Remittances to Drought/Famine-Affected Households in Northern Kenya

Women and children are the ones most susceptible to the effects of drought and famine which is why it is important to consider ways to make remittances more accessible to them. Kenya already has the infrastructure and services to lower the cost of sending money to relatives who need monetary assistance. Of course, money is not the answer to poverty just like food is not the answer to hunger.

Poverty is more than the lack of money. Poverty is not merely the antithesis of prosperity, it’s the result of systemic and structural inequalities as well as inequality on an individual, relational level. Africa, a continent rich in mineral wealth and human capital, is impoverished insofar as inequality persists. It is beset by structural problems like the lack of supportive infrastructures that would enable the success of small businesses, administration, roads, buildings, schools and accessible, affordable healthcare. With this in mind, money is not the answer to poverty, food insecurity and socioeconomic inequality.

In Kenya, mobile technology has changed the way that remittances are sent to relatives. Kenyans were using airtime to send money to relatives before the launch of M-PESA. Before Safaricom and the British Department of International Development collaborated to launch M-PESA in March 2007, Kenyans would take their money to a cellphone shop, buy scratchcards for airtime, and send the code numbers to their relatives via text messages. Recipients of the code would then either use the airtime or give the code to the shopkeeper at the cellphone store who would give them cash. This ingenuous method was a direct challenge to banks and the wire transfer companies.

M-PESA is an SMS-based money transfer system that allows users to deposit, transfer and withdraw money on their cell phones. The M stands for Mobile, and “PESA” is Swahili for “money.” The service was used by up to 38 percent of Kenya’s adult population within two years of its launch. According to an MIT (Massachusetts Institution of Technology) study, M-PESA is one of Kenya’s largest banks, with approximately 75 percent of its 9.5 million account holders using it to store money.

The study conducted at MIT by William Jack and Tavneet Suri focused on 3000 randomly selected households, comprising of rural and urban households as well as non-users and users of M-PESA. It is important to note, however, that this study excluded the more rural northern and eastern regions of Kenya. The study showed that most (61 percent) M-PESA users who send money live and work in urban areas whereas the recipients can be rural (42 percent) or urban residents (45 percent.) Another interesting point is that in terms of overall figures, senders outnumber recipients.

When looking at the macroeconomic impact of remittances, we need to look no further than the female-headed households that receive remittances. Gender affects how money is spent and saved. In a 2004 paper on  Women as Policy Makers: Evidence from a Randomized Policy Experiment in India, Raghabendra Chattopadhyay and Esther Duflo suggested that women could have both micro-economic and macroeconomic impacts based on the way they allocated resources in their own households, and from their political participation. Now this was specific to India, but gendered divisions of household labor are global.  Women tend to be responsible for food production and keeping the household running. This means that they tend to purchase items that have relatively high price/demand elasticity- like food, water, clothing, and shoes.

With the prolonged drought in northwestern and northeastern Kenya, remittances to rural areas are becoming increasingly important. The majority of displaced refugees are women and children. In the rural, northern regions of Kenya, we see that women comprise the majority of small farmers who face a greater risk of food insecurity and poverty due to water shortages and desertification. In early August, the BBC reported that 14 people starved to death in the Turkana region in the northwest. According to the United Nations, 4 million Kenyans (about 10 percent of the population) are affected by this drought, the worst in over 60 years.

Food shortages and the influx of food aid further impact on the market, driving up prices and contributing to currency inflation. Currently, the Kenyan shilling is at its weakest point in 17 years, due to a combination of factors including the economic crisis in the European Union, the debt crisis in the United States and, increased demand for the US dollar. This increased demand for the dollar can be attributed to the flow of incoming shipments of food aid and medical supplies to northern Kenya and southern Somalia. Consequently, food and fuel prices have gone up as the shilling’s buying power has decreased.

That said, remittances are not a solution, but a temporary salve. In the light of food shortages and price hikes due to drought and famine, remitted monies are a necessary remedy. Survival is the first priority. What can be done to make monetary aid more accessible to those who need it most? How can we further lower the cost of sending money?