Wed. Jun 19th, 2024

Mobile remittances to lead digital revolution in rural Africa

To harness the development benefits of using mobile channels to send and receive remittances, the UN’s International Fund for Agricultural Development (IFAD) announced today its first grant to a digital payments company, MFS Africa.

The new program is designed to encourage mobile remittances to be used in marginal rural areas of five African nations: Senegal (Ghana), Senegal (Senegal), The Gambia, Uganda, and Senegal (Senegal).

Mobile remittances – the money that migrant workers sent home through digital channels using mobile technology – can play a catalytic role linking individuals and businesses to the formal economy, while providing access to key financial products and services such as transactions, credit, insurance, payments or savings that can boost their own social and economic wellbeing.

This €1.2 million two-year grant is funded by the European Union through the IFAD-managed PRIME program. MFS Africa and its partners will be able to unlock new markets in marginalized rural areas where mobile remittances could provide significant social and economic benefits for some of the most vulnerable people. This partnership is public-private and will allow MFS Africa to work with its partners to create a public-private partnership. MFS Africa and its partners are co-funding the grant with €0.64 million.

“MFS Africa is a great partner in our efforts to serve marginalized rural areas and leaving no one behind,” said Jyostna Puri, Associate Vice-President of the Strategy and Knowledge Department of IFAD. “What MFS Africa is doing is scalable. This grant is an investment to develop a model linking mobile remittances and financial inclusion that can be scaled up across Africa, and benefit not only remittance families but also their communities,” added Puri.

Mobile remittances: Switching

Despite the fact that mobile remittances have seen a dramatic increase in their numbers since the outbreak, they only account for 3% (US$16billion), of the total remittances that migrants send home to their families in low and middle-income nations.

“In order to change habits and attract people to digital and formal sending channels, it is vital to provide consumer awareness and education on both sending and receiving sides, particularly in rural areas. But these activities do not offer immediate financial returns and are very resource intensive for service providers,” said Pedro de Vasconcelos, Manager of the Financing Facility for Remittances at IFAD.

“Transferring money internationally should be as easy and as affordable as making a phone call. We look forward to expanding the digital remittances industry by increasing the competition and diversity. This will ensure that African consumers have access to cost-effective and sustainable means of sending money,” said Nika Naghavi, Executive Director of MFS Africa.

While the average remittance transfer cost to low- and middle-income countries is 6%, the average to African countries is 7.8%, far from the specific SDG target 10.c of reducing the cost of migrants’ remittances to less than 3% by 2030. This target is already being met by mobile transfer costs.

Mobile remittances will continue to grow and promise to make Africa a more powerful and impactful place in the digital revolution.

MFS Africa will be able to support their payment hub partners through this IFAD grant [money transfer operators in European ‘sending’ countries, and mobile network operators in African ‘receiving’ countries]You can send money directly through mobile wallets to select African countries.

“IFAD support will help us enhance the financial resilience of the African diaspora and their families back home by unlocking the challenges in the remittance value chain, covering both the sending and receiving sides,” said Naghavi

MFS Africa will also test, scale and distribute micro-insurance products that are linked to remittances through selected partners.

Evolve Program

This is the first partnership announced as part of IFAD’s involvement with the Evolve Programme, an initiative that includes the African Export-Import Bank (Afreximbank) and CNN International Commercial aimed at empowering and telling impactful stories, through a series of branded content, about emerging and expanding scale-ups across Africa.

The grant will be of benefit to all people and businesses that make up the remittance chain. It will also increase transparency and encourage competition in corridors often overlooked or neglected by traditional money transfer providers due to low volume.

MFS Africa LimitedThe company is a pan-African, omnichannel payments company that enables interoperable domestic as well as cross-border payments. The company connects enterprises, money transfer operators and banks to each other. It also provides access to over 400 million mobile money wallets across Africa. MFS Africa allows domestic and cross-border collections and disbursements across its network.

Remittances | Key figures:

Remittances are a key part of the fight against hunger and poverty.
Despite the global recession caused by the pandemic in 2001, global remittances (the hard-earned money sent from migrant workers to their families in low- and mid-income countries (LMICs)) grew by 8.6% in 2021. This was due to mobile remittances.

– In 2021, remittances flow to LMICs (US$605 billion) more than tripled the total amount of international official development assistance (US$178.6 billion).
– Money sent home by over 200 million migrant workers around the world this year is expected to reach US$630 billion in 2022, providing a lifeline for more than 800 million family members.

– Remittances remain a crucial financial inflow for African households, with around US$94 billion received yearly from African migrants around the world.
– It is estimated that 50% of remittances worldwide go to rural areas.

– About 75% of remittances are used to make ends meet: buy nutritious food, pay health expenses, housing, or education; the rest is used to support entrepreneurial activities, access to savings and credit, leading to financial independence.

Source: newbusinessethiopia

By Chala Dandessa

I am Lecturer, Researcher and Freelancer. I am the founder and Editor at ETHIOPIANS TODAY website. If you have any comment use caalaadd2@gmail.com as email contact. Additionally you can contact us through the contact page of www.ethiopianstoday.com.

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