Diaspora Remittance Volumes and Economic Development:

Abstract

Diaspora remittance inflows forms an important pillar of external finance for developing economies, often surpassing foreign direct investment and official development assistance. In Kenya, remittance volumes have grown steadily, exceeding USD 5 billion in recent years and accounting for a significant share of GDP. Despite this upward trajectory, there still exists challenges such as youth unemployment, poverty, income inequality, and structural economic imbalances raise concerns regarding the extent to which rising remittance volumes are effectively translated into sustainable economic development. Existing literature has largely emphasized aggregate inflows and poverty outcomes, with limited integration of regulatory, behavioral, and institutional dimensions that shape the development impact of remittances. Consequently, there is dearth of empirical literature on the relationship between remittance volumes and economic development in Kenya. The purpose of this study was thus to assess the relationship between volumes of money transferred from the diaspora and economic development in Kenya through a desktop review methodology. The study was underpinned by Network Theory. The study was guided by a development economics perspective, the review systematically examined peerreviewed journal articles, institutional reports, policy documents, and empirical studies focusing on remittance volumes, economic growth, capital formation, financial inclusion, and institutional quality. The review established that remittance volumes positively influence GDP growth, SME development, household income stability, financial sector deepening, and macroeconomic resilience. However, the findings also indicate that the developmental contribution of remittances is mediated by regulatory efficiency, transaction costs, financial literacy, and institutional coordination. The study thus recommends that theGovernment of Kenya, financial regulators, and diaspora engagement agencies should put in place structured investment instruments, reduce transfer costs, scale up financial inclusion, support data systems, and integrate remittance flows into national industrialization and SME development strategies.