The World Bank (WB) and the African Union (AU) have taken steps to lower the cost of sending remittances to and within Africa by launching an online database that will help increase transparency about prices and stimulate greater competition among service providers.
The database, Send Money Africa, is a years-in-the-making partnership between the Bank, the African Union Commission, and donors, according to the information WB disseminates to the media. Through its interface, migrants can compare the cost that remittance service providers charge to send a particular amount to a given country.
“Send Money Africa will stimulate competition among the service providers and ultimately induce a reduction of the costs. As a result, remittance senders and recipients will benefit from transparent, efficient, less costly remittance services,” said Richard Cambridge, Manager of the Africa Diaspora Program in the World Bank’s Africa Region.
The World Bank estimates that about 120 million people in Africa receive money from about 30 million relatives and friends who left their home country, for a total of US$ 40 billion a year. However, when it comes to choosing which operator to use to send money to Africa, too often migrants do not have the necessary data to make an informed choice.
According to the World Bank “Remittance Prices Worldwide” database, Africa is the most expensive region of the world to send money to. The average cost of sending money to Africa is over 12 percent of the amount sent, compared to a global average cost of 9 percent.
“By virtue of being countercyclical, remittances play a crucial role in poor households,” said Amb. Olawale Maiyegun, Director of Social Affairs of the African Union Commission. “For this reason, any reduction in the cost of the transfer would result in more money remaining in the pockets of the migrants and their families.”
At present, Send Money Africa provides data on the cost of sending and receiving relatively small amounts of money (the equivalent of US$200 and 500) from 15 major sending countries worldwide as well as in Africa to 27 African receiving countries. Research has shown that if the cost of sending money could be reduced by 5 percentage points relative to the total amount sent, remittance recipients in developing countries would receive over US$16 billion more each year than they do now.
In Africa, where remittances represent the second largest source of foreign inflows after foreign direct investment, this added income could provide recipients and their communities with more opportunities for consumption, savings, and investment in local economies.
The database also contains useful information on the methods that can be used to send money, the actual amount of money that is received in local currency by families and friends in the home country, the time needed before the remittance is available to the recipient, the places where the money can be collected, the exchange rates applied to the transaction, and more.
Send Money Africa is published by the Payment Systems Development Group of the World Bank Financial and Private Sector Development Vice Presidency, in the context of the African Institute for Remittances (AIR) Project, which is managed by the Africa Diaspora Program unit of the World Bank Africa Region Vice Presidency.
The AIR Project is funded by the European Commission and implemented by the World Bank in collaboration with the African Union Commission and its member states. It aims to facilitate the creation of the Institute and develop the capacity of the member states of the African Union, remittance senders and recipients, and other stakeholders to implement concrete strategies and operational instruments to use remittances as development tools for poverty reduction.