The Effect of Diaspora Remittances on Economic Growth in Kenya

Abstract

A booming interest in the topic of Diaspora remittances has developed over the past few years on the part of academics, donors, international financial institutions, commercial banks, money transfer operators, microfinance institutions, and policy makers. The surge of remittances to countries of origin in the last two decades, exceeding aid and foreign direct investment (FDI) to developing countries, has reignited debate on their development potential in receiving countries. Alongside the interest in remittances, there is also growing recognition of the importance of transnational practices in shaping the relationship between migration and remittances.

The 2003 World Bank report also noted that remittances are more stable than other kinds of external financial flows, and indeed seem to be countercyclical. In times of crisis, whether natural or man-made, migrants tend to send more money to their families to help them survive or recover, whereas foreign investment and lending tend to dry up. The main objective this study was to determinate the impact of diaspora remittances on the economic growth in Kenya.

Panel data from 2003 to 2012 diaspora remittances was analyzed using multiple linear regressions method. From the discussion of the findings above, it can be concluded that the diaspora remittances indicators are the most significant factors influencing the economic growth in Kenya. Thus it can be concluded that economic growth in the Kenya is largely driven by diaspora remittances.