The secretariat of the Inter-Governmental Authority for Development (Igad) has encouraged member nations of the regional African bloc to standardise diaspora transaction costs in order to stimulate inflows.
During a conference with the central bank governors of the member countries in Nairobi, Igad executive secretary Workneh Gebeyehu stated that, despite the area receiving large amounts of remittances from overseas, transaction rates are far higher than the world average.
Djibouti, Eritrea, Ethiopia, Kenya, Somalia, South Sudan, Sudan, and Uganda are the Igad states.
The average cost of sending remittances to the Igad region is 8.9 percent, which is approximately three times the Sustainable Development Goals goal rate of less than three percent.
The cost of intra-regional remittances transfer among Igadd member nations is 10.6 percent, which is greater than the rate of sending money to the area, making moving money among members more expensive.
“Many remittances to the Igad region are still being sent through informal channels, such as friends and family members carrying cash across borders or using unlicensed money transfer operators,” Mr Gebeyehu explained.
“These informal channels are often unregulated, expensive, and risky, exposing both senders and recipients to fraud and exploitation.”
Despite the impact of Covid-19 on the global economy, remittances to low and middle-income nations hit a record high of $540 billion, according to the World Bank.
According to recent estimates, around 281 million people (or 4% of the worldwide population) live outside their nation of origin and remitted $781 billion in remittances in 2021 alone.
Dr Patrick Njoroge, the host governor, also noticed the exclusion of other diaspora inhabitants in the transaction bands, suggesting the need to alter the previously established transaction levels.
“First and foremost, there is the prospect of having modest ticket sizes. The remittance does not have to be substantial; you may wait until you have, say, $500. Even $20, let alone $10. Smaller ticket sizes can still be used. “If we go back to the existing data that we have, you’ll find that the majority of it is at the bottom of the pyramid and lower tickets,” he added.