Fintech can cut remittance costs to a fraction
A total of 19 African countries rely on remittances for 3% or more of their GDP; six for 10% or more; and Liberia for any incredible 31.2% of its GDP. At the same time, the cost of transferring money via established money transfer operators is very high. Sending money to Southern Africa, for instance, costs an average of 14.6% of the value of the money sent – the highest rate in the world.
An estimated 800m people around the world are now directly reliant on remittances. According to research by the International Fund for Agricultural Development, global remittances to developing countries increased by 51% between 2007 and 2016 to reach almost half a trillion dollars a year – although the number of migrant workers from the countries in question rose by only 28% over the period in question.
The World Bank calculates annual official remittances in Africa at $40bn, although it concedes that informal transfers could be worth even more. Most of this is sent from overseas to Africa but a growing proportion is moved between African states.
Just three money transfer operators – Western Union, MoneyGram, and RIA – account for 35% of the global market. Competition is stymied by the fact that many agents are only allowed to work for one operator because of exclusivity agreements.
Photo courtesy of WorldRemit Comms.