Time flies with great content! Renew in to keep enjoying all our premium content.
Prime
UK edges past Saudi Arabia as diaspora labour shifts reshape remittances
Saudi Arabia had displaced the UK after a rapid expansion in the recruitment of Kenyan workers into the Gulf, turning the kingdom into Kenya’s leading remittance source.
The United Kingdom has, for the first time in three years, overtaken Saudi Arabia as the second-largest source of diaspora remittances to Kenya, reclaiming a position it had lost to the Middle East country amid policy-driven disruptions in Gulf labour markets.
Data from the Central Bank of Kenya (CBK) shows remittances from the UK rose marginally by 0.72 percent to $360.2 million (Sh46.47 billion) in 2025, edging past inflows from Saudi Arabia, which fell 25.06 percent to $302.1 million (Sh38.97 billion). This reversed a ranking that had held since 2023.
Saudi Arabia had displaced the UK after a rapid expansion in the recruitment of Kenyan workers into the Gulf, turning the kingdom into Kenya’s leading remittance source in the Middle East and a key driver of growth in foreign exchange inflows.
The latest numbers, however, point to a shift. Inflows from Saudi Arabia retreated from a peak of $403.12 million (Sh52 billion) in 2024, while UK inflows remained largely stable, underscoring the relative resilience of remittances from mature Western labour markets.
Diaspora groups attribute the slowdown from Saudi Arabia to a combination of higher transaction costs and sweeping labour market reforms that took effect last year, disrupting wages, contract renewals and onboarding schedules for thousands of Kenyan workers.
Saudi Arabia, the leading Middle East source of Kenya’s remittances, began enforcing a value-added tax on services, requiring money transfer platforms to charge and remit tax on transaction costs at a rate of 15 percent, effectively raising the cost of sending money home.
Rising costs
The Kenya Diaspora Alliance (KDA) warned that the higher costs were altering remittance behaviour among Kenyan workers in the kingdom.
“The cost of sending money from Saudi Arabia has recently increased. As a result, most Kenyans who generally make about Sh50,000 a month after taxes could be holding onto their cash and saving it in KSA [Kingdom of Saudi Arabia] rather than sending it,” KDA said last November.
The group noted that many workers were increasingly turning to informal remittance channels such as hawala networks, which carry risks, because of the higher costs of sending money home.
“For many Kenyans in KSA, it is better to save or use unofficial transfer channels,” KDA said, pointing to growing leakage outside formal systems.
CBK data appears to support this trend, showing that average monthly remittance flows from Saudi Arabia dropped 25.06 percent to $25.17 million (Sh3.2 billion) in 2025 from $33.59 million (Sh4.3 billion) the previous year.
Labour reforms
The decline coincided with the rollout of a skill-based work-permit framework in Saudi Arabia, replacing the decades-old, one-size-fits-all iqama system under which all foreign workers — from janitors to surgeons — held the same residency and permit category regardless of education or experience.
Reclassification of existing workers began on June 18, while categorisation for new arrivals started on July 1 last year. Enforcement for already contracted workers, including thousands of Kenyans, began on July 5, with new recruits placed under the regime from August 3.
Under the framework, foreign workers are grouped into three tiers — highly skilled, skilled and basic — based on academic qualifications, experience, technical capability, wage brackets and age.
The highly skilled tier includes doctors, engineers, IT specialists and corporate executives, requiring at least a bachelor’s degree and five years’ experience. The skilled category covers technicians, craftsmen and mid-level supervisors with vocational or secondary training and at least two years’ experience.
The basic tier, which captures the bulk of Kenyan migrant workers in Saudi Arabia, covers entry-level and manual roles, carries no formal education requirement, and is restricted to workers below the age of 60.
Saudi Arabia’s Ministry of Human Resources and Social Development says the reforms are intended to align labour deployment with the kingdom’s economic transformation priorities, curb over-reliance on low-skilled labour and boost productivity.
Income impact
For Kenya, however, where migrant flows to Saudi Arabia are dominated by domestic workers and other lower-skilled categories, the transition appears to have interrupted earnings, delayed contract renewals and slowed cash transmission.
The reversal in cash wired home by Kenyans in Saudi Arabia is striking, given the kingdom’s role as a key driver of incremental remittances between 2021 and 2024. Inflows expanded from $122.96 million (Sh15.86 billion) to over $400 million (Sh51.62 billion) over that period, driven by domestic work placements, contract formalisation and rising Gulf wage floors.
US watch
While the UK’s return to second place in diaspora flows to Kenya restores a more traditional remittance hierarchy dominated by Western economies, attention is also turning to the United States, Kenya’s top source of diaspora inflows.
The US accounted for 54.23 percent of Kenya’s $5.04 billion (Sh650.16 billion) in total diaspora remittances last year, up from 53.17 percent of $4.95 billion (Sh638.55 billion) in 2024. However, its stability as the dominant source will be tested after Washington introduced a one percent excise tax on money sent abroad, raising the cost of remitting funds from January 1 this year.
Shem Ochuodho, the global chairman of KDA and president of the Africa Diaspora Alliance, said the developments reflected a wider global shift towards protectionism.
“I think what we are witnessing is the global effect of President Trump's protectionism. Many countries are waking up to the realisation that remittances could be chipping into their revenues,” he said in a recent interview.
“By their [developed countries] standards, it’s not a lot. But for the developing world, it makes a whole lot of difference. These are people’s personal earnings. They should be free to do whatever they want with it.”
Dr Ochuodho warned that restrictive policies undermine the spirit of the UN Global Compact on Migration, which calls for making it easier for migrant workers to deploy their resources to support development in host and source countries.
“Being restrictive just sends people underground. That’s why people turn to hawalas and even carry cash,” he said, adding that protectionist measures were unlikely to be sustainable in the long term.
He also argued that Kenya itself still captures only a fraction of diaspora wealth. A study by a Kenyan graduate in Norway, he said, found that remittances account for just five percent of the potential pool.
“If the government created attractive incentives and pathways, even an extra five percent would easily double remittances within a short time,” he said. “Let’s create sweeteners for the diaspora to send more money back home.”
