World Bank Unveils Portal On Diaspora Remittances to Africa

This transparency is important.

Send Money Africa provides data on the cost of sending and receiving relatively small amounts of money from selected countries worldwide to a number of African countries, as well as within the African continent. The objective of the database is to increase transparency in the market and provide migrants with complete and reliable information on all the components of the transaction. Send Money Africa allows the users to compare the costs applied by several providers to send and receive money from 15 major sending countries to 27 African receiving countries, for a total of 50 "country corridors".

See country corridors here.

Kenya: Safaricom’s M-Pesa goes global with Western Union

Safaricom, Kenya’s biggest mobile operator, has announced a deal with Western Union, the international money transfer company, to enable its M-Pesa mobile money service subscribers to receive direct cash transfers from Western Union agents worldwide.

Consumers can now send money directly to the mobile ‘wallets’ of Safaricom M-PESA subscribers in Kenya from 45 countries and territories,” explains Karen Jordaan, East and Southern Africa Director at Western Union.

The service taps into Africa’s huge remittances flows, which the World Bank estimates to have totalled $40bn in 2010. 

See full piece here and related posts here.

Kenya's MPESA to Spearhead Seamless Mobile Financial Transfers in the Continent

Michael Joseph, the immediate former CEO of Safaricom, has been tapped to spearhead the expansion of M-Pesa to other African countries as part of a plan to have a seamless mobile money transfer service on the continent.  M-Pesa is already successful in Kenya, and is now also available in Tanzania, Afghanistan, South Africa, while a pilot service is on in India.

But Vodafone is looking at spreading the services to other African countries such as DR Congo, Lesotho, and Mozambique with the aim of linking the market.  This will see mobile phone consumers send and receive money across borders in a move that will pile pressure on traditional money transfer service operators such as Western Union and Money Gram who have lost market share in the local market.

“M-Pesa is the most successful mobile money transfer service in the world and with Michael is a sure bet to drive its regional expansion having been behind its growth in Kenya,” said a senior executive at Safaricom who sought anonymity because he is not the firm’s spokesperson. “The rollout of the service in the new territories will not automatically enable registered Kenyan subscribers to send or receive money.

“But there is a plan to link them to these markets in coming years,” said the source. At present, Safaricom subscribers can receive money from the UK directly to their mobile phones in transactions carried out in partnership with Western Union and Vodafone. Mr Joseph retired from Safaricom in November after serving for 11 years and passed the leadership mantle to Bob Collymore.  He sits on the board of Safaricom and Johannesburg-based Vodacom, which is owned 65 per cent by the Vodafone Group — which has operations in five countries including South Africa, Tanzania, DR Congo, Lesotho and Mozambique.

It was under him that Safaricom rose to become East Africa’s largest and most successful firm in terms of earnings, and a market leader in Kenya’s mobile telephony market with a 76 per cent stake.  By 2005, Safaricom’s grip on the Kenyan mobile market had been cemented and in 2007 the company launched its mobile money transfer service M-Pesa — an innovation whose implementation was credited to Mr Joseph’s courage and which paid off handsomely winning over more than 13.5 million subscribers by September 2010.

Transactions worth Sh596.8 billion have gone through M-Pesa since its inception.  The service accounted for 11 per cent of Safaricom’s revenues or Sh5.2 billion in the six months to September this year up from Sh930 million in the same period in 2008.  Safaricom has used M-Pesa as a value added service, successfully using it to defend and attract subscribers from rival networks.

The service has driven a revolution of sorts in Kenya’s financial services where it is being used for payment of utility bills, dividend, goods at retail shops and banking services such as ATM withdrawals, deposits and cash transfers.  It is this market position that Vodafone seeks to replicate in five African countries served by Vodacom, especially DR Congo, Lesotho and Mozambique. Mr Joseph’s brief will be to shepherd the rollout of the product in the three countries and to shore up its performance in Tanzania and South Africa where the mobile money transfer service is yet to penetrate the market.

Low cost

The service was launched in South Africa in September and Tanzania in April 2008.  Nearly half (47 per cent) of all money transfers in Kenya now take place through the mobile phone, according to a survey by Financial Sector Deepening, a research firm that conducted the survey for the Central Bank of Kenya.

This has seen traditional money transfer service operators lose their grip on the market as more Kenyans turn to mobile phone-based platforms.  Popularity of the service is mainly hinged on the low cost of transaction, safety, and speed. Mr Joseph succeeded Mr Grieves-Cook who had served as the KTB chairman for two consecutive terms since his first appointment in November 2004.  Under his chairmanship, KTB managed to put up aggressive marketing campaigns targeting domestic and international tourists.

In addition, the organisation partnered with international travel and leisure groups as well as the media and airlines to build a strong image for Kenya as a niche tourist destination.

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The Future of African Remittances

Did you know that the remittance service landscape in Africa is dominated by two international money transfer operators that control in excess of 60 percent of the remittance access points across Africa? In addition, because of exclusivity agreements between international money transfer operators and their mainly commercial bank partners, other types of institutions are largely excluded from the market due to regulations that limit non-financial institutions from playing a meaningful role in remittance services markets in most African countries.

International remittance flows to sub-Saharan Africa currently exceed 30 billion dollars annually, while on a global basis, remittances are estimated to have exceeded $315 billion in 2009. In SSA, they affect as many as 25 million recipient households, and have the potential to significantly reduce poverty and stimulate growth. Over the past decade, remittances have evolved from a miscellaneous trade accounting item into a widely recognized flow of foreign financing that often exceeds FDI and ODA to many African countries.

Recognizing the impact that remittances have on development, policy makers and development partners in many other regions have invested substantially in measures to leverage their potential. Worldwide, remittances are now better tracked, transaction costs have declined, and recipients are being integrated into the financial system, giving them more productive options to use their money, thereby leveraging development impact for the communities where they live.

Unfortunately, much of this progress in remittances has not yet reached Africa. However this is slowly changing especially in light of a useful World Bank initiative in collaboration with national central banks of Kenya, Ethiopia, Uganda- to address the Future of African Remittances (FAR).

For instance, the cost of sending remittances to Africa still exceeds 10-15 percent for many countries and reaches 20-25 percent for remittances sent within Africa, which are of growing importance given migration patterns. Reducing transaction costs by only 5 percentage points could increase total resources available to the recipient households by as much as US$ 1.5 billion per year.

In addition, only 20 percent of African households have access to formal financial services and remittances are often relegated to informal transmission channels, which are less secure and even more costly. Promoting product innovation and improving payment services tailored to the needs of the recipient households (especially in rural areas) offers a win-win solution. Households can use remittances as an asset to access formal financial services and benefit from safer and cheaper remittance transfers, while banks and other financial institutions can mobilize a higher share of the remittances to fund private sector investment.

The Future of African Remittances Program aims at strengthening the market for remittance transfers through the following efforts:

• • Technical assistance for regulatory reform targeting the remittance services market
• • Technology development incentives for products linking remittances to financial products (housing, insurance, savings and investments), with a focus on mobile software applications
• • Knowledge exchange with advanced remittance markets in Asia and Latin America
• • Training for regulators on best practices for regulating remittance markets and fostering innovation
• • Financial literacy and encouragement programs for first and last mile remittance product uptake

In combination with rapid innovations in mobile technology in Africa, remittances present a unique opportunity to expand access to finance and lift thousands of communities out of poverty.

More information on the African Remittances Program can be obtained here. 

Remittances to African Countries

Worker remittances are an important source of income for many African countries. With labour markets deteriorating everywhere, many workers were forced to cut the transfers to their families, with potentially large impacts on household income, consumption at home, import taxes  and government revenue.  A number of African countries appear to be particularly dependant on remittances and for instance, in 2008 Lesotho, had a 27% remittance–to- GDP-ratio, the highest in Africa.  According to the World Bank Report, titled Outlook for Remittance Flows 2009-2011 the remittances are mainly received from neighbouring South Africa.

It is difficult to measure remittances, since a good portion is transferred informally and does not appear in official balance-of-payments statistics. However according to the World Bank, when measured in absolute amounts, in 2008 Nigeria and Egypt belonged to the top 10 worldwide recipients of remittances, with inflows of USD 10 billion to Nigeria and USD 9 billion to Egypt. Initial results (or estimates) for 2009 show that some countries experienced sharp falls in remittances, while others were less affected by the crisis.

In Egypt and Morocco, remittances appear to have declined by about 20% in the first nine months of 2009. In Kenya, remittance inflows declined by 8.5% in the first seven months of 2009 against the previous year. Senegal, Lesotho, Sierra Leone, Ethiopia, Liberia, Mauritius and Mozambique also suffered from falling remittances. In Cape Verde, remittances remained very stable in 2009 or may even have increased marginally. Significant increases are reported for Uganda from July 2008 to June 2009. According to World Bank estimates, remittances to African countries declined from almost USD 41 billion in 2008 to above USD 38 billion in 2009 (minus 6.6%).

The decline was more pronounced in North Africa than in sub-Saharan Africa. The actual decline of remittances in 2009 could, perhaps, have been even stronger than this estimate.  Overall however, remittances-to-GDP ratios (prior to the crisis) were between 8% and 11% in Nigeria, Sierra Leone, Togo, Guinea-Bissau, Senegal, Cape Verde and Morocco.  Meanwhile, Gambia, Egypt, Sudan, Comoros, and Uganda followed, with ratios between approximately 5% and 7%.

Remittances are influenced by international movement, migration of workers, and the liberalization of temporary movements of individual service suppliers under the fourth mode (mode 4) of service delivery in the WTO trade in services negotiations.  

Additional World Bank resources on remittances can be obtained here and WTO resources on Mode 4 here.