By Babajide Komolafe
Remittances to sub-Saharan Africa exceed US$21 billion and are forecast to grow by almost two percent in 2010 despite a weak global economy, said the World Bank.
The Bank stated in a press release issued on Tuesday, urging governments and remittance service providers to cooperate and reach out to each other to enhance the development impact of remittances for Africa.
“A recent Bank survey for Kenya estimates that 14 percent of adult Kenyans regularly receive an average of US$735 in remittances from abroad a year. This amount is remitted in seven transactions amounting to US$105 each, according to the survey for Kenya, which was launched today at a joint conference by the World Bank and the Central Bank of Kenya in Nairobi.
The conference announced the results of a national survey profiling remittance inflows to Kenya in 2009 as part of the Future of African Remittances (FAR) Program—a Bank platform for enhancing competition and innovation in the remittances market in Africa. The survey also explores formal and informal channels used for transfers, associated costs, and how remittances are used by Kenyan families.
Remittance flows represent a significant share of Gross Domestic Product (GDP) for Kenya and many African countries. But many governments and financial institutions in Africa overlook the effective role that remittances can play in dealing with economic shocks, access to finance and poverty reduction.
“We urge governments and remittance service providers to cooperate and reach out to each other to enhance the development impact of remittances for Africa,” said Marilou Uy, World Bank’s Africa Region Director for Finance and Private Sector. “The public and private sectors must do well what they do best and rise above their respective limitations to maximize the potential of remittances.”
Despite significant progress in improving the recording of remittances the world over, most official statistics in sub-Saharan African still underestimate the true size of remittance flows. This is in part due to a focus of data collection efforts on formal channels, such as banks.
Efforts to improve remittance data collection can positively contribute to understanding channels used and play a role in leveraging the development impact of these substantial resource flows for recipients and the communities where they live.
While remittances are a private resource flow between family members and friends in a community, policymakers and remittance service providers can play an active and supportive role in leveraging the development impact of remittance transfers by facilitating formal remittance flows, thereby reducing the costs of remittance transfers and enriching families and empowering communities where recipients live.
Governments must develop their legal and regulatory frameworks, as remittance service providers move beyond simple cash-out systems and design and deploy innovative and functional financial products and services linked to remittances that facilitate savings, loans, mortgages and insurance,” said Michael Fuchs, Advisor to the World Bank’s Africa Region on Finance and Private Sector Development.
Governments need to foster increased competition and technological innovation with a view to increasing formal flows and financial deepening, thereby reducing the costs of transmittal and increasing access to financial services among remittance recipients.
“Under the FAR Program, the World Bank is augmenting its efforts in sub-Saharan Africa to assist governments and remittance service providers to realize the development impact of remittances,” said Benjamin Musuku, World Bank’s Africa Region Payment Systems Specialist, who leads the FAR program.