The webinar was moderated by Cenfri technical director and insight2impact programme lead Hennie Bester and featured the following panellists: Leon Isaacs, CEO of Development Markets Associates Global; Olayinka David-West, Academic Director at Lagos Business School; Barry Cooper, Technical Director at Cenfri; and Nikki Kettles, Head of SADC FI Programme at FinMark Trust.
Personal remittances account for around $84 billion of the capital flows to Sun-Saharan Africa in 2018. On average this contributes to 3% of Africa’s GDP, however, for some countries it is more, such as 23% for Lesotho, 10% for Egypt and 6% for Zimbabwe. Around 60% of the remittances are spent on consumption, food and basic living expenses. A drop in remittances will have a disproportionate impact.
The biggest single country where remittances are sent from is the USA who sent $2.6 billion, and the majority (88%) of the $9.5 billion from Europe comes from UK, Germany, France, Spain, and Italy. All these countries are on lock down or restrictions. These restrictions will mean migrants are unable to work or are working under stressful conditions as many work in industries such as health, retail and transport.
Remittance flows have already dropped around 40% as a result of covid-19. Factors affecting this may include migrants having insufficient funds, unavailability of services to cash in or cash out – many remittances cash based at both entry and exit and in some locations agents are closed or working in uncertain conditions. Although the mechanism for sending the funds has moved digitally, the in and out process is still highly cash driven.
Remittances flows need to be safe guarded in order to sustain a recovery for the developing world. Some of the short to medium term suggestions made by the panel to facilitate this include:
- Declaring remittances services as essential in both sending and receiving countries in order to allow them to continue working during lock downs and restrictions
- Fully utilise risk-based approaches (e.g. tiered KYC) to facilitate the opening of accounts and pressure to be placed on FSPs to implement them
- Pay migrants digitally which helps encourage sending of remittances to become digital
- Extend the digital payment ecosystem in receiving countries to avoid full cash out
- Relax regulation to digital cross-border transaction providers so they are able to facilitate risk-appropriate digital cross-border transactions
More information about part 2 and 3 of this webinar series will follow shortly.
Making Finance Work for Africa (MFW4A), DMA Global and the International Organisation for Migration(IOM) hosted a webinar on February 2020. The session allowed financial sector specialists to explore how African countries can identify opportunities to harness diaspora capital as a viable source of productive investment. Building on the “Toolkit for Understanding Diaspora Investment in Africa”, the webinar discussed a series of steps that governments can take to assess the viability of diaspora investing back home and to determine the best approach for attracting this investment.