Remittance flows to and within Africa approach US$40 billion. North African countries such as Morocco and Egypt are the continent’s major recipients. East African countries heavily depend on these flows, with Somalia standing out as particularly remittance dependent. For the entire region, these transfers are 13 per cent of per capita income.

When compared to other regions, money transfers to Africa are among the most problematic mainly due to the fact that the continent faces two major challenges: high rates of informality, particularly within the continent, and a regulatory environment that foments monopolies. In turn, transfer costs are higher and remittance senders obtain less value for their money. Most African countries restrict money transfers to banking depository institutions, and restrict outbound flows of money unless used for trading.

As a result, informality emerges as a solution to the need to remit. Another effect, however, is the persistence of monopolies by banks and the few money transfer operators handling transfers. In all of West Africa, for example, 70 per cent of payments are handled by one money transfer operator. Moreover, 50 per cent of payments are handled directly by banks and the rest by MFIs either as sub-agents of banks, with some exceptions (in Senegal, for example, MFIs operate as independent agents). Nigeria is a case in point: nearly 80 per cent of transfers are handled by one money transfer agency and banks are the sole remittance payers in the country. Africans in South Africa are also faced with significant regulatory restrictions in sending money, and thus rely on informal networks.

Because regulatory environments often prevent other non-banking financial institutions from making transfers or restrict outbound transfers, financial access is also a casualty. As few institutions participate in the transfers, and banks do not cater to lowerincome individuals, financial access among African senders and recipients is relatively low. In some countries like South Africa barriers to entry relate to their legal status, thus disenfranchising migrants. Other countries such as Kenya are seeking to deepen financial access by leveraging remittance transfers through the use of mobile telephony.

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