By Hilary Mare
NAMIBIA is the country with the highest remittance costs in the sub-Saharan region, a report by the World Bank has revealed.
A remittance is the funds an expatriate sends to their country of origin via wire, mail or online transfer. These peer to peer transfers of funds across borders are economically significant for many countries that receive them.
A World Bank report, dealing with migration and remittances, further reveals that the region has the highest remittance costs in the world, and in the first quarter of 2017, some of the most expensive corridors were intraregional, with 27 percent of the principle amount being charged to send money between Namibia and Angola.
Transfers between South Africa to Botswana were charged at 21 percent of the principle amount, while money sent by expats between Nigeria and Mali attracted a 20 percent charge.
“These numbers show that a lot of effort will be required to bring transaction costs below 3 percent, with no corridor above 5 percent, as envisaged in the Sustainable Development Goals (SDGs),” the report laments.
Average remittance costs in sub-Saharan Africa increased from 9.7 percent in 2016 Q1 to 9.8 percent in 2017 Q1, while recorded remittance flows to the region have declined by an estimated 6.1 percent, and reached US$33 billion in 2016.
“The reasons for the decline were slow economic growth in remittance-sending countries, a decline in commodity prices, especially oil prices, impacting countries receiving remittances from regional commodity exporters, and a diversion of remittances to informal channels, due to exchange rate regimes,” the report further states.
The value of personal remittances received in Namibia was US$10 192 860 in 2014. Over the past 26 years, the World Bank also reports that remittances have reached a high of US$17 561 580 in 2005 and a low of US$7 959 586 in 2002.
The global average cost of sending remittances has remained nearly flat, at 7.45 percent in 2017 Q1, significantly higher than the SDG target of 3 percent, according to the World Bank.
A major barrier to reducing remittance costs was reported to be de-risking, which is when international correspondent banks close the bank accounts of money transfer operators, to avoid the risks of money laundering and financial crime.
De-risking has not only increased regulatory burdens, but has also acted as an entry barrier for smaller and newer remittance service providers, with smart technologies.
“Remittance flows to developing countries are estimated to have declined by 2.4 percent, to US$429 billion in 2016, after a decline of 1 percent in 2015. This is the first time in recent history that remittance flows have declined for two successive years,” the World Bank report said.
The report presents an update on migration and remittance flows, as well as salient policy developments in the area of international migration and development.
Personal remittances comprise personal transfers and compensation of employees. Personal transfers consist of all current transfers in cash or in kind, made or received by resident households to or from non-resident households.
Personal transfers thus include all current transfers between resident and non-resident individuals. Compensation of employees refers to the income of border, seasonal and other short-term workers, who are employed in an economy, where they are not resident and of residents employed by non-resident entities.
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