The remittances sent home every year by the African Diaspora should create a doorway to still greater opportunities, and the key to this door is financial access. While remittances do impact the living standards of beneficiaries directly, the banks that pay out the remittances month after month should offer recipient families a basic financial package including savings accounts, payment services and small loans for microenterprise. This should facilitate growth from current levels of remittances saved and invested. Leveraging of remittances through financial inclusion is certain to increase their development potential.
Last year, an estimated 30 million migrants sent cross-border remittances worth $60 billion to recipients in Africa, benefitting an estimated 120 million people. To better leverage these individual remittances an integral approach is required, bringing together government, banks, communities and development agencies. The authorities must regulate to promote competition, entice banks to engage with the unbanked and enable the use of new, cheaper technologies. Banks must respond by seeking new profit opportunities in providing services to remittance beneficiaries. Communities should strengthen financial literacy programs to prepare people to take advantage of their access to credit for productive purposes, with support from government, civil society and Diaspora organizations. Finally, the international development organizations must provide the technical assistance and capacity building required to coordinate and implement these activities.
Current rates to send money to most parts of Africa are far too high at an average 12 percent, compared to a global average of 8 percent. It is unacceptable that the neediest should face the highest costs, reducing the net impact of remittances. Let’s not fail to recognize the power of individual remittances for Africa’s growth. Let’s up the competition, lower prices and put Africa’s remittance dollars to work.