On November 12, Equity Group Holdings (EGH), the holding company of Equity Bank (Kenya) Limited, reported that diaspora remittances increased 28 percent during the first nine months of 2019, versus the same period last year. This is well above the 4 percent increase for the Kenyan banking system and reflects the bank’s growing market share in remittances, a credit positive.
The Bank’s diaspora remittances increased to Sh102 billion ($991 million) in the period, and income generated from remittances grew to Sh602 million, an 8 percent increase from Sh557 million for the comparable period in 2018. This year’s increase follows a threefold increase in diaspora remittances to Sh108 billion in 2018, when income generated also grew 169 percent to Sh751 million. Although the bank’s income from remittances remains small as a percentage of total income at 1.1 percent, it provides a strong source of foreign-exchange income because diaspora flows account for 23 percent of all client foreign-exchange volume, supporting the bank’s foreign-exchange deposits and its ability to lend in foreign currency.
“Equity Bank’s diaspora remittances rose 28 percent in the nine months to Sept 2019, beating a 4 percent rise for Kenya’s banking system overall”
— Christos Theofilou, a vice president and banking analyst at Moody’s
This rise has far outpaced the systemwide growth in remittances. For the first nine months of 2019, cumulative remittances in the system grew by 4 percent compared with the same period last year. The rolling 12-month cumulative remittance growth dropped to 8 percent by September 2019, from a peak of 42 percent as of August 2018. The primary driver for increased remittances in the past has been the tax amnesty on the repatriation of funds, which the government initiated in 2016 and ended in June 2019. Since June, repatriated funds are being levied 10 percent, which will continue until 2024 and has led to the recent remittance slowdown.
Continued growth in diaspora remittances indicates gains in its remittance market share: Equity controls close to 50 percent of the country’s total remittances. The bank’s success reflects its innovative financial technology and partnerships with international money remittance servicers, which have increased money transfer options, improved the ease of transfers and lowered their cost. EGH has partnered with globally recognised remittance partners, such as Wave, while seeking to partner with others. It also leveraged its large footprint in the East African region and well-developed online and mobile banking platforms to allow customers convenient access to their accounts.
Although access remains a challenge for the recipients of the remittances, the bank is also heavily leveraging its vast network of agents and the capabilities of Equitel, the country’s second-largest mobile payments provider, a virtual mobile network owned by Equity in cooperation with Airtel.