The latest edition of the bank’s ‘Migration and Development Brief’ said remittances to SSA have been “buoyed by improved economic activity in high-income OECD countries”.
However, the report said with an average cost of sending money to the region standing at 9.1%, SSA “remains the highest-cost region”.
The global average cost of sending $200 “remained stagnant at 7.2%” in the third quarter of 2017, the report said. “This was significantly higher than the (UN-backed) sustainable development goal (SDG) target of 3%.”
Two major factors contributing to high costs are exclusive partnerships between national post office systems and any single money transfer operator (MTO), the report said. This “stifles market competition and allows the MTO to raise remittance fees, as well as de-risking by commercial banks, as they close bank accounts of MTOs, in order to cope with the high regulatory burden aimed at reducing money laundering and financial crime”, it said.
Lead author of the report and head of the Global Knowledge Partnership on Migration and Development (KNOMAD), Dilip Ratha, said there is an “urgent need to address de-risking behaviour of global banks”.
Ratha said: “Remittances are a lifeline for developing countries; this is particularly true following natural disasters, such as the recent earthquakes in Mexico and the storms devastating the Caribbean. It is imperative for the global community to reduce the cost of remitting money, by eliminating exclusivity contracts, especially in the high-income OECD countries.”
The report said Nigeria was among major remittance recipients ($22bn) while India retained its top spot, with remittances expected to total $65bn this year, followed by China ($61bn).
A study published by the Overseas Development Institute (ODI) in 2014 (36-page / 455KB PDF) said Africans were effectively paying a ‘super tax’ on money transfer fees that were more than double the global average.
The ODI, a UK-based think tank, said cutting the costs of remittances to Africa would enable the continent’s diaspora “to make a bigger contribution to the region’s development and strengthen self-reliance”.