African migrants have been charged US$4 billion more in remittances fees annually, the World Bank study unravels. On average, African migrants pay 5 percent more to wire money back home than other migrant groups.
Africans overseas sent about US$60 billion in remittances in 2012. “Sub-Saharan Africa is the most expensive region to send money to, with average remittance costs reaching 12.4 percent in 2012,” the World Bank’s Send Money Africa database proved, adding that the average cost of sending money to Africa is almost 12 percent higher than global average of 8.96 percent.
Both the G8 and the G20 established 5 percent as the target average remittance price to reach by 2014. “High transaction costs are cutting into remittances, which are a lifeline for millions of Africans,” said the World Bank’s Africa Region Director, Gaiv Tata.
“Remittances play a critical role in helping households address immediate needs and also invest in the future, so bringing down remittance prices will have a significant impact on poverty.” Lower cost remittances also advance financial inclusion, since they are often the first financial service used by recipients, who are then more likely to use other financial services including bank accounts.
The World Bank said remittances are even higher between African nations, with South Africa (20.7 percent), Tanzania (19.7 percent), and Ghana (19.0). Several factors, including limited competition in the market for cross-border payments, are responsible for the hikes.
“Governments should implement policies to open the remittances market up to competition,” said Massimo Cirasino, Manager of the Financial Infrastructure and Remittances Service Line at the World Bank. “Increased competition, as well as better informed consumers, can help bring down remittance prices.”
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