"Sending Money Home to Africa" - Remittances Hold Immense Untapped Potential for...

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Oct 2009
Tunis, Tunisia, October, 21 2009 - African workers send home more than US$40 billion to the region each year but restrictive laws and costly fees hamper the power of remittances to lift people out of poverty, according to a new report by the UN's rural poverty agency, the International Fund for Agricultural Development (IFAD).

"Sending Money Home to Africa" will be presented at the Global Forum on Remittances 2009, organized by IFAD and the African Development Bank (AfDB) in Tunis, Tunisia, on 22-23 October 2009.

Globally remittances top $300 billion per year, outstripping foreign direct investment and development assistance combined. But while transfer costs have declined significantly in Latin America and in Asia, sending money home to Africa is still expensive. Within Africa, costs can be as high as 25 per cent of the sum.

At the G8 summit in L'Aquila in July 2009, world leaders recognized the development impact of remittance flows and set a goal of reducing the cost of remittances by 50 per cent over the next five years, by promoting a competitive environment and removing barriers.

Two major money transfer companies - Western Union and Money Gram - control nearly 65 per cent of the locations where remittances can be picked up. Most African countries restrict the kind of institutions that can offer remittance services, penalizing microfinance institutions, which have a greater geographical reach than banks.

The number of payout locations across the entire African continent is the same as Mexico, which has only a tenth of Africa's population. Between 30 and 40 per cent of all remittances to Africa are destined to rural areas where many recipients have to travel great distances to collect their cash.

The report finds that simply by expanding the kinds of institutions able to conduct remittances services to include microfinance institutions and post offices, the number of payment points would more than double.

The IFAD report highlights how new technologies - such as cellphones - and existing infrastructure - particularly post offices or small retail outlets - could vastly increase the reach of remittance services. Algeria, where 95 per cent of remittances are paid through post offices, could be a model for other African countries.

"Supporting this people-to-people money flow to rural areas of Africa is especially vital now because of the recession" noted IFAD Assistant President, Kevin Cleaver, before leaving for Tunis. "The power of remittances can be catalysed by easing restrictions and making it less costly for African families to collect this money," he added.

Most money sent home by migrants is spent on daily consumption but research shows linking remittances to financial services for the unbanked - savings accounts, loans and insurance - allows even the very poor to save and potentially invest in the development of their community.

On its part, the AfDB, together with a number of partners including IFAD, is committed to search for ways and means to better use such resources. In that respect, the Bank launched a study on migrants' remittances in four corridors, France/Comoros, France/Mali, France/Morocco and France/Senegal. The study, disclosed in Paris in 2008, shows that remittances range in volume from 9% to 24% of GNP in those countries covered, which is 80% to 750% of ODA received. The AfDB intends to play a still greater role in channeling migrants' remittances, notably through a multilateral fund to be set up in the near future.



Source : All Africa
 

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