money transfer to africa

Influence of Money Transfer On African Economy

In 2018, according to the World Bank, overall global remittance grew 10% to US$525 billion, including US$528 billion to developing countries. Africa is estimated to collect about 30billion$ annually, and sub-Saharan Africa gets almost a 21billion$. 

With the introduction of mobile phones, Africa’s development is flourishing gradually. Over the landline, over the PC and the bank account into financial services, mobile devices play huge roles. The Internet is reaching progressively up to Africans. 

With the increase in usage of mobile money, the government has also started encouraging a lot. African government has promised improved identity, addressing and mobile technology for payments, mobile interfaces for all government services. 

A Brief about the Challenges Faced

Lack of Customer Skill

One of the significant challenges faced in Africa is the lack of technological knowledge and customer skill. Many people don’t know the usage of mobile phones though they have one. Government represents the most prominent interactions. Hence government could encourage more to use mobile phones and technologies to ensure economic development.

Lack of Proper Infrastructure

Another major problem faced in Africa is the lack of infrastructure. By 2050, it is estimated that Nigeria will rank as the third most populated country after China and India. Hence, the demand for basic needs will also increase. The one way to combat all these demands is proper technology. Without good infrastructure, technology won’t survive.

There is always room for innovation, scope to create suitable infrastructure, and Africa is slowly working on it. Gradually they are also grasping the internet and technologies.

Many fintech firms like ATL money transfer work hard to ensure hassle-free money transfer globally, even in remote places in Africa. 

Trust issues

Technologies are something very new and still developing in Africa. Hence, it will take some time for the people to trust completely. For fintech companies, trust is vital, and that can be brought in by having a good partnership with values. Trust is a two-way process; hence people also need to come forward and make transactions to examine the trust. For this also, the government needs to create different and valuable laws and regulations.

Many software like ATL money transfer is out there to ensure the data is collected correctly. With this software, one can transfer money safely and track the transaction afterward through the tracking ID provided.

Effects on African Economy

The earnings come from remittance in Africa higher than the FDI coupled with Africa’s official development aid. Around 16 billion $ are untapped potential from this income which can be used as diaspora bonds. This expense is something that the country should consider how they can use to tap potential out of remittances.

The transaction cost in Africa is highest around 10-15%, whereas global transaction cost is approximately 7-8%. Africa can reduce this to 6% and use it for diaspora bonds. Financial firms and government should look into this and start using it as a part of credit writings.

Internal and International Transfer

Africa’s internal remittance also plays a massive role in increasing the economy. In the Sub-Saharan region, around 4.5 billion$ comes from within Africa. But internal money transfer in Africa and external money transfer out of Africa, both transactional costs remain almost identical. 

Financial institutions should lookout for scopes to reduce the transactional costs and channel this cost for development.

Fintech firms like ATL Money Transfer provide low transfer fees and great exchange rates while transferring money. The transactional rates are pretty reasonable.

Formal Sector Remittance

Almost 35-40% of the continent’s remittance goes to the rural areas. Hence, the government or financial institutions can connect the remittances through financial services like loans, credit loans, deposits. These services then can support steady economic development.

Scopes to Reduce Transactional Costs

Many countries in Africa have encompassed cell phone penetration. They are trusting mobiles to transfer money now. Hence, the governments should focus more on developing a framework that can help cross-border remittances. This procedure can also help in reducing transactional costs.

Many fintech firms have come forward and developed software to make the flow of remittance smooth even in Africa’s remote places. For example, ATL Money Transfer software makes money transfer an easy process all over Africa.

Role of Migrants

Migrants are the ones who sent remittances back home, which constitutes both internal and international remittances. Along with remittance, the skills of the migrants are also in use. These skills cover a countries resources. 

So the government should make the proper usage of both the remittances and their skills for development. To measure the remittance, one needs to work with the banks, the UN, and other organizations to create a structure that can help develop.

Remittances Used for Household Purpose

The remittances that are sent back, primarily used for household purposes like groceries, other investments, construction purposes. Most of the remittances help in sustaining households, families. Hence, working with the financial institutions, these remittances can be connected to loans, banks. These services can thereby help in improving the unbanked situation of Africa along with improving the economy.

Final words

Remittances thus play a huge role in the African economy. One of the early adopters of online remittance in Africa. Hence, ATL Money Transfer built a strong base of online money transfer connections across the world. Through this software, you can send money back to your loved ones without any hassle, even to Africa’s remote places.

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