AfDB Stresses Importance of Remittances and Microfinance for Financial Inclusion
The role played by remittances and microfinance in the empowerment of the less privileged in society came under scrutiny on 29 May in Arusha, Tanzania, during a high-level panel discussion ahead of the 2012 annual meetings of the African Development Bank (AfDB) Group.
The discussions were opened by AfDB human development Director, Agnes Soucat, who explained that remittances and microfinance were two key components of the African Development Bank’s approach to inclusive financial services. “Access to finance is a key component of our new Human Capital Development Strategy. Increasing opportunities for the poor and marginalized – and particularly for the African youth – is crucial in order ensure social inclusion as well as job creating growth,” she said.
Africa’s diaspora sends an estimated $40bn back home annually, and Remittances are an essential lifeline for many communities across the continent. Funds remitted to Sub-Saharan Africa were estimated at US$21.5 billion in 2011, which not only helped hard to reach communities to cope with crisis and lack of economic prospects but also contributed to enterprise development and human capital.
The importance of remittances in consumption, thereby reducing poverty, is widely recognized. During the event, key information and broad recommendations were shared as to how to leverage migration for development, while best practices in microfinance and remittances operations were underlined.
“There is no doubt that remittance inflow has been an important factor in Africa’s economic development, a significant proportion of that is handled by Dahabshiil, an African web-based money transfer system. Microfinance initiatives are equally enabling some of Africa’s poorest to plan for the future.” Said Abdirashid Duale, the CEO of Dahabshiil.
The share of remittances to GDP has remained stable for the last decade, averaging 2.4%.
However, effects of the economic crisis and the Arab spring on remittances flows can be felt in Sub-Saharan Africa. According to World Bank calculations, remittances flows to Cape Verde, Senegal and Guinea-Bissau are most exposed to any worsening of the economy.
According to Donald Terry, a professor at the Boston School of Law and former Manager of the Multilateral Investment Fund of the Inter-American Development Bank, “Access to finance for the vast majority of Africans is an important goal for the AfDB's drive for more inclusive growth.” This, he said, “particularly applies to helping millions of African families receiving remittances that cost too much to send, and to help give those families more options to productively use their money to benefit themselves and the communities where they live.”