The New Times (Kigali)

29 January 2013

Rwanda: Remittance Fees Cost Rwandans Billions

Photo: Maria Font de Matas/IRIN
A migrant worker (file photo).

Rwandans living abroad could be sending more money back home if remittance fees were not too high, the World Bank says in a report.

The report indicates that African migrants could save up to $4b (Rwf2.5 trillion) annually only on remittance charges.

According to the report released this week, African migrants pay more to send money home than other migrant groups, therefore affecting their contribution to the development of their motherlands.

"Africa's overseas workers, who sent close to $60b in remittances in 2012, pay more to send money home than any other migrant group," the Bank says.

Through its 'Send Money Africa Database', the World Bank found that Sub-Saharan Africa is the most expensive region to send money to, with average remittance costs reaching 12.4 per cent in 2012.

This is 12 per cent higher than global average of 8.9 per cent, and almost double the cost of sending money to South Asia, with the world's lowest remittance fees at 6.5 per cent.

"Sending money back to Rwanda is a must; my children and wife need it, but it is a struggle considering the fees I am charged," Peterson Nsengimana, an IT specialist in the United Arab Emirates, told The New Times by phone yesterday.

"The cheapest financial agencies charge $11 (Rwf6.950) for sending between $50 (Rwf31,500) and $100, and $21 for sending between $100 and $200. They charge around $25 for sending more than $200 and yet they do not accept sending more than $700 at once," the report says.

The World Bank proposes that bringing remittance prices down to 5 per cent, from the current 12.4 per cent, average cost would save more than $4b for Africa's migrants and their families, who rely on remittances for survival.

The G8 and the G20 established 5 per cent as the target average remittance price by next year.

"High transaction costs are cutting into remittances, which are a lifeline for millions of Africans," said Gaiv Tata, the director of World Bank's Africa Region and Financial Inclusion and Infrastructure Global Practice.

"Remittances play a critical role in helping households address immediate needs and also invest in the future, so bringing down remittance prices will have a significant impact on poverty."

Expensive in Africa

The World Bank says remittance fees are even higher between African states. South Africa, Tanzania, and Ghana are the most expensive sending countries, with charges averaging 20.7 per cent, 19.7 per cent, and 19.0 per cent, respectively.

Western Union, one of the largest money transfer agencies operating in Rwanda, charges 16 per cent for sending $100 or less, $23 between $100 and $200 and $30 between $200 and $300.

"Governments should implement policies to open the remittances market up to competition," said Massimo Cirasino, the manager of Financial Infrastructure and Remittances Service Line at the World Bank.

"Increased competition, as well as better informed consumers, can help bring down remittance prices," he added.

The World Bank also says banks, which are the most expensive remittance service providers, are often the only channel available to African migrants.

"A regulatory environment that encourages competition among remittance service providers can help bring down fees. Migrant workers can also benefit from more transparent information on remittance services," Send Money Africa said.

The Rwandan government projects remittances at $120m in 2013 and $130m in 2014.

"The government realised the evolving important role of Rwandan Diaspora in national development. This importance is envisaged in the diverse sectors such as education, health, private sector, development, trade and investment and knowledge transfers," a statement from the Ministry of Foreign Affairs and Cooperation reads in part.

The Rwandan Diaspora, through its umbrella, Rwanda Diaspora Global Network, initiated the "Bye Bye Nyakasti Project" through which they contributed funds for the construction of homes for poor families.

The community was also heavily involved in the 'One Dollar Campaign' that climaxed in the construction of Rwf800m complex in Kigali to shelter orphans of the 1994 Genocide against the Tutsi.

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