Africans Sent $60 Billion to Africa in 2012, But Overcharged $4 Billion by Money Transfer Companies
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
Jan. 28, 2012 – In a report this morning by the World Bank, African immigrants sent a whopping $60 billion to Africa in 2012, but were overcharged $4 billion by money transfer companies, which averaged 12.4% in charges as against 6.54% charged to South Asians. This is more than twice the total amount of aid received by Africa, which amounted to $28 billion. “Bilateral aid to sub-Saharan Africa was USD 28.0 billion, representing a fall of -0.9% in real terms compared to 2010. By contrast, aid to the African continent increased by +0.9% to USD 31.4 billion, as donors provided more aid to North Africa after the revolutions in the region,” according to a report by the OECD (Organization for Economic Co-operation and Development), in 2012.
What should be understood is that the $60 billion remitted to Africa by African immigrants is the amount officially registered through money transfer companies. It does not include the billions that Africans take with them to Africa when they visit home, which invariably is a lot more than sending the money through money transfer companies. We know that when we travel back home, we carry a lot more money than when we transfer money through money transfer companies. In effect, we can conveniently say that African immigrants send back to Africa more than $120 billion annually.
The African Sun Times has been crusading for a long time for the African Union and its member states to recognize the enormous contributions that African immigrants are making to the economic development of Africa, especially in being more attentive to African immigrants when African leaders visit the Diaspora. On the other hand, on most occasions, African immigrants are totally ignored or disrespected when their leaders visit the Diaspora, with their leaders preferring to meet with so-called Western (white) business leaders than Africans. African immigrants should be shown more respect by their leaders, because as the World Bank report makes clear, the funds remitted are used to solve government problems “recipients in Africa depend on remittances for their survival, health, education, and livelihood.”
Below is the World Bank report:
“January 28, 2013–Every year, millions of migrants leave their homes and families behind to make a living overseas. And every year, these migrants send billions of dollars home to their loved ones, collectively spending millions of dollars on remittance prices in the process. In 2012 alone, 30 million African migrants sent close to US$60 billion in remittances. With scarce opportunities at home, the majority of the 120 million recipients in Africa depend on remittances for their survival, health, education, and livelihood.
But the high cost of sending money home means that remittances aren’t as impactful as they could be.
According to new data from the Send Money Africa database, funded by AIR Project, Africans pay more to send money home than any other migrant group. Sub-Saharan Africa is the most expensive region to send money to, with average remittance costs reaching 12.4 percent in 2012. The average cost of sending money to Africa as a whole is almost 12 percent, which is higher than global average of 8.96 percent, and almost double the cost of sending money to South Asia, which has the world’s lowest prices (6.54 percent).
Bringing remittance prices down to 5 percent from the current average of 12.4 percent, which is what the G8 and G20 are targeting by 2014, would put US$ 4 billion back in the pockets of Africa’s migrants and their families.
“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.” Lowering the cost of remittances can also advance financial inclusion. Remittances 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.
What can bring remittance prices down? According to Massimo Cirasino, Manager of the World Bank’s Financial Infrastructure and Remittances Service Line, competition and transparency are key. “Governments should implement policies to open the remittances market up to competition,” he explains. “Increased competition, as well as better informed consumers, can help bring down remittance prices.”
Currently, Send Money Africa 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 not only gives migrants more choices, it can also help bring down prices. Migrants can also benefit from more transparent information on remittance services because it gives them the resources they need to make informed decisions.”
Courtesy of Chika Onyeani, African Sun Times
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