Politics and policy
Africans in diaspora pay Sh350bn more for money transfers
Posted Wednesday, January 30 2013 at 16:50
- A new World Bank report says Africans are paying Sh350 billion in excess charges a year.
- At 9.2 per cent, Kenya’s charges are lower than Africa’s average but still higher than Asia’s which is under seven per cent.
- World Bank has called for harmonisation of telecoms and banking laws and review of money laundering and anti-terrorism financing laws to enable more banks adopt cross-border mobile transfers.
Despite Kenya leading the continent in domestic mobile money transfer, its diaspora and the rest of Africa pay a steep price for international transfers partly because of money laundering concerns.
A new World Bank report says Africans are paying Sh350 billion in excess charges a year, adding that governments like Kenya could ease the burden by addressing challenges slowing down the growth of the transfer business for phone firms and banks.
Last year, some $1.2 billion (Sh105 billion) was sent to Kenya, meaning senders and recipients lost over Sh10 billion in the process at an average cost of 9.2 per cent.
Safaricom’s M-Pesa and banks including KCB, Barclays, Equity and Co-operative have been offering diaspora cash transfer services but the bulk of the business remains with money transfer companies including Western Union and international banks.
At 9.2 per cent, Kenya’s charges are lower than Africa’s average but still higher than Asia’s which is under seven per cent.
World Bank has called for harmonisation of telecoms and banking laws and review of money laundering and anti-terrorism financing laws to enable more banks adopt cross-border mobile transfers.
“Money transfer services through mobile phone networks have increased significantly in Africa, especially for internal remittances in Kenya but the use of mobile phones to transfer international remittances is limited by concerns over money laundering,” it says.
The African diaspora in general and sub-Sahara in particular is paying more than any other immigrant group in the world for money transfers.
It is estimated that 30 million Africans living abroad send cash to some 120 million people on the continent.
Last year service providers earned $7.44 billion (Sh651 billion), the World Bank said quoting figures from its Send Money Africa database.
“Bringing remittance prices down to five per cent from the current 12.4 per cent average cost would put $4 billion (Sh350 billion) more in the pockets of Africa’s migrants and their families who rely on remittances for survival,” World Bank said Wednesday.
The bank said the average money transfer to the continent was nearly 12 per cent more than outside Africa where it averaged 8.96 per cent. South Asia pays the equivalent of 6.54 per cent which is the lowest.
“High transaction costs are cutting into remittances, which are a lifeline for millions of Africans,” said Gaiv Tata, Director of the World Bank’s Africa Region and Financial Inclusion and Infrastructure Global Practice.