• Monday, May 27, 2024
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Why Sub-saharan Africa is costliest region to send remittances

Why Sub-saharan Africa is costliest region to send remittances

Sub Saharan Africa (SSA) is the costliest region to send remittances. The cost of sending money from abroad to SSA is almost two times higher than what it cost to transfer funds to any other part of the world, data analyzed from the October 2020 Brief of the World Bank’s Migration and Development report shows.

While it cost an average of 8.5 percent to send, for example, $200 to SSA in Q3 2020, it cost an average of 5 percent and 7 percent to send the same amount to South Asia and the Middle East and North Africa, respectively.

The increase in formal remittances channels coupled with the decrease in informal means of sending home money amid the COVID-19 pandemic were some of the factors responsible for the high cost of remittances to SSA.

“Money transfer companies have experienced a significant increase in their transactions through formal channels in the wake of the global pandemic,” the World Bank report said.

Moneygram’s digital transactions surged 106 percent in 2020 Q2 compared to the previous year, while Western Union’s rose 50 percent for the same period.

According to the World Bank, remittance costs across many African corridors and small islands in the Pacific remained above 10 percent while it cost 5 percent in Asia.

The Washington-based lender linked SSA remittance cost to the fact that “new migration flows are reduced to a trickle and return migration surges.” It added that “2020 may well become the first year in recent decades to mark an actual fall in the stock of international migrants.”

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Amid travel bans and restrictions on crossborder mobility set in place since March 2020 in several countries, a smaller number of people crossed borders during the first six months of 2020. According to the provisional results of Germany’s migration statistics, the number of people arriving in the first half of 2020 was down 29 percent. Australia predicts that net migration numbers will fall from 154,000 in the 2019–20 financial year to a net loss of 72,000 in 2020–21, a first since World War II

According to the International Migration Outlook 2020, issuances of new visas and permits in OECD countries fell by 46 percent in the first half of 2020 compared with the same period in 2019, registering the largest drop ever recorded.

“The COVID-19 pandemic has made it more difficult for migrants to remit money to Sub-saharan Africa using traditional or informal channels as most payments are still in cash and some money transfer operators are closed due to the o crisis,” Dilip Ratha, member of the Migration and remittances Uni of the Jobs Group in the Social Protection and Jobs Global Practice said.

According to Ratha, the promotion of digital technology, which is cheaper than non-digital services, combined with a regulatory environment promoting competition in the remittances market, and relaxing moneylaundering regulations, “are essential for SubSaharan countries to achieve the SDG target of 3 percent by 2030.”

On the trajectory of economic activities in major migrant-hosting countries, especially the United States, European countries, and the Gulf Cooperation Council countries, remittance flows to low- and middle-income countries (LMICS) were projected by the World Bank to decline by 7.2 percent, to $508 billion in 2020, followed by a further decline of 7.5 percent, to $470 billion in 2021.

The projected declines in remittances were the steepest in recent history, and steeper than the 5 percent decline recorded during the 2009 global recession. The foremost factors driving the declines were weak economic growth and uncertainties around jobs in migrant-hosting countries, a weak oil price, and, pin many remittance-source, countries, an unfavourable exchange rate against the US dollar.

“The economic crisis induced by COVID-19 could be long, deep, and pervasive when viewed through a migration lens,” the report by World Bank said.

In October 2020, COVID-19 case numbers rose again to surpass 44 million. The number of fatalities surpassed 1.1 million. A recurrence of COVID-19 phases accompanied by lockdowns, travel bans, and social distancing could not be ruled out well into 2021.

Although economic activities and employment levels around the world had rebounded to varying degrees from the depths reached in the second quarter of 2020, they were still far from pre-crisis levels, and the near-term outlook remained uncertain.

“For the first time in recent history, the stock of international migrants was likely to decline in 2020, as new migration slowed and return migration increased. Initially, the lockdowns and travel bans left many migrant workers stranded in their host countries, unable to travel back.” It said.

The adverse effects of the crisis in terms of loss of jobs and earnings, and exposure to and infection with COVID-19, have been disproportionately high for migrants, the World Bank said, adding that it is mostly worse for those in informal sectors and lower-skilled jobs.

Meanwhile, having jobs has not shielded migrant workers from income losses during the crisis. Anecdotal reports suggest that migrants, especially those living in dormitories or camps, are particularly vulnerable to the risk of infection from the COVID-19 virus.

Due to the impact of COVID-19, diaspora remittance flows into Nigeria will tumble by 25 percent this year as the pandemic drags on the economic crisis, deepening hardship for households that receive remittances, according to the World Bank.