The other day, I was approached by a group of Kenyans living in Massachusetts who turned up to narrate to me a horrifying human interest story about the tribulation some compatriots there have been enduring.
Many years ago, these people were lured into investing their hard-earned money in a locally based micro-finance bank by a Kenyan who lived with them in he United States then.
Nine years later, they have not had access to their savings and have been endlessly knocking at doors and sending lawyers letters all over the place in the hope that regulatory and investigatory authorities will take up the matter.
When I met them, they had a copy of a recent Central Bank of Kenya supervision report on the said micro-finance bank. From what the report says about both governance and financial health of that institution, I doubt whether these people will ever get their money back.
But are micro-finance banks really allowed to mobilise savings from outside the jurisdiction of their licences?
I will not go into the details of the matter at this stage but, instead, address the broad policy issues around the Kenyan diaspora and the safety of their investments in their motherland.
We are at a point where we must approach diaspora issues with more seriousness. Diaspora remittances have become Kenya’s single-largest foreign exchange earner, having long-surpassed tourism, tea and coffee.
Indeed, remittances from the Kenyan diaspora have been growing at an exponential rate, even hitting $2.6 billion annually.
So, when you see the CBK Governor, Dr Patrick Njoroge, chest-thumping about how we have healthy foreign exchange reserves or a surplus on the current account — the biggest contributory factor is the flow of diaspora remittances.
Receipts from the diaspora are what is shielding our currency from unpredictable volatility. Yet we don’t have a policy robust enough to harness this cash cow.
Although we came up with some diaspora policy document three years ago, it counts for nothing.
We have not been taking tangible decisions to make it easy, profitable and safe for our people in the diaspora to invest in the country.
Unscrupulous property developers have been taking advantage of the pent-up demand for investment from Kenyans living abroad by coming up with fraudulent schemes to con them of their hard-earned savings.
The scheme is all too familiar: A local developer acquires a large tract of land, typically 60-100 acres, taking control of the property after making part payment to the original owner and on the promise to settle the balance when the property is formally transferred to him.
He will then draw a plan purporting to show that the land has been sub-divided into quarter-acre plots around a gated community typically comprising a club house and borehole — even a golf course.
The stage will have been set for an investor road show to the US, where the developer typically turns up with glossy pamphlets offering the plots for sale in exchange for instalments of between Sh3 million and Sh5 milllion.
Diaspora Kenyans faithfully remit payments in order to acquire the plots.
But instead of investing the money collected through installments into building roads, providing water and generally developing the project, the cowboy developer will invest in a totally new project, where he will make part payment for another piece of land.
The type of developer I describe is usually an over-borrowed individual surviving on massive bank loans, keeping up appearances by involving in conspicuous consumption funded by big loans and the instalment payments received from Kenyans in diaspora.
Even top commercial banks have fallen prey to these ‘developers’. Diaspora Kenyans have been waiting for years to be given titles for the plots.
Which brings me back to the subject of the safety of savings and investments by Kenyans living in diaspora. Because of the growing importance of diaspora remittances to our economy, we must take precipitate action urgently. We must seriously consider introducing policies and institutions that are specifically dedicated to dealing with diaspora affairs.
In 2004, Indians, after realising just how important their diaspora was to that country’s economy, created an entire ministry for that, called Non-Resident Indians.
We need a mechanism of approving products and services that can be marketed to the diaspora. I don’t know what happened to the idea of issuing a diaspora bond.
Let us give diaspora issues the significance commensurate with the role which remittances are playing in the national economy. If we make savings and investment safe for the diaspora, I see it growing even much faster.
Article courtesy of Daily Nation.