Milka Wachira is the manager in charge of Diaspora and Home Loans at Stanbic Bank. Financial Standard had a chat with her on the challenges that Diaspora clients face, the effect of the sliding shilling against the US dollar and the impact of labour deals being signed between Kenya and other nations.
What insights can you share about Kenyans in diaspora?
When I interact with most of them they always want to come back home. They are out there may be because of the opportunities but they always want to come back home. If you look at remittances, it tells you these are people who look forward to eventually coming back home.
How does this inform the products that you develop for them?
What they are looking for is connections, investments and growth back home. We tailor-make solutions specifically to enable them to seamlessly invest back home, and to make sure their money is growing. They should be able to do banking and even other financial services while they are away.
For example, we have savings account in Kenya shillings and foreign currency, and for you to be onboarded, you just do it through a link. Once you set up an account, we have partnered with remittance companies worldwide like WorldRemit. The rates we have currently for fixed deposit for diaspora are much higher than what we have for a local customer just to encourage them to send money back home.
What challenges do your diaspora customers face?
They are quite a number but the first I would pick is they do not have credible sources of information. Information is power. Let’s say today I am in Belgium or Canada, and I want to buy a house; most of them do not know where to start. They have the money, idea or goal but no idea where to start.
Most will start with relatives. They would call and instruct them, “check for me what I can buy. I have Sh5 million” or such amount. And we have seen horror stories where some of them get conned of their money. The relatives back home sometimes do not know the hustle they go through.
The Kenya shilling has depreciated significantly against the US dollar. What impact has this had on diaspora banking?
The shilling is now at around 142 against the dollar yet last year we were doing around 115 or 120. If you are investing in US dollars, it makes it better because you do not have to exchange money. But it also makes our loan products expensive for the client because now they are using more Kenya shillings to pay for what they have taken in terms of financing.
But for someone who is not exchanging any money, it is a good thing. Someone who has invested in the country in US dollars or pounds is at a better position than someone who has invested in Kenya shillings.
The diaspora can take a loan in the currency they are earning. Right now our US dollar loan is at a single digit, we are at 9.5 per cent but it is subject to go up because of what is happening in the economy.
What are your thoughts on the policies the government is implementing with other countries on labour?
I see it as a very good thing. We have seen the horror stories before in places like Saudi Arabia and incidents where individuals’ travelling documents are taken away. When you have Kenyans go into that kind of environment, they do not have that frame of mind to invest or send money back home.
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What the government is doing, with MoUs, is actually protecting those Kenyans working out there. This not only creates employment but also ensures the income they earn will come back home. That means for us as a bank, we have a wider pool of Kenyans to engage.
Remittances will definitely increase and with MoUs, they stand to get more stable jobs and not operate under the radar.
What do you look forward to for diaspora banking?
I am looking at an enhanced and more relaxed regulatory environment for Kenyans out of the country in how they interact with financial institutions back home. At the moment it is very tighte. The requirements we have for anti-money laundering and the data we require from them is a bit tedious.
This information can be relayed even across banks through open banking where a bank back in the US and that in Kenya can exchange information, of course with the consent of the customer, without having to stress them (customer) with so much documentation.
Currently, when you want a mortgage or home loan with any bank, you have to give a lot of documents such as turnovers and credit reports.
I am looking at a future where banks can connect through application programming interfaces (APIs) and that information is relayed to us and we are able to make decisions fast.