Housing minister Soita Shitanda (centre) at a housing exhibition in London in 2008. The minister urged Kenyans in the diaspora to invest back home. Photo/LILLIAN KIMETO
About half of businesses started by Kenyans living abroad in the past five years have collapsed due to poor management and lack of access to investment information by the entrepreneurs, according to a new report.
The survey, done by the International Organisation of Migration (IOM) on Kenyans living in the UK, indicates that many have lost millions after seeing their retail, property and agriculture enterprises fail to take off.
A joint Central Bank of Kenya and World Bank study last year showed that Kenyans in the diaspora are sending home an estimated $1.9 billion (Sh152 billion) every year.
“Almost half said their investments had been unsuccessful due to difficulties in accessing credit, insufficient information about formal investment procedures and how to best manage investments in Kenya while residing in the UK,” said the IOM report.
About 43 per cent of those surveyed said they found it difficult to access credit to finance their businesses.
A similar proportion said they lack sufficient information on investment opportunities, 33 per cent attributed the high failure to poor management, 27 per cent to prohibitive costs and a similar percentage to inadequate infrastructure.
“In particular, two respondents said the reason for the failure of their investments had been corruption and an unconducive environment where only the politically correct survive,” notes the report.
The IOM interviewed 78 Kenyans—50 men and 28 women; majority of whom were living in London and the surrounding areas.
Local investment managers said the Kenyans in diaspora could cut losses by investing through professionals.
“It is a challenge because diaspora investors are sending money to their relatives who may not necessarily know which stocks or real estate investments to get into, probably because there is no cost to it,” said Peter Wachira, a senior investment manager at Pinebridge Investments.
He said investors needed to look for professional investment advisors where they could follow up online, through reports and periodical statements.
“They can also look into reputable real estate firms, but the professional investment advisors come at a cost,” he said.
John Kirimi, director at Sterling Investment Bank and vice-chairman of the Kenya Association of Stockbrokers and Investment Banks (KASIB), said investing in stocks and real estate would offer good returns for Kenyans in diaspora.
“I think where they have failed most has been in real estate where they send money to their relatives who send them photographs that are not of their investments,” he said.
Andrew Toboso, director of Kenya’s development blueprint, Vision 2030, said efforts to showcase investment opportunities to Kenyans abroad should be stepped up.
Last year a Kenyan investment promotion team visited the UK and America.
“This is why we went out to see investors last year and facilitate investments in Kenya, particularly in relation to Vision 2030. We had representatives from the CMA, CFC Stanbic and National Housing Corporation among others,” he said.
“In the past we did not have the information being disseminated and investors would haphazardly make investments in real estate and stocks but we are telling them to invest through credible institutions,” he added.
Mr Toboso said that they were also promoting the use of online stock trading systems to open investments to those abroad.
CFC Financial Services and Suntra Investment Bank have launched automated trading systems that investors can access on the internet.
“Public private partnerships will go a long way to pass on this information to those in the diaspora especially for investments that do not require day to day management” said Mr Toboso.
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