Hunt for cheaper transfer fees
LONDON, (IRIN) – All over the world migrant workers are sending money home to their families. The money pays hospital bills and school fees, buys land, builds houses and sets up small businesses. The cash goes from the US back to Mexico, from the Gulf back to India, from the UK back to Somalia, and from South Africa back to Malawi, Zimbabwe and the rest of southern Africa.
But what these workers probably do not realize, since they usually only ever send to one country, is that the cost of sending money varies greatly. Now a study carried out by London’s Overseas Development Institute has revealed that transfers to African countries cost around half as much as the global average, and twice as much as transfers to Latin America.
The ODI estimates that if remittance charges were brought down to the world average, the money saved could educate an extra 14 million primary school children, half of all those currently out of school on the continent.
The bulk of this money goes through money transfer companies rather than banks, since the recipients are unlikely to have bank accounts, and transfer companies are quick, efficient and have a wide network of agents. But just two big international players dominate the business in Africa, Moneygram and Western Union, and participants in a meeting to launch the research were highly critical of the way they seemed to be abusing their market dominance.
At the end of last year, when the ODI did its research, the fees and charges to send money to most of Africa were around 12% – a bit less to Zambia or Tanzania, a bit more to Uganda, Malawi and the Gambia – against a world average of just over 8%. Even that is quite expensive; the governments of the G8 and G20 countries have pledged themselves to working towards reducing this to 5%.
But if charges to send money to Africa from outside are steep, the cost of sending money from one African country to another can be eye-watering. The report identified ten intra-African routes with bank transfer charges over 20%.