In all of Western Africa...70 per cent of payments are handled
by one money transfer operator
Migration
The African continent has over 30 million people in the
diaspora. Of all the world’s regions, however, Africa’s
predominant migration is the most intraregional. The
fluid migration within Western Africa, for instance, is
partly due to the region’s status as a geopolitical and
economic unit, but also to a common history, culture
and ethnicity among many groupings. There is also
significant international migration to former European
colonial powers such as France, the United Kingdom
of Great Britain and Northern Ireland, the Netherlands
and Italy, among other countries.
Remittances
Remittance flows to and within Africa approach
US$40 billion. Countries in Northern Africa (for
example, Morocco, Algeria and Egypt) are the major
receivers in the continent. Eastern African countries
depend heavily on these flows, with Somalia standing
out as particularly remittance dependent. For the
entire region, annual average remittances per migrant
reach almost US$1,200 and on a country-by-country
average represent 5 per cent of GDP and 27 per cent
of exports.
Rural remittances
Remittances to rural areas are significant and
predominantly related to intraregional migration,
particularly in Western and Southern Africa. The
mobility of Africans within these regions has been
followed by the sending of regular amounts of
money. Two thirds of West African migrants in Ghana
remit to rural areas in their countries of origin.
Market and financial access
When compared with other regions, money transfers
to Africa are among the most problematic, mainly due
to the two major challenges faced by the continent:
high rates of informality, particularly within the
continent, and a regulatory environment that favours
monopolies. Consequently, transfer costs are higher
and remittance senders obtain less value for their
money. Most African countries restrict outbound
flows of money unless used for trading and money
transfers to banking depositary institutions.
As a result, informality emerges as a solution to the
need to remit. Another effect, however, is the
persistence of monopolies on transfers by banks and
the few money transfer operators (MTOs). In all of
Western Africa, for example, 70 per cent of official
payments are handled by one MTO, which demands
exclusivity in money transfers of the banks.
Nigeria is a case in point: nearly 80 per cent of
transfers are handled by one MTO, which expects
exclusivity and prevents other MTOs from contracting agreements with those banks that are the sole
remittance payers in the country. Since banks are the
only entities allowed to pay money transfers, all
official flows end up being handled by a small group
of financial institutions that rely on less than four
MTOs. Migrants in South Africa are also faced with
significant regulatory restrictions on sending money,
and thus rely on informal networks. Because
regulatory environments often prevent other nonbanking
financial institutions from making transfers,
or restrict outbound transfers, financial access is also
a casualty. As few institutions participate in the
transfers, and banks do not cater to lower-income
individuals, financial access among African senders
and recipients is relatively low. In some countries, for
example South Africa, barriers to entry relate to legal
status, thus disenfranchising migrants. Other
countries, for example Kenya, are seeking to increase
financial access by leveraging remittance transfers
through the use of mobile telephony.
Source: IFAD
