Thanks to Duncan Green’s blog From Poverty to Power, for alerting us to an interesting article by Sanou Mbaye, on remittances to Africa. Mbaye argues that despite all the gloomy news, Africa’s macroeconomic performance has improved dramatically since the 1990s. And he says a big factor in that is remittances — money sent home by Africans now living and working overseas.
According to Mbaye: “…a study commissioned by the Rome-based International Fund for Agricultural Development indicates that more than 30 million individuals living outside their countries of origin contribute more than $40 billion annually in remittances to their families and communities back home. For sub-Saharan African countries, remittances increased from $3.1 billion in 1995 to $18.5 billion in 2007, according to the World Bank, representing between 9% and 24% of GDP and 80-750% of ODA [overseas development assistance].”
Of course the value of these remittances has probably dropped quite a bit thanks to the global economic downturn over the last year or two. But still, remittances play an important role.
But none of this is really new. What is interesting, is Mbaye’s argument that African countries need to adapt their banking and regulatory systems to be able to get the most benefit out of these remittances. Governments need to introduce measures to prod banks and financial services companies to reduce the costs of transferring money across borders, and make it easier for people to send and receive cash.
He looks at three different strategies being followed – in the Anglophone, Lusophone and Francophone countries, and points to lessons to be learnt from these.