Boosting the flow of remittances can help revive the economy

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

In 2010, officially registered remittances to developing countries reached $ 334 billion according to World Bank figures. The amount of money remitted 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 moved from their places of origin to earn a living: from 21.6 million in 2000 to 36.3 million in 2017.

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

The COVID-19 pandemic has reduced national remittances in Africa. The urban economy almost came to a standstill. The pandemic has had a negative impact on internal remittances and has dealt a severe blow to 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 level of employment of foreign workers has decreased compared to that of local workers. The number of foreign workers has decreased considerably due to job losses and many of them are returning to their countries.

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

The digital remittance channels that have gained popularity during these difficult times also charge a very high fee. Therefore, policy makers need to ensure that remittance service providers do not have difficulties in partnering with banks. Improving money transfer operators’ access to post offices, national banks, and telecommunications companies could help remove barriers to entry and induce competitiveness among such operators.

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