INCREASED competition, stakeholder collaboration, and investment in financial infrastructure are key to reducing global remittance fees, according to Risana Zitha, Managing Director and Head of Africa at investment banker DAI Magister. Zitha emphasised the significant role remittances play in the African economy, noting that in 2022, the total value of remittances across the continent neared $100bn, with $20bn from intra-African flows.
Despite their importance, remittance fees remain high, posing a challenge to economic growth. The UN Sustainable Development Goals aim to reduce these fees to less than 3 percent by 2030. However, World Bank data shows the current global average is double this target, reaching up to 20 percent in some parts of sub-Saharan Africa.
Mobile money has emerged as a pivotal solution to this challenge. Zitha highlighted that increasing mobile money interoperability, enhancing financial literacy, and streamlining legal frameworks could further reduce remittance costs. He projected that the formal African remittance market, which was valued at $100bn in 2022, could grow to $283bn by 2035, considering a CAGR of 12.1 percent from 2019 to 2022.
Zitha pointed out that the informal remittance market, estimated to be 35-75 percent of the formal market, suggests that Africa’s total remittance market could be worth $500bn by 2035. To fully leverage this potential, he urged stakeholders to address barriers to growth and development. Key strategies include promoting competition, improving regulatory frameworks, and investing in financial infrastructure to offer more affordable services.
Improving access to digital remittance services is also crucial. While mobile money has advanced significantly, there is still room for growth. Zitha called for investments in digital infrastructure, such as mobile networks and internet connectivity, to expand access to digital remittance services. He also stressed the importance of promoting financial literacy to build trust and encourage the use of digital channels.
Zitha concluded by highlighting the urgent need to harness remittance flows, especially as the Sub-Saharan region faces acute hard currency shortages. By overcoming challenges and leveraging technology and innovation, Africa can transform remittances into a powerful tool for sustainable development and economic growth.
