In all of Western Africa...70 per cent of payments are handled by one money transfer operator

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.

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