In the age of globalisation, economic migrants have the chance to explore new cultures and economic opportunities in greener pastures. Migration also carries the unspoken obligation of supporting family members that remain in ones home country. There, the money is used to send a child to school, build a house or buy food to sustain those remaining at home. Remittance to Africa is both bitter sweet. One the one hand, African countries have lost a substantial proportion of their skilled labour force through the “brain drain”. Yet on the other hand remittances from migrants are recognised as a crucial source of resilience for households in African countries.
Remittance is the transfer of money foreign workers to their home countries. Cash remittances are commonly understood as flows of money in physical currency or via banking and finance systems between migrants and their families.
World Bank recorded annual remittance flows to low- and middle-income countries reached $529 billion in 2018, an increase of 9.6 percent over the previous record high of $483 billion in 2017. Global remittances, which include flows to high-income countries, reached $689 billion in 2018, up from $633 billion in 2017. Among countries, the top remittance recipients were India with $79 billion, followed by China ($67 billion), Mexico ($36 billion), the Philippines ($34 billion), and Egypt ($29 billion).
According to the World Bank 2015 Report and Ecofin Agency report published in 2015, one in seven Africans (about 120 million) receive remittances from relatives, friends and families abroad – which thus far represents $60 billion – and as much as a third of total GDP in some African markets. The top sources of remittances to developing countries come from the US, Saudi Arabia, Germany, Belgium, Switzerland and France.
Cash flows to Africa rose from $38.4 billion on average in 2005–2007 to $64.9 billion in 2014–2016, accounting for 2.8 per cent of GDP and 14.8 per cent of total exports in 2014–2016. The flow of remittance in Africa is unevenly distributed between countries, partly reflecting the varying size and location of each country’s stock of emigrants. In 2017, Nigeria ($22.3 billion) and Egypt ($18.1 billion) accounted for 60 per cent of total remittance flows to Africa. Other countries obtaining sizeable sums through remittances include, in 2017, Morocco ($7.1 billion), Senegal ($2.3 billion), Ghana ($2.2 billion) and Algeria ($2.1 billion) (UNCTADstat database). Cash remittances estimates are underestimated, as migrants choose to send money via informal means to avoid paying punitive transaction costs. About 12% of the money sent through formal financial channels is swallowed up by bank fees. Migrants often opt to send cash with travelling friends, family members or via bus or truck drivers.
The diaspora heavily contributes to the economy of their home countries through technology transfer, knowledge transfer, community projects, heritage trade, philanthropy, tourism and investment. Remittance is used for household consumption, education, health and human capital development. At a national level, remittances boost economic development – helping to reduce poverty, promote national development, empower communities and promote access to productive resources. Remittance in Africa has a strong influence on poverty reduction. The annual remittances from the UK are around $4.2 billion, equivalent to 78 percent of the country’s overseas aid budget. The African diaspora remitted $51.8bn (£34bn) to the continent. In the same year, according to World Bank figures, overseas aid to Africa was $43bn (£28bn).
The World Bank forecasts that by 2020 remittances to developing countries will $200 billion annually. Remittances are a major and stable source of income for people in many African countries as well as a crucial source of foreign exchange. The cost of sending money is high. It is necessary to lower transaction costs to unlock remittances as a source of development.