More and more people in Africa depend on the Remittances of their relatives abroad. Banks and transfer services charge high fees and earn vigorously. Informal transfer methods have large inlet.
One of the African countries that benefit most from Remittances of their emigrants, are the Cape Verde Islands: More than 21 billion Cape Verdean Escudos (about 190 million Euro) emigrants 2018 as a so-called “remittances” (engl. “Remittances”) to the small island group, with approximately 450,000 inhabitants transferred. According to the Cape Verdean Central Bank this represents an increase of more than six percent in comparison to 2017.
This is a Trend that is observed in many countries of Africa is also confirmed by the world Bank in April published a report “Migration and remittances”. Never so much money migrants had been to family members in poorer countries remitted, as of 2018, said in the of the Federal government financed study. Of the world’s approximately 430 billion US $ 46 billion flowed into sub-Saharan Africa. This year will be the 50 billion mark will be exceeded, estimates the world Bank.
Dilip Ratha of the world Bank
Foundation of the national economic systems
In many developing countries, the return from making transfers for a majority of overall economic performance. In many cases, these amounts of money even exceeded the international development aid and foreign investment, says Dilip Ratha, head of the Department of Migration and remittances at the world Bank. He assumes that the real transfer totals exceed the official Figures.
Small African countries with high emigration rates, particularly high amounts of remittances. On the Cape Verde Islands, the value corresponds to the money transfers from abroad now more than 15 percent of the gross domestic product. In the Comoros, according to the world Bank report even by 19 per cent, similar to the situation in Lesotho.
Cape Verde: foreign transfers to replace the social system
“We are a Nation of emigrants. Alone in the Metropolitan area of Lisbon, in Portugal, is home to some 50,000 people, with Cape Verdean roots who regularly send smaller amounts of money to the Relatives in the home. Many children and elderly people are in need,” says the Cape Verdean economic and financial expert Paulino Dias in an interview with DW.
Economist Paulino Dias
The remittances to the Cape Verdean economy is practically indispensable, as slides: “The families get the money to revive as consumers, the retail trade, especially in remote areas. Sometimes the money flows in larger-scale projects, such as the construction or renovation of housing, and creates jobs. The cheques from abroad often replace the very weak social security systems.”
Dilip Ratha of the world Bank takes a similar view: The transferred money act as a kind of insurance for poorer people. “It comes directly from those who need it, without the government switched instances in between. So it is used much more efficiently.” The importance of money transfers for the eradication of poverty cannot be overstated, the money will be used for education and for health, but also for the financing of exceptional celebrations such as weddings and funerals.
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World Bank: Remittances to Africa are expensive
But banks and transfer agencies charge high fees for their services. The fees incurred for such transfers of funds are typically many times higher than in the case of Transfers between industrial countries, the world Bank. Sub-Saharan Africa is the most expensive destination region in the world: In the spring of 2019, a Transfer of US $ 200 to Africa cost, on average, 9.3 percent of the value of money. One of the UN goals for sustainable development stipulates that the costs should be reduced to three percent.
Established banks – here in Addis Ababa – fall in the favor of the users.
If the Trend continues and remittances continue to increase, could put a reduction in fees have great economic potential, according to the world Bank.”The transfer prices are for many reasons, including, in some countries, underdeveloped financial infrastructure, limited competition, regulatory obstacles, as well as the lack of access to the transfer station and receiver for the Bank sector”, – stated in the Online presence of the world Bank.
The most important factor for high remittance costs, the lack of transparency for consumers, however. Prices for Transfers are composed of a variety of charges. To charge a fee for sending a certain amount and a margin applied to the exchange rate, sometimes even a fee for the recipients of the money. These components can vary, depending on how fast the Transfer is to be handled and the Form in which the recipient receives money (in cash or by crediting an account).
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Transfer service providers: Faster and easier than banks
According to the world Bank customers prefer to use for money Transfers to Africa money transfer service provider like Western Union or MoneyGram to normal commercial banks. In East and West Africa, provider of mobile payment services would also increasingly as a credible competitor in the money transfer market.
Cashless payment is the rule – increasingly, via mobile
“Western Union, MoneyGram, Ria and other money transfer services providers dominate a large extent the market, because they often offer cheaper and faster services than banks, and also longer opening Hours have”, says the world Bank. With these providers, no Bank accounts are required to transfer money. Also the bureaucratic effort to comply with anti-money laundering legislation was significantly lower.
A MoneyGram branch can be transferred by Deposit in a branch of a money amount between two persons. The depositor receives a reference number. The receiver may, after the reference number from the Deposit has been transmitted, the certain amount of money with virtually no delay free in-store at his place of residence to pay off. Depositor and recipient must identify themselves. The basic idea is to allow people who do not own a checking account, the cashless payment transactions.
Informal money shipping dangers of
Experts of the world Bank estimate that informal channels such as bus drivers, travellers, family members or by using the Muslim Hawala money transfer system – a further 250 billion dollars in the old country arrive. With the Hawala System of money can be through a network of middle-men submitted. The transactions leave no trace, which makes it difficult to prosecute in the case of abuse extremely. Experts say these informal transfer systems were also used by criminal or terrorist organisations, for example, in drug or arms deals.
“The risk can never rule out,” says the Cape Verdean Economist Paulino Dias. “The government of the Cape Verde Islands but, as many other countries in the Region – a lot in the prevention of such risks, invested.” It is going to increase the amounts of remittances, but in a safe way and in accordance with the laws. Only in this way, a positive effect could be ensured on the local economy.