Over 19.5 million Africans work worldwide and send money back home, which is utilized in education, businesses, and healthcare. Their earnings play a magnanimous role in regulating the collective economy of the African continent. However, African expats face a common challenge of high costs associated with sending remittances to their country from the developed parts of the world. Let’s examine why and what the solution is.
The high costs of making remittances to Africa
According to recent World Bank data, African migrants spend more than any other migrant group to send money home to their families. Africans sometimes spend more than twice as much as South Asians, who pay an average of US$6 for every $100 they send home. In South Africa, which has the highest remittance expenses on the continent, about 21% of the money set aside for family members back home is spent on getting it there.
Impact of high remittance costs on African families
According to recent statistics, Sub-Saharan African migrants sent a staggering 54 billion USD home in remittances. In reality, remittance fees can cost Africans up to 12% of the money they transfer home. Unexpectedly, the fees for transmitting money between African nations are incredibly high, averaging 22% of the amount being sent. For instance, remittance fees should be at least 22 pounds if someone sends 100 pounds from Kenya to Tanzania.
Remittance giants and their exploitative nature
Western Union and other established firms have held the money transfer market far too long. They have almost 500,000 locations throughout at least 200 countries, including Africa. Western Union earns billions in remittance fees annually as the biggest supplier of international money transfers. Remittances account for almost 80% of their total income. With the help of banks and other financial institutions, they hold about 70% of the market shares in nations like Rwanda and Mali.
Almost 10% of payments are spent on fees
The poorest continent in the world, Africa, has higher shipping expenses than any other place globally. This implies that high fees take away money that could be used to support the receiving households. The World Bank discovered that in 2017 the average cost of sending money to Africa was 9.4%. This falls well short of the Sustainable Development Goal of reducing transaction costs to 3% by 2030.
Compared to their significantly more prominent firms, which offer lower transaction fees below 4 percent, they need more resources to connect with individuals in rural areas of Africa. Many of the rural regions of Africa need more usage of mobiles and banking facilities, which restricts them from receiving money more conveniently.
Regulatory challenges and their impact on remittance costs
A major barrier is the strict regulatory environment surrounding cross-border transfers from Africa. Laws meant to combat money laundering and terrorist financing require customers to show proof of residency and the source of their funds before they can access financial services, which effectively leaves out a vast number of migrants who live within the unofficial settlements and are paid in cash. Even among those migrants who do have access to banks and MTOs like Western Union, many are not financially literate enough to utilize them.
Mobile remittances are more convenient and affordable
One solution for African expats is mobile remittances, which can significantly reduce the numerous friction points that traditional global money transfer presents. This innovative method eliminates the need to wait in line and complete paperwork at nearby remittance centers to receive and transfer money. It is a solution because this process is streamlined, accelerated, and drastically lowered in cost. Furthermore, there’s no need to carry around large sums of cash and risk being a victim of mugging or other illegal activity. ACE Money Transfer is the leading remittance sending service that has been operating for more than two decades in hundred plus countries. ACE Money Transfer understands the vulnerabilities of African countries and offers the most affordable solutions.
Advantages of ACE Money Transfer
It wouldn’t be wrong to call ACE Money Transfer the best remittance-sending service known for helping clients in every way imaginable. Let’s briefly review the main advantages of using ACE’s website or mobile app to send money online.
Speediness and practicality
Many people prefer ACE because it offers speedy transactions and various alternatives for sending and receiving money. Your funds will reach Africa within minutes.
Safety and credibility
ACE establishes a foundation of reliability and confidence with its users through strong security procedures. It ensures that all transactions are secure and that all user information is protected. ACE uses end-to-end solid encryption with two-factor authentication to provide extra security for your hard-earned funds.
Customer service
ACE prioritizes customer satisfaction and is committed to providing its users with great experiences. To that end, it has a team of professionals ready to help and address any problems.
While it may be challenging to send funds to Africa affordably, it is not impossible. You have the solution right before you, and ACE Money Transfer is ready to assist you. So, sign up for free today and see how much you will save with lower remittance fees.
FAQs
Why are remittance fees in Africa higher than in other regions?
Due to limited competition and strict regulations, fees are often higher.
How do high remittance costs impact African families?
High fees reduce the amount of money that reaches families in need.
Why do established companies like Western Union charge more?
They dominate the market and have high operating costs, leading to higher fees.
Are there affordable alternatives for sending money to Africa?
Yes, services like ACE Money Transfer offer lower fees and competitive rates.
How can mobile remittances help reduce costs?
Mobile remittances streamline the process, making it cheaper and more convenient.
References:
https://worldmigrationreport.iom.int/what-we-do/world-migration-report-2024-chapter-3/africa#:~:text=The%20number%20of%20Africans%20living,over%2019.5%20million%20in%202020.
https://www.worldbank.org/en/news/press-release/2024/06/26/remittances-slowed-in-2023-expected-to-grow-faster-in-2024#:~:text=Remittance%20flows%20to%20Sub%2DSaharan,a%20slight%20decrease%20of%200.3%25.