Tanzania’s high remittance fees hamper cash transfers

Tanzanian banks are retaining a quarter of the money sent out by citizens of neighbouring countries, hampering cash transfers within the East Africa Community, a new report shows.

High remittance fees hinder mobility of capital among countries and is a tactic used to lock in cash generated by foreigners within the country.

Fees charged by Tanzanian banks are four times the estimated global average of six per cent and more than two times the average paid by Africans when sending money from other parts of the world.

“The very high charges levied on remittance corridors to and within Africa reflect the central role of banks — the most costly transfer vehicle,” reads the report by UK’s Overseas Development Institute.

The high remittance charges are expected to entrench perceptions of Tanzania’s lukewarm approach to integration across the region.

The perception has led to faster collaboration between Kenya, Uganda and Rwanda in a partnership dubbed “coalition of the willing”.

The high cost is in spite of the presence by Kenyan banks in Tanzania, which are also present across all the east African countries, such as KCB, Equity Bank, NIC and Commercial Bank of Africa.

READ: Africa loses Sh155bn in high money transfer costs a year

The banks, however, said their systems are inter-operable allowing for customers to deposit in accounts in other parts of the region at no cost, an aspect that may not be captured by the survey.

“It is an issue that may not be addressed by the association of bankers but will pick traction from the integration process because those are some of the challenges that the process has to address,” said Kenya Bankers Association chief executive Habil Olaka.

Payment systems

Mobile money transfers across East African borders are yet to take root. Other options of transfer in the region include Western Union and Moneygram.

Last year, central bankers in the region interconnected the member countries’ payment systems with hopes of cutting the cost of cross-border money transfer and spurring regional trade.

The region has made huge gains in intra-regional trade and increased movement of workers and families among member states since 2005, but lack of a convenient and safe way to make and receive payments has remained an impediment.

The high fees were attributed to lack of transparency by operators, limited competition, regulatory practices that restrict market entry and low financial inclusion.

Kenya receives an average of Sh9 billion each month from the diaspora community with America and Europe being the main source while other markets, which include Africa, contribute about 23 per cent.