Abbay Media - Africa Remittance Report 2007

AFRICA REMITTANCE REPORT 2007

Africa Remittance Report_2007

Ethiopians in the diaspora sent home more than $590 Million USD in 2006

Africa

In all of West Africa...70 per cent of payments are handled by one money transfer operator

Migration
Sub-Saharan Africa has over 30 million people in the diaspora. Of all the world’s regions, however, Africa’s predominant migration is intraregional. The fluid migration within West Africa, for instance, is partly due to the region’s status as a geopolitical and economic unit, but also by a common history, culture and ethnicity among many groupings. There is also significant international migration to former European colonial powers, such as France, England, the Netherlands and Italy, among other countries.

Remittances
Remittance flows to and within Africa approach US$40 billion. North African countries such as Morocco and Egypt are the continent’s major recipients. East African countries heavily depend on these flows, with Somalia standing out as particularly remittance dependent. For the entire region, these transfers are 13 per cent of per capita income and on a country-by-country average represent 4 per cent of GDP and 4 per cent of exports.

Rural remittances
Remittances to rural areas are significant and predominantly related to intraregional migration, particularly in Western and Southern Africa. The mobility of Africans within theses region has been followed by the sending of regular amounts of money. Two thirds of West African migrants in Ghana remit to rural areas in their countries of origin.

Market and financial access
When compared to other regions, money transfers to Africa are among the most problematic mainly due to the fact that the continent faces two major challenges: high rates of informality, particularly within the continent, and a regulatory environment that foments monopolies. In turn, transfer costs are higher and remittance senders obtain less value for their money. Most African countries restrict money transfers to banking depository institutions, and restrict outbound flows of money unless used for trading.

As a result, informality emerges as a solution to the need to remit. Another effect, however, is the persistence of monopolies by banks and the few money transfer operators handling transfers. In all of West Africa, for example, 70 per cent of payments are handled by one money transfer operator. Moreover, 50 per cent of payments are handled directly by banks and the rest by MFIs either as sub-agents of banks, with some exceptions (in Senegal, for example, MFIs operate as independent agents). Nigeria is a case in point: nearly 80 per cent of transfers are handled by one money transfer agency and banks are the sole remittance payers in the country. Africans in South Africa are also faced with significant regulatory restrictions in sending money, and thus rely on informal networks.

Because regulatory environments often prevent other non-banking financial institutions from making transfers or restrict outbound transfers, financial access is also a casualty. As few institutions participate in the transfers, and banks do not cater to lowerincome individuals, financial access among African senders and recipients is relatively low. In some countries like South Africa barriers to entry relate to their legal status, thus disenfranchising migrants.Other countries such as Kenya are seeking to deepen financial access by leveraging remittance transfers through the use of mobile telephony.

Source: IFAD
The International Fund for Agricultural Development (IFAD)

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