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Postal operators can help drive down remittance costs in parts of Africa

June 16, 2018 • East Africa, Opinion, Southern Africa, West Africa

 Sub-Saharan Africa is the world’s most expensive region to send money home

Sub-Saharan Africa is the world’s most expensive region to send money home

Money received from loved ones working abroad can transform a family’s living standards. From Albania to Australia and from Bahrain to Bangladesh, the essential bridges built between countries due to remittances support migrant families and keep children in desperately needed education.

For parts of Africa, however, life-enhancing remittances come at a high price. Sub-Saharan Africa is the world’s most expensive region to send money home. Africans last year paid, as a fee, an average of almost 10 cents from every dollar sent back, and these excessive costs strike hardest at the poorest, especially in rural areas.

More than 200 million people in Africa rely on payments from abroad and some 80 million live in rural areas. The lack of roads and bridges, and other essential infrastructure can make badly needed access to financial services challenging. There are also significant hidden costs, including transport fees, potential dangers along the route and monopolies on the services provided.

All of these problems drive up costs, and make the receipt of remittances prohibitive in the region. The question for governments, international organizations and consumer groups has been how to reduce these costs by finding alternative providers capable of delivering services that are cost effective and reliable.

An efficient solution may come in the form of something that has been a staple of African community life for over a hundred years: the humble, but resilient local post office. The historic footprint of the post office, and the inherent trust placed in these community services, serve to reinforce their suitability.

In some Sub-Saharan countries, post offices are less than 10 minutes’ walk away for 42 per cent of their customers; their proximity shows that postal operators are well placed to deliver financial services to their customers. The facts speak for themselves: In Benin and Madagascar, for instance, 67 per cent of remittance recipients walk to the Post Office for their money, and in Senegal and Ghana it is 62 per cent and 57 per cent respectively.

Digitalization is also sweeping relentlessly across Africa, perhaps at a greater speed than many other parts of the world. These trends are forcing rapid changes in the remittance market and revolutionizing payment systems. The opportunities for postal operators to develop sustainable finance networks that support migrant families and further financial services are immense.

The findings in the African Postal Financial Services Initiative. A success story on remittances at the post in Africa, authored by the International Fund for Agricultural Development and its partners, including the Universal Postal Union, support these findings and highlight the urgency of the situation. We cannot afford to ignore the impact of high costs on the poorest sections of society.

Reductions in remittance costs are on everyone’s list of global priorities. The 2030 Agenda for Sustainable Development under Goal 10, on reducing inequality, calls for steep reductions to less than 3 per cent of the transaction costs of migrant remittances and the elimination of remittance corridors with costs higher than 5 per cent.

Posts are well-positioned to help achieve this goal: They have the networks, the logistics, and the strong ties to government. If these connections are bound to a farsighted strategy and a commitment to offering inclusive financial services, they can succeed in this challenge. The time for action, however, is now. Posts need to reach out and seize this generational opportunity.

By the Director General of the Universal Postal Union Bishar A. Hussein

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