The African diaspora, mainly in Europe and the United States, has been a significant contributor to the economic development of the continent through remittance inflows. Despite the region being the most affected by the global crisis, remittances to Sub-Saharan Africa have remained strong, supporting household expenses in many developing countries like Nigeria and Kenya.
In 2015, the African diaspora in the United States earned $55.1 billion, highlighting their importance in boosting the continent’s economy. However, the high cost of sending money has been a significant hindrance to inflows, limiting the impact of remittances in supporting households. Although payment companies like WorldRemit have lowered transfer costs to busy corridors in Africa, the World Bank and industry stakeholders are now calling for further reductions in the cost of sending money.
According to the World Bank’s report, remittances to Sub-Saharan Africa grew an estimated 5.2% to $53 billion in 2022, with strong flows to Nigeria and Kenya. However, remittances are projected to decline by 1% this year due to weaker conditions in migrants’ destination countries.
The cost of sending $200 to Sub-Sahara Africa, including Kenya, averaged 7.8% last year, down from 8.7% the previous year. Nonetheless, remitting from countries in the least expensive corridors remains significantly cheaper at an average of 3.4% compared to the costliest corridors, which can cost up to 25.2%.
Lowering the cost of sending remittances from the African diaspora to their home countries is crucial in supporting households and boosting the economic development of developing countries. The World Bank and industry stakeholders must work towards further reducing transfer costs to ensure that remittance inflows continue to support households and contribute to the continent’s economic growth.