Cash transfer costs highest in Africa

Safaricom's chief executive officer Bob Collymore. Safaricom shares rose to a new one year high at the at the Nairobi Securities Exchange (NSE) in the first trading session after the company announced a
new half-year profitability record for corporate Kenya. Photo/SALATON NJAU  Nation Media Group

By SCOLA KAMAU Special Correspondent

In Summary

• Analysts said the high charges are as a result of lack of integrated infrastructural systems.
• Reducing remittance prices to five per cent would save senders $4 billion per year, a new World Bank survey shows.
• Charges are even higher between African nations. South Africa, Tanzania, and Ghana are the most expensive countries to send money to, with prices averaging 20 per cent.

Workers abroad sending money to the East African region will continue to pay higher charges on remittance transactions if financial institutions fail to integrate their systems with their countries of origin.

Analysts said the high charges are as a result of lack of integrated infrastructural systems.

“A common clearance system between the country of origin and the recipient country can save senders a lot of money,” said Francis Mwangi, an analyst with Standard Investment Bank. EAC member countries are setting up a common clearance system across central banks where customers will not be charged to make move money across the region.

Reducing remittance prices to five per cent would save senders $4 billion per year, a new World Bank survey shows.

“High transaction costs are cutting into remittances, which are a lifeline for millions of Africans,” said Gaiv Tata, Director of the World Bank’s Africa Region and Financial Inclusion.  The average cost of sending money to Africa is almost 12.4 per cent; the global average is 8.96 per cent. Africa’s overseas workers sent close to $60 billion in remittances in 2012.

Continent most expensive
Charges are even higher between African nations. South Africa, Tanzania, and Ghana are the most expensive countries to send money to, with prices averaging 20 per cent.

In December 2012, Kenyans abroad sent home Ksh9.2 billion ($105.7 million). Central Bank of Kenya said remittances grew by 24.3 per cent from the previous year.

Financial institutions have opened up platforms for the diaspora to send remittances. Kenya’s Safaricom M-Pesa and Diamond Trust Bank’s NationHela are some of the latest.

 

World Bank officials say governments should implement policies to open up the remittances market to competition.

“Increased competition, as well as better informed consumers, can help bring down remittance prices,” said Massimo Cirasino, manager of the Financial Infrastructure and Remittances Service Line at the World Bank.