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The future of African remittances

Diaspora remittances are a financial lifeline for many communities in the developing world. Sub-Saharan Africa, one of the fastest growing markets, is projected to receive upwards of $34 billion in remittances in 2016,

African remittances from disapora are a financial lifeline for many communities in Sub-Saharan Africa, one of the fastest growing markets, projected to receive upwards of $34 billion in remittances in 2016, according to the World Bank – Patricia Egessa. 

While this is good news, it is dampened by the fact that the cost of sending money to the region remains significantly high. Africa’s diaspora pays almost double the global average in charges to send money to the continent, according to a report by the Overseas Development Institute.

In this era of mobile banking and internet transfers, one would expect that this high fees would be a thing of the past. However, that is not the case. The two largest global money transmitters, Western Union and Moneygram, which account for two-thirds of remittance transfers to the region, have now capitalized on mobile banking by partnering with local service providers.

In Kenya, for example, the two companies have partnered with M-PESA to enable users to transfer funds directly to their recipients’ mobile wallets. Even then, they still charge the same fees for mobile account deposits as for cash pick up at an agent location. 

Bitpesa an African digital exchange has taken issue with these exorbitant fees and aims to charge 3 per cent to the consumer. Charlene Chen, COO of Bitpesa tells Appsafrica.com  “our proposition is to be 50-75% cheaper than Western Union and other providers, while also sending money much faster.”

In 2014, Sendwave, a mobile money transfer app was developed in response to these high costs and other difficulties associated with navigating through the remittance services. The app, which is available on android and iOS devices, leverages technology to make sending money easier and cheaper. Unlike with Western Union and MoneyGram, users of the platform are not charged any fees to send money. They can also see live competitor rates within the app.



Sendwave, the brainchild of Drew Durbin and Lincoln Quirk, currently enables users in the U.S. and Canada to instantly and securely transfer funds to people’s mobile wallets in Kenya, Uganda, Tanzania and Ethiopia. Once a user downloads the app and sets up their account using their debit card, sending money is as easy as texting. All one needs to do is fill in the recipient’s full name, the amount one wants to send, verify the information, hit send and enter their password when prompted. Recipients get the money instantly and a receipt is emailed to the sender. According to Sendwave’s website, all its users personal data is encrypted to ensure their protection.

The company is able to provide a no fee transfer service to users of the app because it only makes money on its exchange rate. Additionally, in the four countries it works in, it has formed partnerships with local mobile banking service providers. It has partnered with M-PESA in Kenya and Tanzania, and MTN and Airtel mobile money programs in Uganda. In Ethiopia, Sendwave has its own network of local agents on the ground from whom recipients can pick up their cash.

Such no fee money transfer apps are the future of remittances to African countries. The high remittance charges that Africans in the diaspora incur divert resources that can be used for the progress of their families and communities. Africa loses $1.8 billion a year from excessive charges on money sent home by Africans overseas, according to the Overseas Development Institute.

These are funds that could be used to invest in education, agriculture, health, technology and other productive projects that will benefit the continent in numerous ways. Reducing, or in this case, eliminating these remittance costs will undoubtedly increase money transfers to the region and boost development.

The entrance of Sendwave to the Kenyan, Ugandan, Tanzanian and Ethiopian markets is a welcome reprieve for diasporans from the four countries in the U.S. and Canada. It’s an innovation that has not only successfully managed to drive down the remittance costs but that also breaks the long held duopoly of Western Union and MoneyGram in the region. This much-needed competition provides an affordable money transfer alternative. Most importantly, it encourages innovation that will benefit both Africans at home and in the diaspora through cost reduction and improvement in service quality.   

Limited competition is not the only factor that contributes to these money transfer fees. There are other elements such as concentration of market power and flawed financial regulations that African governments should work to reform. However, promoting competition and harnessing technology are both steps in the right direction. Eliminating these high charges will unlock the full potential of remittances to positively impact Africa’s development.



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