Much of the conversation about migration, particularly when it comes to Africans, is dominated by the terrible scenes we see reported from Libya and deadly Mediterranean crossings. The narrative is still largely the same—people are seeking a better life in new surroundings.

From an economic point of view, the rapid growth in the numbers from Africa is of great interest. This is especially true for the money transfer industry. Remittances to sub-Saharan Africa grew to $37.8 billion in 2017, according to the World Bank and are forecast to hit around $39.2 billion this year and $39.6 billion in 2019. Perhaps unsurprisingly, as the largest population and economy, Nigeria topped African recipients with $22.3 billion in 2017. Liberia was the African country for whom remittances accounted for the highest share of GDP at 25.9%.

Even as those numbers grow, it’s clear the nature of migration and the migrant experience is changing. Technology is making this even more true. Ismail Ahmed, founder of WorldRemit, a London-based remittances business, is very clear about the impact of innovation on his business. WorldRemit, which opened an office in New York this week, has operations in 50 countries around the world and completes nearly a million transactions a month. It took around £60 million (~$80 million) in revenue last year and has a current annualized run rate of around $100 million.

Ahmed, who is originally from Somaliland, says innovation has played a crucial role in changing the way companies like his are able to connect migrants in Western countries to their homes in Africa, Asia or Latin America for example. Needless to say, the mobile phone has been vital in enabling the ease of connection, more migrants send smaller amounts more frequently now, with apps, mobile money and traditional bank accounts all playing their role.

But while much focus is often on migrants in Western countries, the largest amount of people moving to new countries is within Africa. One of the biggest challenges that face those who have moved to African countries is the lack of infrastructure that makes it easy for them and citizens to move money between neighboring countries. Indeed, Africa has the highest remittances costs in the world. The World Bank typically measures the cost of sending $200 and in the third quarter it was $9.10, compared to the global average of $7.20.

Ahmed sees this as an important opportunity for his company to fix a multi-billion dollar money transfer problem between neighboring African countries. This wouldn’t just have a significant impact on the hundreds of thousands of Africans moving between  countries in search of a decent living, but also even those traveling on short business trips. Not only does technology add a convenience to the process but in Africa it brings a layer of transparency to things like exchange rates which should have significant impact and encourage more economically beneficial movement between countries.

By Yinka Adegoke

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Billions of dollars in remittances flowed to Africa in 2017. The money could go further if it wasn’t more expensive to send money to Africa than anywhere else in the world, a new World Bank study finds.

Immigrants sent a $38 billion (€31.1 billion) back home to Africa in 2017, according to a new World Bank briefing paper.

Nigeria accounts for the lion’s share of this with $21.9 billion, followed by Senegal with $2.2 billion and Ghana with $2.2 billion.

“The [African] diaspora … are making a lot of money and they are willing to share that money with the countries which they first came from,” said Africa commentator Ayo Johnson, who hails from Sierra Leone but is based in the UK. “Remittances are going back to their host countries in huge, huge volumes.”

Although the total amount of remittances sent worldwide hit record levels last year, the World Bank found this wasn’t the case in Africa. However, more money was sent to the continent in 2017 than in 2016 when migrants remitted $34 billion.

The real sums sent to Africa are assumed to be much higher. Not only is official data unreliable (or, at times, unavailable), remittances often flow through informal channels carried by trusted friends or bus drivers across borders instead of Western Union and MoneyGram.

An alternative source of income

Remittances have now become one of the most important external sources of finance for Africa.

“Remittances are a lifeblood,” said Nikki Kettles from Finmark Trust, a South African-based organization working to make financial services more accessible to the poor. She said it was families, especially to women and children, who benefited from remittances in southern Africa where her organization worked.

“People working in South Africa send money home, for example, to Zimbabwe, DR Congo and Malawi. People are using [the payments] to feed or educate, not for other reasons,” she said.

Numerous studies have found that remittances directly benefit the welfare of those receiving the money. In poorer regions and countries, such payments can often buffer the vagaries of poverty or instability by covering basic necessities such as food, school fees, rent and health care.

Remittances are also often used to start a business, build a house or buy a vehicle.

Less opportunity for corruption

One of the big benefits of remittances is that, unlike development aid, they flow directly into the pockets of the intended person.

“The strength of remittances is how they are dispersed,” said Mathieu Jacques, manager of the EU-funded ACP-EU Migration Action Programme (ACP stands for African, Caribbean and Pacific countries).

“There are project management cost savings in the way they reach the community,” he told DW. “And there is less opportunity for [payments] to be siphoned off or change direction.”

In some of Africa’s smaller or impoverished nations, remittances are literally keeping their economies afloat. According to the World Bank’s Migration and Remittances briefing,money sent by immigrants make up a significant share of gross domestic product in African countries such as Liberia (27 percent), The Gambia (21 percent) and Comoros (21 percent).

But even if remittances have the power to lift individual families out of poverty, their effect on a country’s economy as a whole is unclear. Some studies suggest remittances help fuel economic growth; other are less conclusive.

“One of the problems is that because [remittances] go into the community in a diversified fashion, there is no targeted investment,” said Jacques. “And without the targeted investment you can’t see incremental change from an economic perspective.”

Fees eat up nearly ten percent of payments

It costs more to send money to Africa – the world’s poorest region – than anywhere else in the world. This means expensive fees eat up a chunk of cash that could otherwise help the receiving families.

The average fees for transferring remittances to Africa was 9.4 percent in 2017, the World Bank found. This is a slight drop from 2016 (when it was 9.8 percent) but it’s still a far cry from the Sustainable Development Goal of slashing transaction costs to 3 percent by 2030.

“Countries, institutions, and development agencies must continue to chip away at high costs of remitting so that families receive more of the money,” said Dilip Ratha, lead author of the report, in a press release.

Companies like WorldRemit that offer cheaper transaction fees below 4 percent have limited resources compared to their much larger competitors to reach out to people in rural parts of the African continent.

It’s not just the cost of transferring money that is a stumbling block. Sending cash via money transfer companies also usually requires showing a passport or identity card which migrant workers might not have, or might not want to show because they lack work permits or visas.

Many are putting their hopes in mobile money transfers as a way of cutting fees and making it easier for people to send and receive money across Africa’s borders. Some services are already offering cross-border mobile payments – although there are still issues such as compatibility and regulatory differences between countries that need to be ironed out.

By DW

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