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Global remittances or the money migrant workers send to family members in LMICs (low- & middle-income countries), increased by 8.6% in 2021. The increase occurred despite experts' predictions that Covid-19 might reduce remittance flows. A 48% increase in mobile channels money transfer helped sustain the momentum. IFAD (International Fund for Agriculture Development) confirmed this report through the Mobile Remit Africa.
The IFAD published that remittances digitalization via mobile channel transfers is an excellent boost to rural development programs since over half of the transactions go to rural areas. Mobile transfers also lower transaction costs on things like transaction fees and travels to ensure a safer and more convenient process for promoting financial and digital inclusion.
In any case, the previous US-$605 billion remittances flow tripled to US-$178.6 billion in total international official development assistance. What’s more, over 200 million migrant workers sending money home to different parts of the world might increase the remittances flow to about US-$630 billion to help rally around over 800 million family members. Generally, remittances play numerous family roles like housing investments, health expenses, education fees, and food for some migrant families.
Further reports indicate that remittance flow to low & middle-income countries might hit US-$5.4 trillion in the next eight years. $5.4 trillion is twice Africa’s GDP in 2021. The increasing trend in remittances might moderate over 2022 since inflation erodes wages and Covid-19 pandemic-related support plans end in rich nations. Besides, the Russian invasion of Ukraine can also impact the figures since it blocks remittance transfers in neighboring countries that contribute up to 30%.
IFAD analysis of seven African nations concluded that mobile transfers have reduced costs for migrant workers and their families. Nonetheless, the African remittance transfer is still the most costly market with a 7.83% average cost against the 6% global average cost. In General, a reduction to 3% as per SDGs (Sustainable Development Goals) would boost the remittances to Africa by almost US-$4 billion yearly.
The IFAD Mobile Remit Index report shows that Kenya, Tanzania, and Rwanda are the top East African countries in mobile money innovations. This report has considered preparedness to leverage remittances digitalization for over a decade. Most importantly, digitalization has enabled these countries with the flexibility to benefit from finance options like insurance, loans, and savings. Hence, the UN promotes financial inclusion and digitalization in Kenya, Ghana, South Africa, Senegal, Uganda, Gambia, and Morocco.
The program seeks to benefit over one million African users. Thus, the UN works with the PRIME and private stakeholders to lower transaction fees, promote innovations, and facilitate formalization options & financial inclusion among recipients & senders.
Digital and Financial Inclusion Final Remarks
The African remittance market remains an essential source of livelihood for over 800 million family members in middle income countries LMICs. These low and middle income countries rely on millions of migrant workers around the world.Thus, mobile transfer costs for day of family remittances should allow the market to boost rural development and agricultural development.
The international official development assistance and other pandemic related support programmes should facilitate means to lower the transaction costs. National private sector stakeholders should take part in stabilizing Russia's neighboring countries to increase remittances growth.