AfDB seeks to slash cost of remittance

By BUSINESS REPORTER

AFRICAN Development Bank (AfDB) is financing projects involved in the money transfer business as it steps up efforts to ease the cost of remittances to encourage Africans living and working abroad to send more money to their countries of origin.

AfDB sees Diaspora remittances as a vital source of funding for the continent’s development projects. Thus increasing competition in money transfer business is essential if the cost of remitting such funds is to drop.

The Bank says the cost of sending money to Africa ranges from 10 and 15 per cent of the amount sent. It seeks to slash the cost by half.

“These transfers represent or are equivalent to aid, but they are inefficient because of the costs involved,” Agnès Soucat, Director Human Development at AfDB said at the Bank’s ongoing annual meeting in Arusha.

World Bank statistics show that Africa receives US$40 billion in remittances every year. Experts estimate the figure could be around US$60 billion because some remittances do not go through formal channels.

According to the World Bank, Sub-Saharan Africa alone received US$21.5 billion last year in remittances.   By financing companies involved in money transfer, AfDB hopes to address challenges affecting players including logistical and infrastructure weakness, legal and regulatory environment, and security risks to cash.

“Remittances are a major source of finance, however, no country should be proud of it, nor should any government develop a policy to encourage migration,” said Donald Terry from Boston University.

AfDB officials told Business Times that selling Diaspora bonds would be the best way to allow Africans working and living abroad invest and optimise the impact of creating jobs and attract savings in their respective countries.

Some experts warn that remittances to Africa are vulnerable to terrorism and money laundering mainly as a result of weak regulation.