There is a boom for Africa-focused money transfer companies, as diaspora wanted to help their families amid COVID 19 pandemic. According to the World Bank, the remittances to sub-Saharan Africa totalled $48 billion last year. This development is despite predictions from the World Bank of a historic 20% drop to $445 billion in remittances to poorer countries this year, as a result of a pandemic-induced global economic slump.
Remittance companies got an additional boost early on in the pandemic, when African central banks reduced fees and loosened limits on digital transactions, to encourage the public to use digital services to facilitate social distancing.
According to Dare Okoudjou, Founder of MFS Africa, “I would probably agree with the World Bank that the total amount (of remittances) will go down, but anyone who’s in digital would actually gain market share and see their volume go up.”
What you should know
Nairametric had earlier reported that PricewaterhouseCoopers, a global tax and consulting firm, estimated that migrant remittances to Nigeria could grow to US$34.8 billion by 2023.
The pandemic gave remittance companies an advantage over their main competition in Africa; the sprawling informal networks of traders, bus drivers, and travellers used by many migrants to send money home.
- Remittances to sub-Saharan Africa officially totaled $48 billion last year, according to the World Bank. Experts, however, said this figure only tells a part of the story, though much of the monies Africans ship home via informal networks is absent from official data.
- Amongst the industry executives, the shift is likely to last as digital remittance services are typically cheaper, faster, and safer than informal networks, which are difficult for governments to regulate.
- Online remittance company, WorldRemit, reported last week that transfers to Zimbabwe via its service had doubled over the past six months.
- Azimo, a UK-headquartered remittance company, whose major African markets include Nigeria, Ghana, and Kenya, saw a nearly 200% increase over the expected number of new customers in April, May, and June.
- According to Kenyan central bank data, remittances to Kenya were up 6.5%; though, August compared to the same period last year. Remittance inflows to Zimbabwe were up 33% through July.
- Remittance companies got an additional boost early on in the pandemic when African central banks reduced fees and loosened limits on digital transactions, to encourage the public to use digital services to facilitate social distancing.
- MFS Africa, which runs networks across 36 African countries to channel remittances between mobile money accounts, has seen year-on-year transaction growth of over 90% in 2020.
- The company, which runs networks across 36 African countries to channel remittances between mobile money accounts, has seen year-on-year transaction growth of over 90% in 2020.
- Mukuru based in South Africa, which focuses mainly on African remittances and allows customers to send both cash and groceries, has seen a roughly 75% acceleration in growth compared to last year.
What they are saying
Having fled an economic implosion in his native Zimbabwe, Brighton Takawira was able to support his mother back home with modest earnings from a small perfume business he set up in South Africa.
Brighton Takawira uses the Mukuru remittance app which enables him to send money and groceries home to family in Zimbabwe from his home in Pinetown, South Africa. Then the pandemic struck and borders closed. The buses he had used to send his cash stopped running. According to him, “I had to send something, even a few dollars, though it meant sometimes going without bread”
According to Patrick Roussel, Head of mobile financial services Africa at French telecom company, Orange, “We saw an increase of transfers as the diaspora wanted to help their families”
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According to Andy Jury, Chief Executive of Mukuru, South Africa, “We’ve seen an influx of new customers, and we see them mainly coming to us from the informal market.”