Boosting the flow of remittances can help jump-start the economy

Migrants send money to their families and friends who do not live with them. For many developing countries, the volume of remittances is quite large and facilitates the mobility of funding.

In 2010, officially recorded remittances to developing countries reached $ 334 billion according to World Bank figures. The amount of money sent by migrants from sub-Saharan Africa has increased tenfold in two decades, from $ 4.8 billion in 2000 to $ 48 billion in 2018. This is due to the steady increase in the number. of people who have left the country. of their original livelihoods – from 21.6 million in 2000 to 36.3 million in 2017.

The economies of smaller, poorer countries are more dependent on remittances which facilitate the flow of foreign funds to multiple countries. According to the World Bank, if remittances made through informal channels are recorded, the total remittances could be up to 50% higher than the official record.

The COVID-19 pandemic has reduced domestic remittances to Africa. The urban economy has almost stopped. The pandemic has had a negative impact on internal remittances and has severely affected the ability of migrants to send money, especially to rural areas.

The pandemic has slowed the flow of migrants due to widespread fear of infection, travel restrictions and poor job prospects. In many host countries, the employment level of foreign workers has declined relative to that of local workers. The number of foreign workers has significantly decreased due to job loss and many of them are returning to their countries.

The decline in remittances is worrying for Africa and calls for government efforts to maintain remittances in Africa. In addition, the fees paid to remittance service providers to send money to Africa are very high and the cost of international remittances to Africa is also very high.

Digital remittance channels, which have grown in popularity in these difficult times, also charge very high fees. Therefore, policymakers should ensure that remittance service providers do not encounter difficulties in establishing partnerships with banks. Facilitating money transfer operators’ access to post offices, national banks and telecommunications companies could help remove barriers to entry and promote the competitiveness of these operators.

Remittance channels can also be used to leverage diaspora investments through diaspora bonds and bond financing through the securitization of remittance flows. The global community should consider creating a non-profit remittance platform to provide a one-stop solution for the flow of remittances, especially for the benefit of the poor.