Thursday, January 28, 2010

Harnessing the multiplier effect of the Diaspora $, £, ¥, €

The debate in Kenya about the efficacy of the diaspora remittance has been spilt into 3 categories;

Welfare givers-that is, diaspora remittances are seen as primarily useless because they only go help relas' consumption out in Kenya. However, this is ignoramus in the extreme. My simple maths tells me that if we assume that this bottle of milk equates to Kenya's store of money. Its quantity currently stands at 8 litres. If a diasporan comes along and adds another 1/8 of a litre, its no longer 8litres but its 8 and 1/8 litres. Whether it increases because of that is immaterial suffice to say there is more of it now. The other point is that this view ignores the circulation of money without which central bank policy the world over would not be effective in combating inflation and the like. If a diasporan sends 20k to his mother in mashinani for her spending she will go to the shopkeeper and buy her supplies. The shopkeeper will go to his supplier with the 20k and buy supplies. The supplier will go the manufacturer for more supplies who will go to the farmer for more materials.


Bubble creators: its argued that diasporans by following Kenyans down the road of currently popular investment avenues (NSE between 2005-6 and real estate since 2008), they add fuel to already overheating investment avenues and with their deeper pockets push prices to artificial highs. Agreed.


The diaspora are also involved in infrastructure projects as well as purely humanitarian projects.

Beyond these avenues, is a consideration of how a significant portion of the remittances can be used to create multiplier effects at a micro level i.e. via the remittances to relatives. And the first step has to be able to step back from the instinctive and emotional reaching for the pocket whenever a rela say they need help. How so?

If you take a typical diasporan. He will probably send Ksh100k per year as part this knee-jerk response to relas. Apart from genuine emergencies i.e. medical/nature related funding or parents/spouse, he’d be better off stepping back and asking the said rela to come with a income generating project that he can finance.

· Say the diasporan was to send Ksh50k to a rela two buy two dairy cows. Assume the dairy cow is those ordinary ones that can produce around 7 litres per day, 5 which can be sold to the local cooperative.

· At ksh23 a litre, that is KSh230 a day and if you assume spending equates to Ksh4,000*12=ksh48k per year.

· Not Mercedes buying income, but if the diasporan supports two of his relas on that basis, will equate to zero handouts the year after!

· Or a potato framing venture. Here, say the disaporan gives the 50k to his farming cousin who can use the same to lease an acre of land. Assuming 50 bags of potato per acre at Ksh1,300 per bag. That is another Ksh50k after domestic spending.

· Another example, the piki piki business can earn one around ksh300 per day and so forth…

Clearly, it’s a win win situation for the both the diaspora and the recipients of their remittances to view it this way.

2 comments:

Maishinski said...

Have you noticed that once the recipient gets the money, some more urgent priorities (or tradeoffs or "must have" consumer goods or better sounding - though mostly bird brained ideas) come up from nowhere. Talk about easy come easy go.

Soon the money is finished and you have to contribute to maendeleo again.

Also it would take some seriously dummy proof businesses for majority of people given current attitudes. I think the Harambee system has made people lazy.

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