Africa is known as one of the world’s most mobile population and most of the African nations account for a large and growing slice of the global remittance market. The World Bank report claimed that in 2018, remittances flows to Sub- Saharan Africa have increased substantially by almost 10 % to $46 billion. African migration has been rising steeply in recent years, fuelling the growth of cross-border flows.
According to UN Data survey in 2017, it has been analyzed that 25 million sub Saharan migrants were living outside their home countries. Nevertheless, the available data on migration and remittance flows are not accurate, as undocumented migration and informal remittance channels exist, mean there is definitely a much larger movement of people and money compared to the official figures suggest. The bigger demographic and economic picture presents a significant opportunity for the domestic remittance market.
Considering the current remittance situation in Africa, the market is full of challenges as well as opportunities. The most critical challenge being faced, is the need to lower the cost of remittances. Reports suggest that Africa has an exorbitant cost, averaging around 9% for a $200 transaction compared to the global average cost of around 7%. Undoubtedly, Africa has still a long way to go to be able to achieve the UN’s Sustainable Goal of 3% by 2030. Success will depend on building the right infrastructure and introducing policies to support an increasingly mobile population.
When it comes to infrastructure, Africa can take advantage of mobile money to be able to propel remittances across the continent as well as promote financial inclusion. The African continent is known as an early adopter of mobile technology and digital wallets, with M-Pesa blazing the trail in Kenya and in other African countries. It has been followed by other mobile initiatives and there is now a firm foundation to support the African diaspora.
Fundamentally, digital transformation is bringing possibilities of connecting more people in more African corridors. Cross- border transactions are facing many security measures and restrictions in order to stop money laundering and terrorist financing. In addition, we are witnessing a growing collaboration and partnerships between mobile money operators, banks and Fintech companies to improve the remittance infrastructure and to expand the potentials of digital technology. Hence, it is important that this is done in the spirit of free trade and open market access, as Africa has been characterized by often-exclusive partnerships and other barriers to competition. This has been the main reason why remittance costs in Africa remain high.
Whether migration is caused by civil disorder, the search for better prospects, or any other factors such as demographic and economic factors, the forecast is for increased movement between the African people. The existence of a fluid labour market marks the necessity for digitally enabled and competitive remittances. African Governments, Trade bodies, International money transfer operators and the Fintech community must work together to make that happen.