Digital Assets, The Lifeline To Declining Remittance

For many years, remittances to Africa have been an important part of the continent’s economy. In 2023, remittance flows to low- and middle-income countries were estimated to have reached $669 billion, with Sub-Saharan Africa receiving approximately $54 billion. Among the top countries for remittance inflows include Nigeria, Ghana and Kenya. So, it’s no wonder that this year’s decline in remittances to Kenya has raised concerns.

In January, remittances in Kenya stood at $412.4 million, and by June, they were at $371.6 million. This reduction has raised concerns given the critical role remittances play in the nation’s economy, particularly in supporting household incomes, healthcare, education, and investments.

Sharon Tum, Senior Regional Manager in East Africa at Yellow Card, shared insights into the multifactorial challenges that have contributed to the decline in remittances in the country.

“Global factors such as inflation have resulted in less disposable income for remittance. The fluctuation in the USD/KES exchange rate and the gaining of KES to the USD, recent civil unrest reducing investor funding, and the Finance Bill of 2023 introducing a 15% tax on repatriated income for non-residents with a permanent establishment in Kenya, have all contributed,” she said.

Despite these challenges, digital assets present a promising solution. Blockchain technology offers innovative ways to navigate the complexities of international money transfers, potentially revitalising remittance flows.

The question then becomes how can one harness the potential of digital assets to provide solutions and relief for Kenyans, both abroad and at home, in the current economic climate. While some challenges are beyond individual control, exploring digital platforms and blockchain technology instead of traditional channels offers many benefits.

“Making use of digital assets, such as stablecoins, to send and receive money is a cost-effective, fast, and secure option, ensuring the welfare of those abroad and in Kenya,” said Sharon Tum. “Additionally, digital asset providers have integrated instant cashout options, including Mobile Money, ensuring fast, easy, and secure delivery,” she added.

Looking at this from a pan-African perspective, remittances remain a vital economic lifeline for many countries. By adopting digital assets and blockchain technology, African nations can improve the efficiency and security of remittance flows, providing much-needed economic stability and growth. Embracing these technologies can help mitigate the impact of global economic challenges, ensuring that remittances continue to support millions of households across the continent.

With the current political and economic state in Kenya, it is clear that the decrease in remittances emphasises the necessity for creative strategies to uphold this vital financial support. On a worldwide scale, digital assets and blockchain technology offer a promising opportunity to improve the efficiency and security of financial transactions as the world changes. Through the use of these technologies, both Kenya and the entire continent of Africa can more effectively address economic obstacles, guaranteeing ongoing assistance to households and promoting economic development.