Remittance Flows to sub-Saharan Africa Projected to Decline - What can be done?

A key lever for facilitating remittance flows during the crisis is reducing the cost of sending money: The fees paid to remittance service providers to send money to Africa average nearly 9 percent— the highest rate in the world and three times the Sustainable Development Goal target for remittance costs (3 percent). The cost of international remittances within Africa—intra-regional migration and remittances are large there—is even higher than the cost of remittances from the United States or Europe. Digital remittance channels, which have gained popularity during the crisis, also have high fees that have increased in recent months.

Lowering the burden of sending remittances can maximize this important flow of financing for development. Policymakers must work to make sure remittance service providers do not face difficulties in partnering with correspondent banks. Indeed, opening access of money transfer operators (MTOs) to partnerships with national post offices, national banks, and telecommunications companies could help remove entry barriers and increase competition in remittance markets. And these remittance channels can also be used to mobilize diaspora investments through diaspora bonds and bond financing through securitization of future flows of remittances. The global community should consider creating a non-profit remittance platform to provide a one-stop solution to keep remittances flowing and leverage them for development financing for the benefit of millions of poor people in Africa and the rest of the world.

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Source: Foresight Africa 2021, pg. 19 (Brookins Institute)