Migration and Development Initiative

Background

Migrants’ remittances are recognized as one of the major sources of financial flows to developing countries. Various corridor-specific and empirical studies suggest that remittances sent through informal channels could add, at a minimum, an additional 50 percent to the official estimates, making it the largest source of external capital in many developing countries. Recognizing the important role remittances play in developing countries at the macroeconomic level and in addressing the needs of the poor in developing countries, as well as the weaknesses of official data, the G8 launched the Global Remittances Initiative in 2004. In Africa, remittance inflows have been growing steadily over the last 10 years, while Official Development Assistance (ODA) and Foreign Direct Investment (FDI) have been fluctuating. Remittances have played a key role in several African countries, from Least Developed Countries (LDCs) such as Comoros, Mali, Togo and Uganda, to more advanced economies such as Egypt, Morocco and Tunisia.

Objectives

The overall objective of the AfDB’s Initiative on Migration and Development (the Initiative) is to maximize the development impact of remittances by increasing their productive use, promoting business opportunities and job-creation at the grassroots level. The Bank has five operational objectives related to remittances:

1. Better mobilizing remittances as a flow of resources: From the macro-level by promoting savings mobilization and directing funds through official channels, more resources will be available for credit to individuals and private sector entities;
2. Increasing the flow of resources to the end beneficiaries while allowing better control on the amounts transferred by migrants: achieved by reducing transaction costs and supporting the design, test and introduction of new tools and products;
3. Empowering local communities and households: by promoting more effective uses of funds for social consumption (by supporting mutual schemes and public private partnership in the areas of education and health) and supporting the productive use of available resources through the involvement of local entrepreneurs;
4. Helping to strengthening financial systems in receiving countries, in particular, by empowering local agents, such as Micro-finance Institutions (MFIs), as players;
5. Contributing to efforts at combating money-laundering: through the absorption of the informal sector and better offers from the formal bank and non-bank sectors, remittance-related activities will also contribute to reductions in the risk of remittance flows being used for money-laundering purposes.

Activities

• Improving  Data Collection: In addition to its work with the World Bank, and in line with the work undertaken with the support of France and DFID, the Bank intends to conduct a number of country assessments. These assessments will aim at increasing the knowledge base of African remittances and assisting in identifying obstacles to efficient remittance flows, use of funds and appropriate policy responses in order to better design programs and projects in countries in question.
• Improving Mechanisms to Channel Resources: The Bank will support innovations and pilot projects aimed at lowering transfer costs and developing new products tailored to the needs of receivers and expectations of senders. It also intends to support efforts at enlarging and strengthening existing financial infrastructures with a view to increasing the outreach, in particular, in remote areas, and lower the costs of transfers.
• Enhancing Key Stakeholders and Public Awareness: The Bank looks forward to supporting programmes and activities aimed at enhancing stakeholder knowledge and sharing knowledge on opportunities and risks related to existing remittance methods and the use of related resources.
• Developing Programs and Supporting Projects to Roll out Innovations: The complexity of the remittance system and its ramifications at the international, national and local levels require the design of integrated programs that will involve all concerned stakeholders, taking into account their respective interests, needs and expectations. In particular, rolling out innovations or introducing new financial products should be in line with the following key principles: Participation and Ownership, Comprehensiveness and Selectivity; as well as Partnership and Subsidiary. These are based on the principles of participation and ownership, comprehensive approach and priority action, partnership and subsidiary.