“Sending Money Home to Africa” – Remittances hold immense untapped potential for the poor

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Date: 22/10/2009
Location: Tunis, Tunisia
  • An IFAD report explores how remittances could be catalysed through informed policy decisions

Tunis, 20 October 2009 – African workers send home more than US$40 billion to the region each year but restrictive laws and costly fees hamper the power of remittances to lift people out of poverty, according to a new report by the UN’s rural poverty agency, the International Fund for Agricultural Development (IFAD).

“Sending Money Home to Africa” will be presented at the Global Forum on Remittances 2009, organized by IFAD and the African Development Bank (AfDB) in Tunis, Tunisia, on 22-23 October 2009.

Globally remittances top $300 billion per year, outstripping foreign direct investment and development assistance combined. But while transfer costs have declined significantly in Latin America and in Asia, sending money home to Africa is still expensive. Within Africa, costs can be as high as 25 per cent of the sum.

At the G8 summit in L’Aquila in July 2009, world leaders recognized the development impact of remittance flows and set a goal of reducing the cost of remittances by 50 per cent over the next five years, by promoting a competitive environment and removing barriers.

Two major money transfer companies – Western Union and Money Gram - control nearly 65 per cent of the locations where remittances can be picked up. Most African countries restrict the kind of institutions that can offer remittance services, penalizing microfinance institutions, which have a greater geographical reach than banks. 

The number of payout locations across the entire African continent is the same as  Mexico, which has only a  tenth of Africa’s population. Between 30 and 40 per cent of all remittances to Africa are destined to rural areas where many recipients have to travel great distances to collect their cash.
The report finds that simply by expanding the kinds of institutions able to conduct remittances services to include microfinance institutions and post offices, the number of payment points would more than double.

The IFAD report highlights how new technologies - such as cellphones - and existing infrastructure - particularly post offices or small retail outlets - could vastly increase the reach of remittance services. Algeria, where 95 per cent of remittances are paid through post offices, could be a model for other African countries.

“Supporting this people-to-people money flow to rural areas of Africa is especially vital now because of the recession” noted IFAD Assistant President, Kevin Cleaver, before leaving for Tunis. “The power of remittances can be catalysed by easing restrictions and making it less costly for African families to collect this money,” he added.

Most money sent home by migrants is spent on daily consumption but research shows linking remittances to financial services for the unbanked – savings accounts, loans and insurance – allows even the very poor to save and potentially invest in the development of their community.

On its part, the AfDB, together with a number of partners including IFAD, is committed to search for ways and means to better use such resources. In that respect, the Bank launched a study on migrants’ remittances in four corridors, France/Comoros, France/Mali, France/Morocco and France/Senegal. The study, disclosed in Paris in 2008, shows that remittances range in volume from 9% to 24% of GNP in those countries covered, which is 80% to 750% of ODA received. The AfDB intends to play a still greater role in channeling migrants’ remittances, notably through a multilateral fund to be set up in the near future.

Media contacts:

  • Frances Kennedy, media contact IFAD in Tunis, +39 347 2429462
  • Jessica Thomas, media contact IFAD in Rome, +39 06 5459 2215
  • Chawki Chahed, media contact IFAD in Tunis, +216 22 290 290, 
  • Lotfi Madani, media contact IFAD in Tunis, +216 21 21 81 50<
  • Yvan Cliche, media contact IFAD in Tunis, +216 71 10 23 87

For more on the report, please contact the authors:

IFAD Technical Advisory Division :

Notes to Editors:

The Global Forum on Remittances 2009 is hosted by IFAD in partnership with the AfDB and in collaboration with the Inter-American Dialogue, from 22-23 October in Tunis. The 2009 Forum, will asses trends in remittances to Africa, amid the financial crisis, and identify policy solutions and will also host a Business Models and Technology Fair.

IFAD’s multi-donor Financing Facility for Remittances (FFR) was set up to support innovative cost effective and accessible remittance services.  IFAD promotes partnerships between African microfinance institutions and financial institutions in the US to link remittances to other financial services. Ethiopian migrant families can access low cost transfer services and also be introduced to other financial products.

IFAD works with the Universal Postal Union to provide remittance services to rural areas using post offices, linking remittances to other financial services such as bank accounts savings and loans.

The AfDB, together with a number of partners including IFAD, is committed to search for ways and means to better use such resources. In that respect, the Bank launched a study on migrants’ remittances in four corridors, France/Comoros, France/Mali, France/Morocco and France/Senegal. The study, presented in Paris in 2008, shows that remittances range in volume from 9 to 24 per cent of GNP in those countries covered, which is equivalent to 80  to 750 per cent of ODA received. The AfDB intends to play a still greater role in channeling migrants’ remittances, notably through a multilateral fund to be set up in the near future.

The International Fund for Agricultural Development (IFAD) works with poor rural people to enable them to grow and sell more food, increase their incomes, and determine the direction of their own lives. Since 1978, IFAD has invested over US$11 billion in grants and low-interest loans to developing countries, empowering some 340 million people to break out of poverty. IFAD is an international financial institution and a specialized UN agency based in Rome – the UN’s food and agricultural hub. It is a unique partnership of 165 members from the Organization of the Petroleum Exporting Countries (OPEC), other developing countries and the Organisation for Economic Co-operation and Development (OECD).

With nearly 3,300 projects funded in Africa during 5 decades, representing some USD 60 billion, the African Development Bank is the center of reference on economic and social development issues in Africa. During all these years, we have worked hard to help reduce poverty, improve living conditions for Africans and mobilize resources for the economic and social development of a continent where the AfDB Group is financing roads, power plants, health care centers, improving the management of state agencies, is investing in companies to create jobs, and aims to strengthen the quality of education…

Being Africa’s preferred partner, providing quality investment and advice, the Bank focuses its operations on infrastructure, governance, developing a more robust private sector, and higher education. Through investments in these areas, the AfDB contributes directly to regional integration, middle income countries and fragile states assistance, human development, and agriculture.

Knowledge-generation, climate change and gender are mainstreamed in all the institution's operations.


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