Kenyans in the diaspora, who number around 3 million according to data from the Ministry of Foreign Affairs, are today the country’s number one source of forex. The remittances they send back home have in recent years surpassed export earnings from tea, tourism and other key export sectors. Data from the Central Bank of Kenya (CBK) reveals that remittances more than doubled from $1.29 billion (approx. Sh129 billion) in 2013 to $2.69 billion (approx. Sh269 billion) in 2018. What is driving this explosive growth?
This Special Feature looks at the fundamentals driving the growth of global remittances to Kenya, as well as the instrumental role that digital innovation is playing in disrupting the sector. We will cover online money transfer service WorldRemit, whose rapid adoption in more than 150 countries globally (including Kenya) in just ten years since its founding, has seen it emerge as one of the hottest and fastest-growing brands in the global payments industry.
The emergence of a strong diaspora community that plays an influential role in the domestic economy is not a phenomenon unique to Kenya. It is part of a broader continental trend—more Africans are moving abroad to work and live.
Sub-Saharan African nations accounted for eight of the 10 fastest growing international migrant populations between 2010 and 2017, according to analysis from Pew Research Center, which notes that North America and Europe were the preferred destinations for most migrants.
On migrating, Africans in the diaspora don’t cut ties with their home countries. They send money back home for different reasons such as school fees and medical bills for dependents, gifts to family and friends or for investment purposes. This explains the surge in remittance inflows in Africa, which today exceed official development aid to the continent.
Although remittances are currently playing a key role in driving economic growth in Africa, the continent is one of the most expensive remittance markets in terms of fees. A 2014 report by London-based think-tank ODI states that the region incurs costs of up to $2.3 billion per year, due to high remittances fees.
The high cost of traditional remittance services, as well as the general inconvenience (you have to physically go to an agent during official business hours and fill in paperwork), was part of the reason behind the founding of WorldRemit in 2010.
WorldRemit’s founder Ismail Ahmed, who was the company’s first CEO before taking on the role of Executive Chairman in 2018, was a migrant himself in the U.K, having fled the war in Somaliland in 1988. As a migrant, he experienced first-hand the time-wastage and exorbitant fees associated with traditional remittance services. With the help of co-founders Catherine Wines and Richard Igoe, Ismail founded WorldRemit to bring an offline industry to an online future.
Ismail had a singular mission of using digital technology to make it easier and faster for migrants to send money home. Bringing remittances online _an approach that WorldRemit helped to popularise – fundamentally changed the remittance industry.
With WorldRemit, migrant workers and expats in the diaspora can simply visit the website or download the WorldRemit mobile app to instantly send money back home – no more taking time off work to queue for an agent. On the receiving end, it’s equally simple as there are options to receive the cash directly into a bank account, on a mobile wallet like M-PESA, as airtime top-up or as a cash pick-up at a number of partner financial institutions. WorldRemit states that “90% of our transactions are authorized within minutes, and 70% of our mobile-to-mobile transfers take less than 3 minutes.”
The ability to send money directly to mobile money wallets has been particularly helpful in markets like Kenya, where mobile money has become the de facto backbone of the financial services sector. The option to send directly to a nominated bank account has also opened new avenues for growth, especially for migrants who want to send money to their own accounts back home without involving third parties. The company has formed partnerships with a select number of Kenyan banks, including Cooperative Bank, Gulf Africa Bank, Diamond Trust Bank, KCB and NIC Bank, which is now NCBA following the recent merger with CBA Bank.
Thanks to its digital and mobile-first approach, which has enhanced convenience and affordability in the remittance industry, WorldRemit has grown robustly, supporting over 90 currencies, whilst enabling migrants in 50 countries to send money to recipients in over 150 countries. With global headquarters in London and multiple international licenses (including in all 50 U.S. states), the company employs more than 700 people and serves 4 million customers globally.
From £200,000 in seed capital
WorldRemit was launched with seed capital of approximately £200,000 – money Ismail received as compensation from the United Nations after he blew the whistle on alleged corruption at a UN remittance project in Somalia.
Despite these humble beginnings, the business has since gained the attention of some of the most prolific institutional investors in the tech world such as Accel Partners – an early backer of several successful tech start-ups, including Nasdaq-listed social media giant Facebook, cloud storage service Dropbox and music streaming service Spotify.
The company has so far raised more than $375 million (approx. Sh37.5 billion) in debt and equity financing, including recently raising $175 million (approx. Sh17.5 billion) in a Series D funding round led by returning investors, TCV, Accel and Leapfrog Investments.
This strong investor confidence signals the strategic positioning of WorldRemit as it embarks upon a global expansion strategy at a time when the global remittance market is warming up to digital remittances. The company’s current CEO, Breon Corcoran, who stepped in when Ismail was elevated to Executive Chairman in 2018, is leading the global expansion. Mr. Corcoran is a seasoned executive who is credited with the 2016 merger of Betfair and Paddy Power to form the world’s largest online gaming company with operations in over 100 countries.
In just 10 years, WorldRemit has proven that through innovation and hard work, companies can achieve remarkable growth.
We have planned for an in-depth video interview with a senior executive from WorldRemit to get an inside view of the company’s growth as well as its plans for Kenya and Africa. Stay tuned.