6
Remittance Markets in Africa
in Africa continues to be characterized by a high degree of informality, lack of effective competition, exchange controls on outward transfers, and often-exclusive partnerships of international money transfer companies with local banks and post offices that contribute to high costs and restrict market entry and competition. At the same time, the widespread adoption of mobile money transfers for domestic remittances represents a success story of how Africa has effectively leapfrogged the technology frontier to design and deliver technology solutions targeting the poorest. This rest of the overview is organized as follows. We first discuss recent trends and prospects for migration and remittances in Africa. Next, we examine the implications of remittances for growth and access to external finance of African countries. The section on implication of remittances for the welfare of African households draws on the literature and recent household surveys. The subsequent section reviews remittance costs, competition, legal and regulatory environments, and technological innovations in African remittance markets. We then discuss recent policy initiatives and outline some policy options for better leveraging remittances for Africa’s development. The final section summarizes the studies of eight remittance markets in Sub-Saharan Africa (chapters 2–9 of this volume) and two key destination countries of African migrants: France and the United Kingdom (chapters 10–11 of this volume).
Recent Remittance Trends in Africa Migrant remittances have become an important source of external finance for the African continent. Officially recorded remittance flows to Africa, as shown in figure 1.1, are estimated to have increased from $9.1 billion in 1990 to nearly $40 billion in 2010 (divided roughly equally between North Africa and Sub-Saharan Africa). The true size of remittances, including unrecorded flows, is believed to be significantly higher. Remittances to Africa equaled 2.6 percent of GDP in 2009, higher than the average of 1.9 percent of GDP for all developing countries. Recorded remittance flows to the African continent are several times larger than official aid to North Africa (3.3 percent versus 0.6 percent of GDP) and almost 60 percent of the size of official aid flows to SubSaharan Africa, as table 1.1 shows. For many low-income African countries, remittances exceed private investment flows and represent a lifeline to the poor. A few countries account for a substantial share of remittances to SubSaharan Africa and North Africa. Nigeria’s $10 billion equaled about half