high charges undermine african diaspora remittances

Africans are paying a “super tax” to send remittances home, because of the high charges imposed by two of the world’s leading money transfer operators –Western Union and MoneyGram.  This is the conclusion drawn by the Overseas Development Institute, a London based think-tank, which carried out an extensive study of the cost of remittances paid by diaspora communities from developing countries.

Remittances from diaspora communities play an increasingly important role in supporting the welfare of communities left behind, and they have become a key source of external resource flows for developing countries. According to the latest issue of the World Bank’s Migration and Development Brief, these funds  now exceed official development assistance and are more stable than private debt and portfolio equity flows.  But a major development institute in London has warned that the benefits of remittance transfers to Africa are lost as a result of the high charges imposed by two of the leading money transfer operators –MoneyGram and Western  Union.

This year,  remittances to developing countries are expected to  top $436 billion and by 2016, are projected to rise to $516 billion. India receives the highest level of remittances, with $70 billion in 2013, while Nigeria is also a large recipient, receiving $21 billion. These funds support education, health, education, food security and productive investment in agriculture and in many developing countries, they surpass earnings from major exports.

In a report issued to coincide with  the World Bank’s Brief, the Overseas Development Institute stated that the African diaspora now pay 12% to send $200 – almost double the global average.  The report states that “ in effect, Africans are paying a remittance ‘super tax’. Reducing charges to world average levels and to the 5% target would increase transfers by $1.8 billion annually. That figure would pay for the education of some 14 million primary school age children in sub-Saharan  Africa –half of the out-of-school total; improved education for 8 million people or  clean water for 21 million.


Sources: www.odi.org/remittances-africa & http://blogs.worldbank.org/peoplemove/




Written by Patsy Robertson, Ramphal Institute, Chair