According to an exclusive survey by world bank, the money sent by African diaspora exceed foreign aid and investment.
The population of the African diaspora is estimated to be around 140 million meanwhile the population of the African continent is 1.2 billion.
A report published on the World Bank’s “Data Blog” on July 2, 2019 highlights that migrant remittances have become, for the first time, the main source of external financing for low- and middle-income countries (with the exception of China) outpacing FDI (Foreign Direct Investment) and ODA (Official Development Assistance).
The news should bring relief to the heart and encourage “closed” countries to accept that mobility is an essential element for the development of world economies but also a good sign of a humanity undermined by rigidities at the borders.
The funds that workers send to their families from abroad have become a cornerstone of many economies around the world. They should help local development, if they are not seen as an incentive to leave by millions of young Africans who could see in them a call to departure. Admittedly, success calls for success, but it could also be dangerous adventures when mobility is unregulated and these young people are forced to follow the bypassed ways of immigration.
According to the most recent data, remittances from the diaspora are bound to increase. They reached a record $ 529 billion (which is the amount reported only) in 2018, and are expected to grow to $ 550 billion in 2019.
In Africa alone, the rapid growth in the numbers is of great interest. This is especially true for the money transfer industry. Remittances to sub-Saharan Africa grew to $37.8 billion in 2017, according to the World Bank and hit around $39.2 billion in 2018 and are expected to hit $39.6 billion at the end of this year 2019. Perhaps unsurprisingly, as the largest population and economy, Nigeria topped African recipients with $22.3 billion in 2017. Liberia was the African country for whom remittances accounted for the highest share of GDP at 25.9%.
The flows of these transfers are roughly equivalent to the amounts of foreign direct investment (FDI).
They are the main source of foreign exchange earnings in low- and middle-income countries, according to the latest World Bank Group and KNOMAD Migration and Development Briefing Note. (Global Knowledge Partnership on Migration and Development). In other words, migrants’ remittances exceed FDI as the main source of external financing in africa.
As Dilip Ratha, a senior economist at the World Bank’s Macroeconomics and Public Financial Management cluster, points out, “migrant remittances are becoming a staple in financing for development”.
According to the note, these flows are now at least three times larger than official development assistance (ODA), while FDI has been on a downward trend in recent years. “In five years, money transfers will exceed the combined amounts of ADP and FDI,” says the head of KNOMAD. “The underlying factors that drive these remittances will continue to weigh more and more. We could reach the trillion of dollars in the near future. “
Factors that promote remittances
The factors that underlie the migration of workers and, as a result, their remittances are part of broad global trends already evident. Experts identify four:
- Income gaps: The average income per capita in a high-income country is $ 43,000, compared to $ 795 in a low-income country, a ratio of 54 to 1.
- Demographic imbalances: between 2018 and 2030, 552 million people will be of working age in low- and middle-income countries; in high-income countries, this category will decrease by 40 million people.
- Climate change: an estimated 143 million people have already been displaced in their own country due to climate disruption.
- Fragility, conflict and violence: a record 70.8 million people were forced to flee their homes in 2018 (including 25.9 million refugees in other countries).
However, if remittances are a lifeline for countries, fares are too expensive. the generally high cost of operations averages 7% for a $ 200 transfer. The banking circuits are the most expensive (10.9%).
In sub-Saharan Africa, the average tariff is 9.3%, but it reaches 18.7% in the five most expensive transfer corridors, three times higher than the global average and six times higher than the target. SDGs.
However, this “constraint” counts for little in their contribution to the reduction of poverty: because they go directly to the families, there is little waste, explains Dilip Ratha. The United Nations has recognized the importance of remittances for the development and achievement of the Sustainable Development Goals (SDGs).
The SDGs aim to reduce the cost of remittances to 3% of the value of a transfer. Advocates of electronic or virtual currencies argue that they could expand access to credit and avoid many costs. According to new studies, international digital remittances will exceed $ 300 billion globally by 2021, or about 44 percent of total reported remittances.
To maximize the impact of remittances, migrant workers can also be encouraged to invest in their home countries more formally through dedicated bond issues. According to Dilip Rata, “diaspora bonds” are an instrument that can increase the efficiency of remittances and an “ideal solution for financing development”.
“In addition to remittances, the cumulative amount of savings for migrant workers worldwide is about $ 500 billion a year. If one-tenth of their savings could be mobilized, it could increase funding for development by an additional $ 50 billion, “he adds.