Cost of diaspora remittances high as tech improves

Sending money from the United Kingdom (UK) to Africa is more expensive than to anywhere else in the world despite new technologies that should make money remittances cheaper.

A new report to be released on Thursday during the Global Remittance Conference in New York, US, argues that existing technologies like regional automated clearing houses, remittance payment processing hubs should make sending money from UK to Africa very economical.

The report commissioned by Financial Sector Deepening Africa (FSD Africa) and written by Developing Markets Associates (DMA) showed that in Kenya, £334 million (Sh44.4 billion) is sent annually by 151,073 Kenyans living in the UK.

The average cost of sending £120 (Sh15,960) from the UK to Kenya is seven per cent, much lower though than to Tanzania that costs 14 per cent.

“Sending money home is very expensive, compared to the relatively low incomes of migrant workers and the small amounts they typically send,” said DMA chief executive Leon Isaacs.

“The real challenges contributing to higher costs of sending money from the UK to Africa are not fixable by new technologies alone. Instead, we need to focus on scaling existing technology, creating the regulatory environments for those technologies and on changing consumer behaviour to make the sending of money digital from end-to-end,” added Mr Isaacs.

The report showed that the average cost of sending money from UK to Africa is almost 10 per cent, compared to the global average of just over seven per cent.

The report also showed that 1.5 million people in the UK send over £4 billion to Africa every year. But it revealed that nine out of 10 of these transactions are carried out using cash and only one in 20 is initiated online.

The United Nations Sustainable Development Goals say by 2030 the global average price for remittances should not exceed three per cent of face value, with the most expensive countries not being more than five per cent.