NAIROBI, Kenya — The United Kingdom has overtaken Saudi Arabia to become Kenya’s second-largest source of diaspora remittances, marking a significant shift in inflow patterns as taxation and labour-market changes reshape overseas earnings.
New data from the Central Bank of Kenya (CBK) shows that remittances from the UK rose to $360.2 million (Sh46.47 billion) in 2025, edging past Saudi Arabia’s $302.1 million (Sh38.97 billion) and ending a three-year period in which the Gulf state ranked second after the United States.
The shift reflects both rising inflows from Europe and a slowdown in remittances from the Gulf, where Kenyan workers have been affected by higher transaction costs and evolving employment arrangements.
According to CBK figures, average monthly remittances from Saudi Arabia declined sharply from $33.59 million in 2024 to $25.17 million in 2025.
Diaspora organisations have linked the drop to the introduction of a 15pc value-added tax on remittance service fees, which took effect in 2024, increasing the cost of sending money home.
“The VAT on remittance services has significantly reduced disposable income for workers and discouraged formal transfers,” said a representative of a Kenyan diaspora welfare group in the Gulf, who asked not to be named due to ongoing engagements with employers and financial institutions.
Some workers, the group noted, have shifted to local savings, informal transfer channels or reduced remittance volumes altogether as household expenses in host countries rise.
By contrast, remittances from the UK posted a modest but steady increase, supported by relatively stable employment conditions and stronger financial integration with Kenyan banks and digital transfer platforms.
Overall, Kenya received a total of $5.04 billion in diaspora remittances in 2025, reinforcing the sector’s position as the country’s single largest source of foreign exchange, ahead of tea, tourism and horticulture.
The United States retained its position as Kenya’s top remittance source, accounting for 54.23 per cent of total inflows.
However, analysts have warned that future remittances from the US could face headwinds following the introduction of a 1 per cent excise tax on outbound remittances, effective January 1, 2026.
The tax, introduced under US fiscal reforms, is expected to marginally raise transfer costs, potentially affecting volumes sent to countries such as Kenya that rely heavily on diaspora inflows.
Economists say the changing remittance landscape underscores the sensitivity of cross-border flows to policy decisions, taxation regimes and labour conditions in host countries.
“Diaspora remittances respond very quickly to costs and regulatory signals,” said a Nairobi-based economist.
“Even small taxes or fees can influence whether people use formal channels, informal networks, or reduce transfers altogether.”
For Kenya, remittances remain critical in supporting household consumption, education, healthcare and small businesses, while also bolstering foreign exchange reserves and stabilising the shilling.
CBK Governor Kamau Thugge has previously described diaspora remittances as a “resilient and dependable” source of external financing.
However, policymakers have acknowledged the need to protect the sector from excessive taxation and regulatory friction.
