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What diaspora should look for when investing

According to the Central Bank of Kenya report for February 2018, remittance flows from the Kenyan diaspora based in different continents across the globe have continued to grow with the American continent leading with $ 115.971 million followed by Europe with $63.826 million and the rest of the world accounting for $30.574 million. This is equivalent to Sh21.246 billion. From January to November 2017, Kenyans in the diaspora sent home a total of $ 1.74 billion (Sh177.48 billion).

What diaspora should look for when investing

It’s not how much money you make, but how much money you keep, how hard it works for you, and how many generations you keep it for.” – Robert Kiyosaki. If you’re a millionaire by the time you’re 30, but do not invest wisely, you’ve gained nothing. You need to grow and protect your investment portfolio by carefully diversifying it, and you may find yourself funding many generations to come. Diaspora Kenyans have a great opportunity to invest back home given the huge amounts of remittances that they send. According to the Central Bank of Kenya report for February 2018, remittance flows from the Kenyan diaspora based in different continents across the globe have continued to grow with the American continent leading with $ 115.971 million followed by Europe with $63.826 million and the rest of the world accounting for $30.574 million. This is equivalent to Sh21.246 billion.

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From January to November 2017, Kenyans in the diaspora sent home a total of $ 1.74 billion (Sh177.48 billion). This represents a key source of foreign exchange and a huge opportunity in the Kenyan economy especially for the banks and companies that process such remittances. Whereas some of the funds are remitted to support the families of the Kenyan diaspora, some are intended for investments in the various sectors in the country. However, some of the diaspora are not familiar with various opportunities available in the Kenyan investment scene and the various details to look for in order to preserve and grow the value of their hard-earned capital. They are aware of the existence of a securities exchange as well as the constant news of investors making lucrative returns from investing in real estate but could be battling with the questions of which segment to focus on. Some choose to leave it in the hands of their relatives to choose and manage their investments. If you are a diaspora Kenyan, here are key things you should know in order to preserve your capital and make the right choices regarding investing back home. The first thing to know is the cost of remittance and conversion of your foreign exchange once received in the country. According to a report by the UK-based firm Overseas Development Institute, charges on remittances to Africa are well above global average levels. Migrants sending funds home can expect to pay on average 12 per cent in charges in some jurisdictions, which is almost double the global average. While the governments of the G8 and the G20 have pledged to reduce charges to 5 per cent, there is no evidence of any decline in the fees incurred by Africa’s diaspora.Also, the World Bank monitoring of Remittance Prices Worldwide (RPW) confirmed that remittance costs are higher for African corridors, with the worst cases being for intra-Africa remittances.However, Kenya is seeking to cut the charges on sending money home from foreign countries to less than 3 per centof the amount transacted. The move is part of an initiative called Nairobi Action Plan on Remittances, spearheaded by the Ministry of Foreign Affairs and Trade to implement UN’s sustainable development goal that calls on countries to cut the cost of sending remittances to three per cent of the amount sent by the year 2020.Countries have been lobbying for remittance tax reliefs, trans-boundary financing schemes and capping the remittance costs.The Nairobi forum called for increased investments in technology and mobile money transfers and increased competition to drive down costs.As a prospective investor, one should shop around commercial banks, money remittance companies a nd other channels to establish the cheapest remittance channel so as to attain the best rates and preserve much of your hard earned funds as possible. Another key component of the cost of sending money home is the exchange rate that a bank or the money remittance company uses to convert the hard currency to the local currency. Different banks and remittance companies charge different exchange rates and it is for the sender to ensure that they negotiate for the best exchange rate. To crosscheck the competitiveness of the exchange rate, the sender should compare the exchange rate offered with the prevailing inter bank exchange rates. These are the rates that commercial banks use to transact foreign exchange among themselves and they are a good guide to assess competitiveness while exchanging money. Naturally after understanding cost of remittance and the rate of conversion, the second thing that the sender should identify is the asset classes available back home to invest in. Kenya offers a wide variety of investment opportunities for the Kenyan diaspora. One of the main investment avenues to consider is the securities exchange which is currently the region’s largest exchange with a market capitalization of Sh2 trillion. Contrary to public opinion, the NSE is one of the most profitable exchanges in the continent due to the underlying diverse economy as well as very profitable and heavily weighted stocks. During the last year, the NSE has produced a number of notable performers driven by gains in large cap stocks such as DTB, KCB Group, Safaricom, Equity, and Cooperative Bank which gained 62.70 per cent, 48.70 per cent, 39.70 per cent, 32.5 per cent, and 21.205 respectively.

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