Closure of dozens of money transfer firms in Kenya believed to have links with Somali based al Shabaab has set mainstream banks expecting to reap immensely of remittance business.
Kenya reached the decision to suspend licences for 13 hawala money transfer firms suspected of having links with Al Shabaab terror group on Wednesday following the latest attack by al Shabaab on a Kenyan university that left 148 people dead.
Half of diaspora remittances into Kenya come in through unofficial channels with the hawala system suspected to handle the bulk of this money.
Following hawala closure and the suspension, senders are now expected to revert to conventional means as the government tightens the noose around transfers that are not easily traceable.
The Treasury estimates that Kenyans in the diaspora sent Sh108 billion ($1.2 billion) through unofficial channels last year equal to the sum sent officially.
According to Habil Olaka, Kenya Bankers Association (KBA) chief executive officer, the banking sector is currently looking at ways of further reducing the amount to entice more members of the diaspora to use the formal means.