Moneygram Widens Its Agent Network in Deal

Money sent home by Kenyans living abroad is sparking off a flurry of activity in the country's banking sector, as industry players and international money transfer firms angle for fast growing remittance business.

MoneyGram International this week launched a partnership with Imperial Bank to widen its agent network in the country. The firm already has a running partnership with Co-operative Bank of Kenya.

"Kenya is becoming a major hub for remittances in Africa and the potential to grow the money transfer business in immense," says Nikki Spottiswoode, regional director Africa, MoneyGram.

MoneyGram International is a global payment services company which currently operates in 125,000 money transfer locations in 170 countries including 4,300 locations in Africa.

Already, services such as Remitt AsYou Earn (RAYE) based on QuikRemit, a remittance platform with distribution and foreign exchange capabilities spanning more than 90 countries, are gaining prominence in developing economies. The RAYE concept is targeting countries such as India, Pakistan, the Philippines, Nigeria, Ghana, Kenya as well as cash and non-cash delivery methods.

The latest statistics from the Central Bank of Kenya indicate that remittances from the diaspora through formal money channels hit Sh3.6 billion in March compared to Sh2.8 billion in the same period last year.

This comes as the latest World Bank statistics show that Kenyans in the diaspora sent back home Sh85 billion ($1.3 billion) in 2007 to support their relatives and for investments in various sectors of the economy. This was much more than had been officially estimated and more than double the average $581 million that was coming into the country between 2000 and 2005.

Kenya now ranks as the second biggest destination for remittances in Africa behind Nigeria, which attracts Sh205 billion ($3.3 billion) from its diaspora and ahead of Sudan ($1.2 billion), Senegal and Uganda ($0.9 million each) and South Africa ($0.7 million).

The increasing role of remittances in the domestic economy- especially at the household level-provides both opportunities and challenges for service providers.

The opportunity lies in getting into the cash transfer business that is already on the spotlight because of high charges, while the challenge lies in tapping the inflows that come in diverse currencies, amounts and geographic areas into a sustainable supply chain.

According to a new World Bank report, Migrations and Remittances Fact Book 2008, the inflows could be far much higher if informal channels of sending money home are taken into account.