Business News of Tuesday, 29 January 2013
Ghana together with South Africa and Tanzania have been described as the most expensive sending countries in Africa, in terms of remittance prices, the World Bank's (WB) Send Money Africa database report disclosed on Tuesday.
The report which was copied to the Ghana News Agency in Accra said the high cost of the remittances was as a result of several factors including limited competition in the market for cross-border payments, adding that fees averaged 19.0 for Ghana, 20.7 for South Africa and 19.7 for Tanzania.
It said Sub-Saharan Africa was the most expensive region to send money to, with average remittance costs reaching 12.4 per cent in 2012.
The report added that the average cost of sending money to Africa was almost 12 per cent higher than the global average of 8.96 per cent, and almost double the cost of sending money to South Asia, which had the world's lowest prices (6.54 per cent).
It said Africa's overseas workers, who sent close to US$60 billion in remittances in 2012, paid more to send money home than any other migrant group. The report quoted Gaiv Tata, Director of the World Bank's Africa Region and Financial Inclusion and Infrastructure Global Practice as saying: “High transaction costs are cutting into remittances, which are a lifeline for millions of Africans”.
“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”, he added. The report said the G8 and the G20 established 5 per cent as the target average remittance price to reach by 2014.
It said that lower cost remittances advanced financial inclusion, since they were often the first financial service used by recipients, who were more likely to use other financial services including bank accounts.
The report added that remittance prices were even higher between African nations.
It quoted Massimo Cirasino, Manager of the Financial Infrastructure and Remittances Service Line at the World Bank as saying “Governments should implement policies to open the remittances market up to competition”.
“Increased competition, as well as better informed consumers, can help bring down remittance prices”, he added.
Send Money Africa also found that banks which are the most expensive remittance service providers were often the only channel available to African migrants. The report suggested that a regulatory environment that encouraged competition among remittance service providers could help bring down remittance prices.
Migrant workers could also benefit from more transparent information on remittance services, it added.
The report suggested that if remittance prices were brought down to five per cent from the current 12.4 per cent average cost, it would put US$4 billion more in the pockets of Africa's migrants and their families.