Published on Nasikiliza

Making Remittances Work for Africa

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Remittances are the money that migrants send back to their home countries to sustain their families. In the case of Africa it is estimated that 120 million people benefited from the US$60 billion sent home by 30 million migrants in 2012. While most of these flows are used for consumption, they could have a greater development impact if a larger portion was saved in banks by recipients and channeled into productive investment such as microenterprise activities.

This link between remittances and financial inclusion was the main topic discussed in a Forum organized by the World Bank in Brussels on May 16th, bringing together representatives of francophone African countries and Diaspora communities with several development partners such as the African Development Bank (AfDB), the International Organization for Migration (IOM) and the African Union Commission (AUC), who with European Commission (EC) funding and World Bank implementation, are collaborating to address this issue with concrete action.

In effect, the occasion served to sensitize the audience to the creation of the African Institute for Remittances (AIR) as a specialized Institute at the AUC, whose broad objective is precisely to leverage remittances for social and economic development. As an African-led initiative, AIR aims to help countries manage remittance flows by providing them with technical assistance, capacity-building and research, as well as engaging in advocacy with the public and private sectors. With four African countries offering to host the Institute, the project is currently awaiting a decision by AU Member States on its location.

Remittances encompass various issues: their high cost (on average, 12%) is a major concern which must be addressed. But there is a broader agenda to be tackled – built around topics such as more accurate measurement and understanding of the markets, greater competition promoted by the regulatory frameworks,  financial literacy, technology and microenterprise – all grouped under the general heading of financial inclusion.

Many beneficiaries first come into contact with the formal banking system when receiving a remittance, which can be a time-consuming process for those living in remote, rural areas. While banks should exert themselves more in attracting remittance beneficiaries as customers and providing them with credit and other basic financial services, greater effort should also be made at the community level to equip people with basic financial concepts. Innovative technology can reduce the cost of traveling that very long “last mile” for the remittance disbursement.

Noting that the high volume of remittances could taper off in the future as migration stabilizes, Mr. Paul Noumba Um of the World Bank said that the strategy should be to “think big, act small and start now”—a quote from best seller writer Tom Friedman—to take advantage of the favorable circumstances to promote financial inclusion.

Diaspora communities attending the Brussels event were supportive both of this broader approach and of the AIR initiative. As major originators of remittances and with their detailed knowledge of local conditions back home, they are well placed to engage with the public and private sectors at the community level, participate in financial literacy programs and identify investment opportunities. They noted, however, that the project was taking too long in becoming a reality. We agree that a quick decision on the location of AIR is needed to avoid stakeholders losing interest and development partners present at the Forum reaffirmed their commitment to the project.

The Send Money Africa (SMA) database Send Money Africa was also presented at the event. With detailed costs for different service providers transferring funds through the main remittance corridors to and within Africa, it is an essential tool for migrants and a valuable source of information for academia, government authorities and private entities.


Soheyla Mahmoudi

Senior Operations Officer

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