The average cost of sending money to Africa is almost 10%, compared to the global average of just over 7%, an issue that can be solved with proper investments in technology. This is according to a new analysis which will be presented at this week’s Mobile 360 conference in Dar Es Salaam, Tanzania.
“Sending money home is very expensive, compared to the relatively low incomes of migrant workers and the small amounts they typically send,” Leon Isaacs, CEO of DMA, who will present the research at the conference, said in a press release.
With the Mobile 360 conference taking place in Tanzania, the analysis reveals that sending money to the country is more expensive than anywhere else in East or Southern Africa.
More than £44 million is sent each year by more than 38,500 Tanzanians living in the UK. But the cost of sending money is twice as much as sending to neighbouring Kenya or Zimbabwe. The average cost of sending £120 from the UK is:
14% to Tanzania, 13% to Ethiopia, 13% to Zambia, 13% to Rwanda, 12% to Mozambique, 9% to Uganda, 7% to Kenya and 7% to Zimbabwe.
The UN Sustainable Development Goals say that by 2030 the global average price for remittances should not exceed 3% of face value, with even the most expensive countries not being more than 5%.
The key is tech
“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 be focusing on scaling existing technology, creating the regulatory environments for those technologies and on changing consumer behaviour to send money digitally from ‘end-to-end’.” Added Isaacs.
Every year one and a half million people in the UK send over four billion pounds to Africa. But the research reveals that nine out of ten of these transactions are carried out using cash and only one in twenty is initiated online.
The report argues that international development donors should support a pilot project to enable UK based remittance service providers to access Southern Africa through SADC’s integrated regional electronic settlement system, through which 95 banks serve 11 Southern African countries.
“It’s more expensive to send money to Africa than anywhere else in the world. But it doesn’t have to be like that. The way we stay in touch, do our shopping, and even the ways in which some of us find love, have all gone digital. Yet, for the vast majority of people sending money home to friends and family in Africa, they are still doing it the way they have always done it: in cash.” Juliet Munro, Director of Inclusive Finance at FSD Africa, said in a press release.
The report was commissioned by Financial Sector Deepening Africa (FSD Africa) and written by Developing Markets Associates (DMA).