Kenyans working in Saudi Arabia have surpassed those in the United States as the largest contributors to remittances sent back home. This trend underscores the continued impact of high inflation on household incomes in the United States, the world’s largest economy.
Official data reveals that remittances from Saudi Arabia accounted for nearly two-thirds of the growth in diaspora inflows during the first eight months of the year. This occurred at a time when total remittances from Kenyans living abroad experienced their slowest growth rate since 2010. However, it’s important to note that the United States still maintained the majority share of remittances.
Overall, diaspora remittances increased modestly by 3.43 percent, totaling $2.77 billion (Sh409.41 billion) during the review period. This slowdown can largely be attributed to the ongoing pressures of rising living costs, driven by increased energy, food, and rental prices, which have reduced disposable income for households in the United States.
Nevertheless, remittances from Saudi Arabia have continued to grow at a remarkable pace among the top global sources. Kenyans working in Saudi Arabia sent $57.16 million (Sh8.46 billion), which was 30.28 percent more during the eight months through August compared to the same period in the previous year. Saudi Arabia, now the second-largest source, contributed 62.27 percent of the $91.79 million growth in total remittance flows, according to the data.
In contrast, despite controlling 56.18 percent of total remittances during the review period, the United States saw a 0.72 percent decrease to $1.55 billion (Sh229.99 billion). Kenyan expatriates in the United States reduced their remittances to Kenya by Sh1.66 billion.
In August, inflation in the United States rose to 3.7 percent from 3.2 percent the previous month, marking the third consecutive month of increased annualized living costs after a two-year low.
Diaspora remittances have been the largest source of foreign cash inflows into Kenya since 2015, surpassing income from tourists, foreign direct investments (FDIs), and key agricultural exports like horticulture and tea.
A survey commissioned by the Central Bank of Kenya in December 2021 suggested that a significant portion of these remittances is used to support families in Kenya by purchasing food and household goods.
Shem Ochuodho, the global chairman of Kenya Diaspora Alliance, suggested that offering incentives such as tax rebates, typically given to foreign investors, could encourage more remittances to be directed towards direct investments in Kenya.
Saudi Arabia’s emergence as the second-largest source of remittances coincides with Kenyan authorities signaling stricter registration rules for recruitment agencies. This move aims to protect migrant domestic workers in the Middle East, where a considerable number of Kenyan workers have been facing challenges due to joblessness in economies struggling to provide employment opportunities for their growing skilled, young population.
Approximately 200,000 Kenyans are estimated to be employed in Saudi Arabia, with 60 percent of them working in professional sectors such as healthcare, ICT, and construction.
Efforts are being made to diversify the types of employment opportunities for Kenyans in the Middle East beyond domestic work. This includes negotiations for a labor agreement with Saudi Arabia to allow more professionals to work in various sectors.
Currently, most Kenyan workers in the Gulf are recruited and connected to employers through the “kafala” system, which has been associated with challenges in monitoring and protecting migrant workers in sectors like domestic work and construction. The system ties the legal status of foreign workers to their employers, making it difficult for them to change jobs or leave the country without their employers’ consent, leading to reports of widespread abuses by some employers in the Gulf region.