Remittances to Africa are likely to drop by 5.4%, findings from the 2021 report of Continental Migration have revealed. As of 2020, total remittances in the continent amounted to $44 billion. However, based on the report’s findings, a drop to $41 billion is expected this year.
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The expected decline in Africa’s remittances is attributed to the COVID-19 pandemic as one of the main causes. Despite this, a report by Africa News shows that remittances have become a reliable source of capital to the continent more than foreign investments.
Drawing from this, the Continental Migration Report, advised governments to make active efforts in boosting remittances in their fight against the pandemic. Aside from COVID-19 being one of the most likely causes of remittance drop, the 2021 report noted that high transfer costs played a major role as well.
Calculating the costs involved, the report gave an instance of where somebody sending $200 to Africa is likely to incur an average fee valued at 8% of the amount sent. This puts the average transfer fee 5% above the target of 3% which is Goal 10 among UN Sustainable Development Goals.
Additionally, the CM 2021 report acknowledged the efforts of certain African countries to lower high remittance fees. One of the measures reported is relaxing forex controls, thereby paving the way for reduced costs on electronic and mobile money transfers.
Highlighting recommendations, the report advised African states to enact laws relating to sending and receiving remittances. More so, the report recommended healthy competition among local banks and remittance agencies. According to the report, this will encourage low-cost transfer services.
The report concluded by recognizing the role of mobile money transfer service providers like Mpesa. However, it did not touch on crypto-based solutions despite their significant involvement in addressing high remittance costs.