{"id":396660,"date":"2011-04-25T14:10:03","date_gmt":"2011-04-25T14:10:03","guid":{"rendered":"http:\/\/www.ghanamma.net\/2011\/04\/25\/growing-remittance-through-banks-has-black-market-grumbling\/"},"modified":"2011-04-25T14:10:03","modified_gmt":"2011-04-25T14:10:03","slug":"growing-remittance-through-banks-has-black-market-grumbling","status":"publish","type":"post","link":"https:\/\/www.ghanamma.com\/2011\/04\/25\/growing-remittance-through-banks-has-black-market-grumbling\/","title":{"rendered":"Growing Remittance through Banks Has Black Market Grumbling"},"content":{"rendered":"
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Addis Fortune<\/a> (Addis\u00a0Ababa)<\/p>\n

Mahlet Mesfin<\/p>\n

23 April 2011<\/p>\n

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Customers waiting to receive their remittances at the Commercial Bank of Ethiopia’s Sellassie Branch, located in Arat Kilo.<\/p>\n

Aynalem Manaye, 49, a homemaker and mother of six, was impatient with eagerness to receive the money sent via Western Union by her eldest son who lives in Atlanta, United States (US), on Tuesday, April 19, 2011.<\/p>\n

Sitting on one of the chairs in the waiting area of Commercial Bank of Ethiopia’s (CBE) Selassie Branch in Arat Kilo, Aynalem was awaiting her turn for a teller to pay her the remittance.<\/p>\n

Aynalem is among the 39pc of Ethiopia’s population who have relatives abroad, according to a sample survey by the World Bank (WB) published in 2010. Out of these, 18pc are regular remittance recipients with the money averaging 120 dollars at least five times a year, according to the survey.<\/p>\n

India, China, and Mexico are the top three remittance recipient countries while the US, Saudi Arabia, and Switzerland are the top remittance senders in the world.<\/p>\n

Remittances contributed 1.2pc to Ethiopia’s nominal GDP in 2010, less than many other Sub-Saharan countries like Kenya (5.4pc), Uganda (4.5pc), and Sudan (4.8pc), according to the report. Most of the remittance recipients in Ethiopia are individuals living in urban areas, aged between 25 years and 34 years old, of which 35pc are men, the WB claimed.<\/p>\n

However, most of the people waiting alongside Aynalem were elderly women.<\/p>\n

While very keen to find out the amount her son has sent this time, she was told by the teller that the money has not yet arrived. He politely explained about problems with the network and asked her to return the following day.<\/p>\n

She did not find this at all satisfactory as she needed the money urgently.<\/p>\n

“My son called me last night and told me he has sent the money,” Aynalem told Fortune. “I do not know how this could happen.”<\/p>\n

The remittance she receives from her son is her only source of income. He regularly sends his mother money, usually on a monthly basis. The amount she receives each time differs as it depends upon how much he has, but it usually amounts to 100 dollars. This increases over holidays.<\/p>\n

Last week, she expected a large sum due to the Easter holiday, and she had already allocated the money to going towards paying for certain things in her budget.<\/p>\n

“I am expecting 3,000 Br, but will not use all of it for the holiday because I have to pay the 10,000 Br debt on my condominium house,” she said. “I should have done that today.”<\/p>\n

The number of customers, especially those receiving remittances, increases during holidays, according to Asrat Hossaena, the branch manager. To handle the increased traffic caused by customers, the bank added two additional counters to pay remittances that day and planned to remain open from 7:00am to 12:00pm everyday until the eve of the holiday, he explained.<\/p>\n

“It is customary for us to experience such workloads during holidays, but New Year [September 11] is the busiest time for us, followed by the start of the new school year, and then Easter,” Asrat told Fortune.<\/p>\n

Banks, remittance service providers (RSPs), credit cards, and travellers to the country are the most common methods through which people receive remittances, the WB report found. A total of 64pc make use of banks to receive remittances in Ethiopia, while 14pc receive hard currency from people travelling to the country, according to the report.<\/p>\n

This hard currency is often exchanged for local currency on the black market. The capital has different places known for exchanging foreign currency illegally; the area around Ethiopia Hotel, located on Gambia Street, is a major hub.<\/p>\n

Some individuals, including shoeshine boys, around the hotel offer their services to passersby they suspect of looking for a currency exchange. They are not the exchangers, but act as scouts and look out for the police. These individuals are very conscious and suspicious of the people they approach as the police sometimes send officers disguised as civilians when holidays are approaching.<\/p>\n

Over the past Ethiopian Christmas in January 2011, 40 individuals were arrested for alleged illegal trading. They were released after two days due to a lack of evidence.<\/p>\n

“We do not usually have a lot of cash at hand to trade on the spot,” one of the black market actors around Ethiopia Hotel told Fortune. “Once we confirm that a person wants to exchange money and the exact amount they want, we withdraw it from the bank, which makes it difficult for the police to find evidence of our activities.”<\/p>\n

To receive remittances legally, though banks, there are around 23 different RSPs that work with the different commercial banks; the major ones are Western Union, Atlantic Transfer, MoneyGram, and Xpress Money.<\/p>\n

“In the past, people used to prefer exchanging the remittances they received through travellers on the black market, but now many are using banks for remittance transfers as they have come to understand the benefits, such as safety, and the significance of foreign exchange for the country,” Asrat told Fortune.<\/p>\n

The country’s foreign exchange reserves increased following the devaluation of the Birr against a basket of major currencies in September 2011, the fourth since January 2009.<\/p>\n

“There were a number of people who had held on to their foreign currency and wanted to exchange it the day of the devaluation,” Asrat told Fortune.<\/p>\n

Although carrying the risk of inflation, devaluations can spur economic growth and reduce current account deficits to boost exports by discouraging imports, according to experts.<\/p>\n

In addition to the devaluation making importing expensive, the government set a price cap on 18 commodities in January 2011, restricting traders from selling them at profitable prices.<\/p>\n

Due to the devaluation and price cap, importers are importing fewer goods.<\/p>\n

The gross rate of imports decreased from 50pc last year to 14pc, while exports increased from 30pc last year to 48pc, according to Prime Minister Meles Zenawi’s eight-month report to Parliament earlier this month.<\/p>\n

Despite the benefits for the economy, people who operate on the black market complained that their business has been suffering.<\/p>\n

“Our main customers were traders who were mostly importers,” the illegal trader said. “Because imports have decreased, they no longer need our services. We are now able to survive because of the holiday.”<\/p>\n

Another reason why many customers prefer using banks is that the exchange rates offered on the illegal market, while they differ from place to place, are less competitive than that offered by banks.<\/p>\n

On Tuesday, the exchange rate for the pound was 27.31 Br, the dollar was 16.76 Br, and a euro cost 24.09 Br at CBE. On the same day, one could not exchange pounds on the black market, but a dollar cost 16.80 Br and a euro 24.30 Br.<\/p>\n

Henok Debebe, 25, a student at one of the private colleges in Addis Abeba, was asking after the exchange rate of the day around Ethiopia Hotel, on Tuesday. He had received 200 dollars from his older brother in the US through a friend visiting Ethiopia.<\/p>\n

“After comparing the rates I will decide on where to change my money,” Henok told Fortune. “Today’s rate is almost the same as that of the banks and there is no point in trading here. I will wait until the rate becomes more profitable.”<\/p>\n

As Henok was planning to spend the money on having a party with his friends, he was in no hurry to change it. However, the remittance being the only source of income for Aynalem, the breadwinner of her family, she faced a bigger predicament. She intended to return to the bank the following day, and hopefully its network problem had been sorted out by that time.<\/p>\n

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Addis Fortune (Addis\u00a0Ababa) Mahlet Mesfin 23 April 2011 Customers waiting to receive their remittances at the Commercial Bank of Ethiopia’s Sellassie Branch, located in Arat Kilo. Aynalem Manaye, 49, a homemaker and mother of six, was impatient with eagerness to receive the money sent via Western Union by her eldest son who lives in Atlanta, United States (US), on Tuesday, April 19, 2011. <\/p>\n","protected":false},"author":0,"featured_media":396661,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[],"class_list":{"0":"post-396660","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-politics"},"yoast_head":"\nGrowing Remittance through Banks Has Black Market Grumbling - Ghanamma.com<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.ghanamma.com\/2011\/04\/25\/growing-remittance-through-banks-has-black-market-grumbling\/\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:title\" content=\"Growing Remittance through Banks Has Black Market Grumbling - Ghanamma.com\" \/>\n<meta name=\"twitter:description\" content=\"Addis Fortune (Addis\u00a0Ababa) Mahlet Mesfin 23 April 2011 Customers waiting to receive their remittances at the Commercial Bank of Ethiopia's Sellassie Branch, located in Arat Kilo. 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