Why are financial transfers stagnating when Africa needs them more than ever?

Despite growing demand, financial transfers to Africa have remained stagnant at $54 billion for two years, highlighting a key economic problem.

In 2023, money transfer The amount transferred by Africans living abroad reached $54 billion. Although this amount is huge, it has remained stable for two years. However, these transfers remain vital for African economies. Nigeria was the first beneficiary with $19.5 billion, followed by Ghana, Kenya and Senegal.

Growing economic dependence

These financial transfers are a real mainstay for many African countries, especially as development aid and foreign investment continue to decline. For example, they account for more than 20% of GDP in Gambia and Comoros and more than 9% of GDP in Senegal. This financial support is crucial for families, especially for health and education costs.

High transfer cost

Despite its importance, remittances to Africa remain expensive. African expatriates must pay an average of 8% in fees, which can exceed 30% for some intra-African transfers. The World Bank says fees in sub-Saharan Africa are the highest in the world, at an average of 7.4%.

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Regulatory and technical barriers

The high costs are partly due to complex and inconsistent regulations. Remittance companies often have to obtain different licenses in each country, which complicates transactions between neighboring countries. In addition, digital solutions, while cheaper, are not always suitable for everyone due to the required documentation.

Innovation and technological solutions

Fintech companies are innovating to reduce these costs. For example, some allow bills to be paid directly to families who stay behind, thus avoiding traditional bank fees. However, cryptocurrencies such as Bitcoin remain off-limits due to their volatility and uneven regulation.

The challenge of population mobility

Refugees and other displaced people face additional barriers. In Uganda, for example, the lack of centralized refugee ID cards complicates access to remittance services. Harmonizing regulations, reducing documentation requirements, and encouraging digital innovation are necessary to facilitate these transfers.

To improve the situation, multiple avenues should be considered: harmonizing regulations, reducing documentation requirements, encouraging digital innovation, and increasing competition among providers. These measures could transform the remittance landscape in Africa, making these services more accessible and affordable to all.