Cost of sending money home to families in Sub-Sahara Africa is prohibitive

3 February 2013

KONICA MINOLTA DIGITAL CAMERAFor many families in countries such as Sierra Leone, monies received from their loved ones overseas, provide the cushion that saves them from falling below the poverty-line.

And as the global recession continues to affect employment opportunities overseas, the incomes of millions of African migrant workers continue to fall, reducing the amount of cash they are able to send back home to families.

But the cost of sending money to Africa is rising and adding to the very high burden faced by Africans working and living abroad.

As the African Press Organisation (APO) finds out, a report published by the World Bank says that; “High transaction costs are cutting into remittances, which are a lifeline for millions of Africans.”

Bringing remittance prices down to five percent from the current 12.4 percent average cost, would put US$4 billion more into the pockets of Africa’s migrants and their families – who rely on remittances for survival.

Africa’s overseas workers, who sent close to US$60 billion in remittances in 2012, pay more to send money home than any other migrant group.

Malaria in AfricaAccording to the World Bank’s Send Money Africa database, Sub-Saharan Africa is the most expensive region to send money, with average remittance costs reaching 12.4 percent in 2012.

The average cost of sending money to Africa is almost 12 percent- higher than global average of 8.96 percent, and almost double the cost of sending money to South Asia, which has the world’s lowest prices (6.54 percent).

The G8 and the G20 established 5 percent as the target average remittance price to be be achieved by 2014.

“High transaction costs are cutting into remittances, which are a lifeline for millions of Africans,” said Gaiv Tata, Director of the World Bank’s Africa Region and Financial Inclusion and Infrastructure Global Practice.

“Remittances play a critical role in helping households address immediate needs and also invest in the future, so bringing down remittance prices will have a significant impact on poverty.”

Lower cost remittances also advance financial inclusion, since they are often the first financial service used by recipients, who are then more likely to use other financial services-  including bank accounts.

Remittance prices are even higher between African nations. South Africa, Tanzania, and Ghana are the most expensive sending countries in Africa, with prices averaging 20.7 percent, 19.7 percent, and 19.0 percent respectively, due to several factors, including limited competition in the market for cross-border payments.

“Governments should implement policies to open the remittances market up to competition,” said Massimo Cirasino, Manager of the Financial Infrastructure and Remittances Service Line at the World Bank.

“Increased competition, as well as better informed consumers, can help bring down remittance prices.”

freetown centralSend Money Africa also finds that banks, which are the most expensive remittance service providers, are often the only channel available to African migrants.

A regulatory environment that encourages competition among remittance service providers can help bring down remittance prices.

Migrant workers can also benefit from more transparent information on remittance services.

For more information, visit Send Money Africa:

sendmoneyafrica.worldbank.org

 

 

 

 

 

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