African Development Bank and World Bank present report findings at IFAD headquarters in Rome

Rome, 7 April, 2011 – With about 30 million Africans living outside their home countries, migration is a vital lifeline for the continent. Yet African governments need to do more to realize the full economic benefits of the phenomenon, says a new report by the African Development Bank and the World Bank.

The report titled “Leveraging Migration for Africa: Remittances, Skills and Investments” presents data from new surveys. It finds evidence that suggests migration and remittances reduce poverty in the origin communities. Remittances lead to increased investments in health, education and housing in Africa. Diasporas also provide capital, trade, knowledge and technology transfers.

Two-thirds of migrants from sub-Saharan Africa, particularly the poorest, move to other countries within the region, while more than 90 per cent of migrants from North Africa move away from the African continent. The principal destinations for African migrants are France (9 per cent), Côte d’Ivoire (8 per cent), South Africa (6 per cent), Saudi Arabia (5 per cent), and the United States and the United Kingdom (4 per cent respectively).

“African governments need to strengthen ties between diasporas and home countries, protect migrants and expand competition in remittance markets,” said Dilip Ratha, main author of the report and lead economist at the World Bank, who participated via video conference at the report’s presentation in Rome. “Otherwise, the potential of migration for Africa remains largely untapped.”

“IFAD’s interest in migration issues derives from the fact that migration is intimately related to rural poverty,” said Kevin Cleaver, Associate Vice-President of IFAD.

“This report complements many initiatives undertaken by IFAD: in 2007, IFAD highlighted the contribution made by migrant workers to their home countries by publishing “Sending Money Home”. Also, in collaboration with the African Development Bank, IFAD organized the Global Forum on Remittances, which followed up with concrete regulatory and market interventions that could increase competition, reduce prices and help local financial institutions utilize migrant savings for local investment,” he concluded.

One innovation worth considering is diaspora bonds which are sold by governments or private companies to nationals living abroad. These bonds have already been successfully used to tap into assets of Israeli and Indian citizens living abroad. According to Ratha, sub-Saharan African countries could potentially raise US$5 billion to US$10 billion a year in diaspora bonds. Countries with large diasporas in high-income countries that could potentially issue these bonds include Ethiopia, Ghana, Kenya, Liberia, Nigeria, Senegal, Uganda and Zambia in sub-Saharan Africa; and Egypt, Morocco and Tunisia in North Africa.

Recorded remittances into Africa, which grew fourfold between 1990 and 2010 to reach nearly US$40 billion, are the continent’s largest source of foreign capital after foreign direct investments. Recent surveys show that investments such as land purchases, building a home and starting a business were the highest uses of remittances sent home by African migrants. As a share of total investment, these represented 36 per cent in Burkina Faso, 55 per cent in Kenya, 57 per cent in Nigeria, 15 per cent in Senegal and 20 per cent in Uganda. Education was the second-highest use of remittances from outside Africa into Nigeria and Uganda, the third highest into Burkina Faso and the fourth highest into Kenya.

However, official remittance flows to Africa are significantly underestimated, with only about half of the countries in sub-Saharan Africa collecting and reporting remittance data with any regularity.

The report finds that it is still very expensive to send remittances to African countries. According to Ratha, these high costs encourage the use of informal channels and are an unnecessary burden for African migrants and remittance recipients.

Ambassador Giandomenico Magliano, Director General for Globalization from the Italian Ministry of Foreign Affairs participating in the presentation of the report underlined the key role remittances can play in investment and entrepreneurship in migrants home countries. “Upon Italian proposal, the international community has adopted the goal of halving from 10% to 5% in five years the cost of transferring remittances” he said.” “This is part of a broader strategy of cooperation for financial literacy, for more market transparency and for additional productive activities and jobs by leveraging on remittances”.

Stephen Ogongo Ongong’a, a migrant and the editor of Africa News, said that it is important for Africans living abroad to be sending money home with a clear purpose. Apart from the money they send for basic family needs, they should also be given the opportunity to identify viable investment projects to channel part of that money.

The report recommends that post offices, savings and credit cooperatives, rural banks and microfinance institutions that have large branch networks can play an important role to expand access to remittances and financial services among the poor and in rural areas. But they should avoid exclusive agreements with money transfer operators, which limits competition and tends to increase the cost of sending money. There is also a need to assess the implications of telecom companies in Africa offering mobile money transfers and other financial services for banking stability and systemic risk.

Evelyne Anita Stokes-Hayford, Ambassador of the Republic of Ghana to Italy and Permanent Representative to IFAD, commenting on the report said, “Thank you for writing this report to help people understand the contributions that African migrants are making”.

The report was presented at IFAD headquarters in Rome on Wednesday 6 April.

The report, released in Washington D.C. on 30 March 2011, was funded by the Canadian International Development Agency; the United Kingdom’s Department for International Development; the French Ministry of Immigration, Integration, Asylum and Solidarity Development; the Ministry of Foreign Affairs of Denmark; the Swedish International Development Cooperation Agency; and the International Fund for Agricultural Development (IFAD).

The full report and the latest migration and remittances data are available on World Bank website.

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Press release No.: IFAD/26/2011

The International Fund for Agricultural Development (IFAD) works with poor rural people to enable them to grow and sell more food, increase their incomes and determine the direction of their own lives. Since 1978, IFAD has invested over US$12.5 billion in grants and low-interest loans to developing countries, empowering more than 370 million people to break out of poverty. IFAD is an international financial institution and a specialized UN agency based in Rome – the United Nation’s food and agricultural hub. It is a unique partnership of 166 members from the Organization of the Petroleum Exporting Countries (OPEC), other developing countries and the Organisation for Economic Co-operation and Development (OECD).