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How Money Transfer Fuels African Economies

December 18th, 2019

How Money Transfer Fuels African economies

Africa has seen a massive shift in its remittance figures and patterns over the past decade. Remittances to Africa in 2010 were recorded at USD 40 billion by the World Bank. In 2018, money transfers to Africa were around USD 46 billion in sub-Saharan Africa and USD 62 billion in the Middle East and North Africa combined.

A positive economic outlook

One can understand how much money is sent to Africa by studying the growth of remittances to the continent. Remittances to Africa have undoubtedly been a building block in the growth and prosperity of the region. In 2018, Egypt was among one of the top remittance recipients globally, as per data published by the World Bank. The country received USD 29 billion in foreign remittances last year, marking an overall growth of 17%. Remittances to North Africa and the Middle East grew by 9%, while sub-Saharan Africa saw an increase of 10%. 
This increase in money transfers to Africa may have its roots in the rise of migration. The number of expats from the continent has increased drastically over the last ten years. In fact, the fastest-growing migrant population is from sub-Saharan Africa. Lack of job prospects and rising political instability in countries like Libya, Somalia, and Sudan have prompted citizens to migrate overseas in search of better opportunities. Increase in migration eventually fuels their home economies through cross border remittances.

According to the World Bank’s Migration and Remittances report of April 2018, remittances to sub-Saharan Africa grew from USD 38 billion in 2017 to USD 46 billion in 2018. Continued growth is expected for 2019 as well. The downside to remittances in Africa is the high transfer costs; reports suggest it is more expensive to send money to sub-Saharan Africa than anywhere else in the world.

Problems faced by the remittance industry

When we talk about migration, it is essential to note that money transfers to Africa do not happen only from outside Africa. There is much movement within the continent as expatriates send money to Africa from within the continent. However, a lack of proper banking infrastructure in the region is a concern for remitters and receivers. 

Remittance costs in the continent are staggering when compared to the rest of the globe. When you calculate remittance costs for higher volumes and understand their impact on currency conversions, you will realise how expensive the whole process can be for Africa.

There is also a high level of financial exclusion in Africa, as international money transfers tend to be controlled by a handful of institutions. There has been a rise in remittance inflows to Africa and within Africa, but the continent’s financial infrastructure does not match this growth. Corruption, political turmoil, illiteracy, and the lack of civil stability in some countries also affect the remittance industry in the continent – and ultimately, African economies.

Problems faced by the remittance industry

International Money Transfer Organisations (IMTOs) can help reduce costs while increasing accessibility, security, and versatility. For example, Xpress Money partners with financial institutions across Africa to provide customers with more choice. We work with a wide range of banks, telcos, and non-banking financial companies (NBFCs) to make it convenient and economical to transfer funds. Among Xpress Money’s partners are leading financial players such as Cooperative Bank of Kenya, DFCU Bank in Uganda, ADB Bank in Ghana, FBN in Senegal, Real Transfer in Namibia, Commercial Bank of Ethiopia, Diamond Trust Bank, and Kenya Commercial Bank.  

How to transfer money with low fees to African countries?

One of the most popular channels for money transfers to Africa is the rampant use of mobile wallets. Mobile wallets are an effective way to reduce the costs of money transfer in Africa. Twelve years ago, mobile wallets gained popularity in Kenya as an easy and convenient way to transfer funds. M-Pesa was one of the pioneering contributors and offered additional services like microfinance loan repayment through mobile wallets. Interestingly, along with the rise of foreign remittances, sub-Saharan Africa also reported the maximum number of mobile-to-mobile money transactions. Over 45% of the world’s total transactions happen in this region alone. Today, Xpress Money offers mobile wallet services in African countries like Kenya, Ghana, Nigeria, Uganda, Benin, Zimbabwe, Congo, Cameroon, and Senegal.

Africa is one of the early adopters of digital remittances, and Xpress Money has built a strong base of mobile money transfer services across the continent. Our delivery channels in the continent also include cash-to-cash and account credit transfers, enabling customers to choose from a gamut of services. Most importantly, our services are instant, affordable, and secure.

If you choose to receive money in cash, Xpress Money provides an array of options for the banked and the unbanked. Our cash pay-out services are available in over 13500 locations across the continent. If you prefer bank transfers, Xpress Money services are available in countries such as Ethiopia, Morocco, Nigeria, Uganda, and many others. Africa has shown tremendous growth potential within the remittance sector, and it is interesting to see how African economies are already benefiting from money transfers in the region. While the absence of a formal infrastructure in many countries is a primary concern, institutions are working to bridge this gap. Xpress Money works towards creating an infrastructure that ensures remittances can flow cost-effectively across borders thereby supporting local economies.