The Importance of Remittances on the East African Economy

Focusing on the money transfer needs of the African diaspora in Minnesota, entrepreneurial senior executive Garad Nor heads two successful international remittance operations, which process millions of dollars in transfers every year. As a reflection of the lucrative remittance market, Garad Nor’s latest venture, Banana Pay, handles over 10 million dollars in international transfers every month. 

The earnings of East Africans in Europe, Canada, and the U.S. are often sent back to relatives in their home countries. In Kenya, nearly four percent of the Gross Domestic Product comes from remittances. 

The billions of dollars infused into the economy helps boost flailing currencies and drives business growth. Moreover, the increased purchasing power of remittance recipients contributes to increased spending on education, healthcare, and other sectors that support economic development. 

Researchers have found that remittances can have ripple effects throughout a community. Recipients often use their extra income to buy more goods, which increases localized production and creates more jobs. 

However, remittances may deepen economic inequality and reduce participation in the workforce. In an attempt to democratize the benefits of remittances, the Kenyan government has enacted a series of policies to increase diaspora investment in nationwide projects.