VENTURES AFRICA – As Kenya’s banking sector becomes more competitive with each financial institution seeking to expand its market share, banks are looking for alternative ways to support their balance sheets and growth of their operations.
Almost exhausting the bonds and equity markets, financial institutions are now turning their focus on the Diaspora market that is proving very lucrative.
Kenyans in the Diaspora send more than $1.7 billion annually, attracting financial institutions to tap into this new market.
Last year alone, Kenyans in the Diaspora sent home $1 billion, a 55.3 percent rise from $490 billion sent five years ago.
As Diaspora remittances continue to rise, more fanatical institutions are positioning themselves for a price of the pie.
An investment analyst at Suntra Investment Bank, Johnson Nderi agrees that this it the new frontier for banks to grow their capital as the operating environment becomes more competitive.
“As long as the people abroad are investing locally, the market will always remain sustainable,” said Nderi.
Most of the money sent by Kenyans in the Diaspora in now being used to fund investment projects, a move that has attracted local companies, especially in the banking sector.
World Bank estimates Kenyans in the Diaspora to be approximately 500,000.
Deposit taking Microfinance Jamii Bora which signed an agency agreement with KCB to offer money transfer services through Western Union is the latest entrant into this lucrative market.
Jamii Boara will act as a KCB agent and it targeting to establish over 510,00 agents in over 200 countries using western union services.
KCB group chief business officer Peter Kimondo, said: The mutual partnership will provide us with additional income, business growth and a link to the over 3.5 million Kenyans in the Diaspora.”
Jamii Bora is banking on KCB, which has proved it wants to take the largest share of the multibillion market.
After opening an online platform for its corporate and consumer divisions two months ago, KCB used the just ended London Olympics as an opportunity to register over 300 account holders from the United Kingdom (UK).
KCB’s Diaspora banking seeks to tap remittances from families of its East African customers.
The service offers it account holders a platform to invest in both stocks and real estate.
Other firms are also leveraging on mobile money transfer systems that has seen them seals deals with mobile service providers to effectively battle for a space in the market.
Integrated Communications service provider Safaricom, with the largest market share in the mobile phone industry, and the fastest growing mobile network, Essar’s Yu, appear to be banks’ favourites.
Equity bank as at the end of last year, had partnered with three mobile service providers to consolidate its efforts.
After first partnering with Safaricom, it entered into a deal with Orange Telkom and finally with Yu.
Though Yu is limited in its reach, the partnership engaged Infrastructure provider, Obopay that also powers Yu Cash, to offer the bank a platform it ahs used to cast its net wide for mobile banking.
The largest holder of Western Union accounts, Diamond Trust Bank is also in the game after entering into partnership with the largest media house in East and Central Africa, Nation Media Group (NMG) two weeks ago.
Barclays Bank is mulling plans of joining the fray by next month. It will leverage on a platform, dubbed Pinglt, a system that is currently used in UK.
It is set to be launched in Kenya, a move that will up the battle for remittance form the UK with KCB.
Over the last 12 months, Europe accounted for 30 percent of total remittances and increased by 5.95 percent from $28 million to $28.7million, according to Central Bank of Kenya (CBK) statistics.
“Remittance inflows from the rest of the world also increased form $21 million to $25 million over the same period, said CBK.