African migrants paid on the average no less than US$7.5 billion to send money home to their families living on the African continents in 2012, an amount considered far too high by the World Bank.
Bringing remittance prices down to five per cent from the current 12.4 per cent average cost would put an extra US$4 billion in the pockets of Africa’s migrants and their families who rely on remittances for survival‚ the World Bank said yesterday.
Data supplied by Send Money Africa showed that 30 million African migrants sent close to US$60 billion in remittances. “With scarce opportunities at home, the majority of the 120 million recipients in Africa depend on remittances for their survival, health, education, and livelihood”, the agency said.
But it was noted that the high cost of sending money home means that remittances are not as impactful as they could be as cost of transfer escalates.
The G8 and the G20 established five per cent as the target average remittance price to reach by 2014.
According to new data from the Send Money Africa database, funded by AIR Project, Africans pay more to send money home than any other migrant group.
According to the World Bank’s Send Money Africa database‚ sub-Saharan Africa is the most expensive region to send money to‚ with average remittance costs reaching 12.4 per cent in 2012.
The average cost of sending money to Africa is more than 12 per cent – higher than global average of 8.96 per cent‚ and almost double the cost of sending money to South Asia‚ which has the world’s lowest prices at 6.54 per cent.
SWIFT SA chief executive Hugo Smit said last month that the high economic growth of sub-Saharan Africa excluding SA was reflected in the more than 20 per cent growth of volumes in SWIFT transactions in this area over the past three years.
SWIFT is the international financial messaging provider for more than 10‚000 banking organisations‚ securities institutions and corporate customers in 212 countries and territories.
“High transaction costs are cutting into remittances‚ which are a lifeline for millions of Africans‚“ said Gaiv Tata‚ director of the World Bank’s Africa region.
“Remittances play a critical role in helping households address immediate needs and also invest in the future‚ so bringing down remittance prices will have a significant impact on poverty,” Tata said.
Lower cost remittances also advance financial inclusion‚ since they are often the first financial service used by recipients‚ who are then more likely to use other financial services including bank accounts.
The World Bank noted that remittance prices are even higher between African nations. South Africa‚ Tanzania‚ and Ghana are the most expensive sending countries in Africa‚ with prices averaging 20.7 per cent‚ 19.7 per cent‚ and 19.0 per cent respectively‚ due to several factors including limited competition in the market for cross-border payments. The average cost of sending money to Nigeria was about 10 per cent.