Kenyans in the diaspora are continuously increasing as more Kenyans are moving abroad either for search of greener pastures or for furthering their education.
According to the data at Ministry of Foreign Affairs, the number of Kenyans in diaspora is in excess of 2.5 million with Kenyans both in other African states as well as overseas. The Foreign Direct Investment (FDI) remittances in 2015 were approximately Kshs.163 billion which was a 16.5% improvement from Kshs.139 billion in 2014.
As the Kenyans increasingly relocates to the diaspora in search of academic and economic opportunities, both the Government and private institutions such as mortgage houses, banks and insurances should increasingly come up with customized and re-engineered financial products to meet the needs and preference of this community.
During the Kenyans in the diaspora investment forum which was organized by the Kenyan Government and held in Windsor in July 2015,most Kenyans expressed their dissatisfaction with the current systems put in place especially in relation to the financial remittances as they are costly and inaccessible.
The various challenges being experienced by the Kenyans in the diaspora includes:
1. Information dissemination
Most of the Kenyans in the diaspora are not privy to the information regarding the products and services which are in offer suitable for their financial needs and preference. This therefore makes it impossible for them to explore the opportunities in place for them to grow.
2. There lacks systems for the exchange of information with the diaspora community.
The diaspora community have vital information gained either through the challenges they have experienced outside their country and especially when they want to send their money home or to make an
investment. With a clear, straight forward and simple platform which they can easily learn and adopt, then they are able to explore, learn and grow.
Financial institution, mortgage houses and insurance companies then can use the information gathered to make tailor made and customized products.
3. Cost of money remittances back home still high
The cost of remitting money among the diaspora community is still high as compared to informal systems such as Hawala1. This therefore puts able and credible customers off the system.
With a simple and straight forward mechanism such as Account-Mobile phone-Transfer- Recipient account or phone. The system becomes easy and attractive to the users and is less risky.
4. Lack of formal partnerships between the Government and private players in promoting diaspora participation and confidence
The Government and private institutions should formulate a framework to promote confidence and enhance integration between the diaspora community and the amenities/products in their home country.
This will boost the general economy and remittances from the diaspora as many Kenyans in the abroad will look forward to investing in their country.
5. Differentiated products
Financial and mortgage players are supposed to generate differentiated products e.g. students seeking education should have tailor made products from the employment class.
The same should be for various Kenyans living in different parts as the challenges are not the same. We should therefore develop products depending and able to suit different people ranging on the country, age and economic status.
Risks which are likely and inherent to private institutions (banks, insurance & mortgage houses) when targeting the diaspora market
1. Reputation risk
When dealing with the diaspora community, the level of the KYC (Know Your Customer) or customer due diligence is always lower than expected due to geographical separation and at times it becomes difficult to verify some of the information presented.
Due to this, it may sometime become difficult to know whether the financial dealings relate to money received from fraudulent dealings such as terrorism or drugs and the system is just used as conduit for money laundering.
2. Default risk
This is the risk resulting for not honoring financial obligations as and when required either for the services rendered or for a loan advanced to the borrower in the diaspora.
Default risk can only be controlled by ensuring when advancing a loan, there is sufficient due diligence and the fall back position (collateral) is certain and can be converted to liquidity easily.
For the default risk to be mitigated, most of the facilities needs to be guaranteed by the employer where possible or the facility should be for purchasing properties in the home country which can be attached in the event the facility is not paid.
3. Loss of Revenue (Return on Investment)
Every product to be developed incurs a huge cost which is involved in feasibility study, public participation and in putting structures in place.
In the event that the developed product fails to meet the needs of the market, then it is rendered irrelevant in the market and therefore it not only results to loss of revenue but can result to a reputation risk.