Despite predictions that the COVID-19 pandemic may have reduced remittance flows, the momentum was sustained due to a 48 per cent increase in money sent through mobile channels, according to a report titled, MobileRemit Africa launched yesterday by the International Fund for Agricultural Development (IFAD).
Global remittances, the hard-earned money sent by migrant workers to their family members in low- and middle-income countries (LMICs) also grew by 8.6 percent in 2021, according to the report.
Speaking as the world celebrated, ‘The International Day of Family Remittances’ (IDFR), adopted by the United Nations General Assembly, the President of IFAD, Gilbert F. Houngbo said the digitalisation of remittances, particularly through mobile channels was a great opportunity to boost rural development as over half of these funds go to rural areas. “Digitalisation reduces fees and other transactions costs like travel time, making the process more convenient and safer while promoting digital and financial inclusion,” he added.
According to him, remittances flow of $605 billion more than tripled the total amount of international official development assistance $178.6 billion.
“It is expected that money sent home by over 200 million migrant workers around the world this year is expected to reach $630 billion, providing a lifeline for more than 800 million family members.
Remittances lift people out of poverty, put food on the table, pay for education, cover health expenses, allow housing investments and many other family goals beyond consumption,” added Houngbo.
“The aggregated flows of family remittances to LMICs are expected to reach US$5.4 trillion by 2030, a figure equivalent to twice the GDP of Africa in 2021,” he said.
However, the upward trend seen in remittances’ growth was expected to moderate in 2022 as inflation erodes wages while pandemic-related support programmes end in rich countries, IFAD emphasised.
For the Manager of the Financing Facility for Remittances at IFAD, Pedro De Vasconcelos, “Mobile remittances offer a unique opportunity to bring millions into the formal financial sector, bringing financial services and income-generating opportunities closer to their communities,” he said
“In Africa more than in any other region, mobile money has triggered financial inclusion, especially in Eastern and Western Africa.
“At the customer level, adoption of mobile money alternatives results in reduced average fees and transaction costs due to saving time and travel to send and receive remittances; increased convenience and safety to both remittance senders and recipients; and expanded reach among vulnerable populations, including rural dwellers and women.”
Meanwhile, an analysis of seven African countries conducted by IFAD in the report, the use of mobile channels for remittances by migrant workers and their families brought an overall reduction in costs.
It however noted that the “African remittance market remains the most expensive, with an average cost of 7.83 percent against the global average of six percent.
“Reducing the cost to the three percent goal agreed in the Sustainable Development Goals (SDGs) would lead to an additional $4 billion per year being received by migrant families in Africa.
“Mobile transfer costs are already in line with the SDG target of three percent,” it added.