment Opportunities: Through Bilateral Investment Treaties and economic partnerships, Kenya can create more attractive investment opportunities for the diaspora. This can include facilitating the flow of remittances into productive investments in Kenya, such as real estate, enterprise development, and other sectors, rather than just personal consumption.
  1. Promoting Economic Stability: By actively participating in regional trade and economic agreements, Kenya can foster economic stability, which is conducive to attracting remittances. A stable macroeconomic environment reassures the diaspora that their contributions are entering a secure and growing economy, making it more likely for them to send money home.
  1. Fostering a Favorable Regulatory Environment: Kenya’s involvement with regional blocs can help to develop a transparent and favorable regulatory environment that supports the flow of remittances. This includes the alignment of financial regulations which simplifies compliance for financial service providers and ensures the protection of funds sent by the diaspora.
  2. Strengthening Diplomatic Relations: International treaties and agreements strengthen diplomatic relations between Kenya and countries with large Kenyan diaspora populations. These enhanced relations can pave the way for negotiations that directly benefit diaspora communities.

Despite these efforts, there remains untapped potential for Kenya to optimize the benefits of diaspora remittances through bilateral or multilateral agreements with countries hosting significant Kenyan diaspora communities. Direct remittance channels, reduced transaction fees, and incentives for diaspora investment could be negotiated, streamlining remittance processes and promoting financial inclusion.

However, merely agreeing on these frameworks is not enough. A strategic approach is essential for policymakers to unlock the full potential of remittance flows. Strategies such as regulatory alignment, technological innovation, financial literacy initiatives, and diaspora engagement are crucial for maximizing the impact of remittances. By prioritizing these areas, Kenya can unlock new opportunities for economic growth, poverty reduction, and sustainable development.

In today’s rapidly evolving global landscape, harnessing the power of international agreements is essential for Kenya to tap into new avenues for economic development and build a more inclusive future. Strengthening partnerships and collaboration on diaspora issues will be vital in realizing Kenya’s socio-economic aspirations.

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If you have any queries or would like to learn more on this topic, please reach out to either Munyiva Mbevi on mmbevi@gvalawfirm.com, or litigationlawyers@gvalawfirm.com


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