Remittances in Africa: A Catalogue of Studies and …...Foreword Remittance inflows to Sub-Saharan Africa continue to rise and recover from the global financial crisis. In 2012 the

Remittances

in Africa

The World Bank GroupThe European Commission

A Catalogue of Studies and Technical Assistance by the

World Bank, Development Agencies and Government in Africa

November 2013

Remittances in Africa A Catalogue of Studies and Technical Assistance by the World

Bank, Development Agencies and Government in Africa

November 2013

The World Bank The European Commission

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CONTENTS

Foreword ............................................................................................................................................................. 5 Acknowledgments ............................................................................................................................................ 6 Abbreviations and Acronyms ............................................................................................................................ 7 Executive Summary ............................................................................................................................................ 9 1. Introduction .............................................................................................................................................. 11

1.1 About the Document .......................................................................................................................................................... 11 1.1 The African Institute for Remittances .......................................................................................................................... 11 1.2 The AIR Project ................................................................................................................................................................... 11 1.3 General Background .......................................................................................................................................................... 12 1.4 Migration Patterns .............................................................................................................................................................. 13 1.5 Remittance Flows................................................................................................................................................................ 13 1.6 Regulated Remittances ...................................................................................................................................................... 14 1.7 Unregulated Remittances ................................................................................................................................................. 15 1.8 Costs ........................................................................................................................................................................................ 16 1.9 Regulatory Framework ..................................................................................................................................................... 16 1.10 General Principles for International Remittance Services .................................................................................. 17 1.11 Partnerships in Remittance Programs ........................................................................................................................ 18 References: Chapter 1 ................................................................................................................................................................... 19

2. Technical Assistance to Governments .................................................................................................... 20 2.1 World Bank ........................................................................................................................................................................... 20 2.1.1 East and Central Africa .......................................................................................................................................... 21 2.1.2 Southern Africa ......................................................................................................................................................... 23 2.1.3 West Africa ................................................................................................................................................................. 23 2.1.4 North Africa ................................................................................................................................................................ 23 2.2 Development Partners ...................................................................................................................................................... 24 2.2.1 CGAP .............................................................................................................................................................................. 24 2.2.2 IFAD ............................................................................................................................................................................... 24 2.2.3 EU .................................................................................................................................................................................... 25 2.2.4 GIZ .................................................................................................................................................................................. 26 References: Chapter 2 .................................................................................................................................................................. 27

3. Carrying out Training, Capacity-Building Programs and other projects .......................................... 28 3.1 World Bank .......................................................................................................................................................................... 28 3.1.1 East and Central Africa .......................................................................................................................................... 28 3.1.2 Southern Africa ......................................................................................................................................................... 28 3.1.3 Global ............................................................................................................................................................................ 28 3.2 Development Partners ...................................................................................................................................................... 29 3.2.1 AfDB ............................................................................................................................................................................... 29 3.2.2 Credit Suisse Bank ................................................................................................................................................... 29 3.2.3 DFID ............................................................................................................................................................................... 29 3.2.4 EU .................................................................................................................................................................................... 30 3.2.5 IFAD ............................................................................................................................................................................... 31 3.2.6 The Government of the Netherlands ............................................................................................................... 32 3.2.7 Opportunity International UK ............................................................................................................................ 32 References: Chapter 3 .................................................................................................................................................................. 33

4. Study of Remittance Flows within Africa .............................................................................................. 34

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4.1 World Bank ........................................................................................................................................................................... 34 4.1.1 Migratory patterns .................................................................................................................................................. 34 4.1.2 Remittance Flows .................................................................................................................................................... 35 4.1.3 Costs .............................................................................................................................................................................. 35 4.1.4 Regulated and unregulated means of sending remittances .................................................................. 36 4.1.5 East and Central Africa .......................................................................................................................................... 37 4.1.6 Southern Africa ......................................................................................................................................................... 37 4.1.7 West Africa ................................................................................................................................................................. 38 4.2 Development Partners ....................................................................................................................................................... 38 4.2.1 ACP Group of States ................................................................................................................................................ 38 4.2.2 AFD ................................................................................................................................................................................. 38 4.2.3 AfDB ............................................................................................................................................................................... 38 4.2.4 DFID ............................................................................................................................................................................... 39 4.2.5 EC .................................................................................................................................................................................... 40 4.2.6 FAO-UN ......................................................................................................................................................................... 40 4.2.7 French Ministries of Economy, Foreign Affairs and Interior (former Ministry of Immigration).............................................................................................................................................................................. 40 4.2.8 GIZ .................................................................................................................................................................................. 40 4.2.9 IFAD ............................................................................................................................................................................... 41 4.2.10 IMF ............................................................................................................................................................................... 41 4.2.11 IOM .............................................................................................................................................................................. 41 4.2.12 Ministry of Foreign Affairs of Denmark and the Center on Global Counterterrorism Cooperation ................................................................................................................................................................................ 42 4.2.13 USAID ......................................................................................................................................................................... 42 References: Chapter 4 .................................................................................................................................................................. 43

5. Policy Research and Dialogue on How Remittances Contribute to the Development of Sub-Saharan

Africa ................................................................................................................................................................. 45 5.1 World Bank ........................................................................................................................................................................... 45 5.1.1 National level ............................................................................................................................................................. 45 5.1.2 Household level ........................................................................................................................................................ 46 5.1.3 Community level ...................................................................................................................................................... 47 5.2 Development Partners ....................................................................................................................................................... 47 5.2.1 ACP Group of States ................................................................................................................................................ 47 5.2.2 AfDB ............................................................................................................................................................................... 47 5.2.3 DFID ............................................................................................................................................................................... 48 5.2.4 EC .................................................................................................................................................................................... 48 5.2.5 Finmark Trust ........................................................................................................................................................... 49 5.2.6 GIZ .................................................................................................................................................................................. 49 5.2.7 IFAD ............................................................................................................................................................................... 49 5.2.8 ILO .................................................................................................................................................................................. 50 5.2.9 IMF ................................................................................................................................................................................. 50 5.2.10 IOM .............................................................................................................................................................................. 51 5.2.11 USAID ......................................................................................................................................................................... 51 References: Chapter 5 ................................................................................................................................................................ 53

6. Development of Content and Technology Platforms for Remittances ................................................. 55 6.1 World Bank ........................................................................................................................................................................... 55 6.1.1 East and Central Africa .......................................................................................................................................... 55 6.2 Development Partners ....................................................................................................................................................... 56 6.2.1 CGAP .............................................................................................................................................................................. 56

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6.2.2 BIS ................................................................................................................................................................................... 56 6.2.3 BMZ (German Federal Ministry for Economic Cooperation and Development) ......................... 57 6.2.4 DFID ............................................................................................................................................................................... 57 6.2.5 GIZ .................................................................................................................................................................................. 57 6.2.6 IFAD ............................................................................................................................................................................... 57 6.2.7 Finmark Trust ........................................................................................................................................................... 58 6.2.8 Government of France ........................................................................................................................................... 58 6.2.9 Government of Italy ................................................................................................................................................ 58 6.2.10 Government of the Netherlands ..................................................................................................................... 59 6.2.11 Opportunity International UK ......................................................................................................................... 59 6.2.12 UPU .............................................................................................................................................................................. 59 6.2.13 Others ......................................................................................................................................................................... 59 References: Chapter 6 ................................................................................................................................................................. 61

7. Examples of Country Programs .................................................................................................................. 62 7.1 Ethiopia — Leveraging Remittances through Diaspora Bonds and Securitization ..................................... 62 7.2 Zambia — Improving Payment Systems through Technology ........................................................................... 62 7.3 Uganda — Improving the Regulatory Framework for Payment Systems ....................................................... 62 References: Chapter 7 .................................................................................................................................................................. 65

Annex 1. Countries Originating Most Tertiary- Educated Migrants, 2000 ................................................. 66 Annex 2. Top 10 Remittance Recipients (Sub-Saharan Africa), 2011 .......................................................... 67 Annex 3. MTOs in Sub-Saharan Africa .......................................................................................................... 68 Annex 4. Venues for Dissemination of Remittance Research and Studies ................................................... 69 Annex 5: Some terminology concerning RSPs ............................................................................................... 75 Attachment 1. FATF Recommendations 2012 ................................................................................................ 76

Foreword

Remittance inflows to Sub-Saharan Africa continue to rise and recover from the global financial crisis. In 2012 the region received approximately $31 billion in remittance flows from a stock of more than 21.8 million emigrants. It is estimated that remittance inflows could increase by 25%, reaching $39 billion in 20151. However, despite the importance of remittances, Sub-Saharan Africa is still the most expensive region to send to, with an average transfer cost of 12.29% in the third quarter of 20132. The undeniable importance that remittances have for the economic livelihood of the region and the need to continue to reduce prices has reinforced the demand for more efforts and projects by different organizations in the region.

One such effort is the African Institute for Remittances (AIR). AIR is one of five Africa Legacy projects and will aim at improving the impact migrant remittances have on social and economic development in Africa. In order to establish AIR as a specialized institute of the African Union Commission (AUC), an initiative known as the AIR Project was launched amongst key development partners, namely the European Commission (EC), the African Development Bank (AfDB), the International Organization for Migration (IOM) and the World Bank, which aims at providing assistance to the AUC and its member states in these efforts. At its core, the main objectives of the AIR Project are not only to facilitate the process leading to the creation of the institute, but also develop the capacity of the member states of the African Union (AU), remittance senders and recipients, and other stakeholders to implement concrete strategies and operational instruments to use remittances as development tools for poverty reduction.

Remittances in Africa: A Catalogue of Studies and Technical Assistance by the World Bank, Development Agencies and Government in Africa provides a comprehensive review of such efforts, including studies, policies and technical assistance programs on remittances in Africa that have been carried out by the World Bank, other development agencies and governments. The document should be considered as an annotated catalogue providing a useful tool for remittance practitioners who would like to know what is being done in the field and which organizations are involved, and pointing the reader in the right direction to find relevant and exhaustive information.

The report was produced in the context of activities undertaken by the AIR Project, which is pleased to present the latest version of the catalogue and hopes it proves helpful to those who read it.

____________________________________ Gaiv Tata Director Financial and Private Sector Development in the Sub-Saharan Africa Region & Financial Inclusion and Infrastructure Global Practice, Financial & Private Sector Development Network The World Bank

1 The World Bank Migration and Development Brief 20-April 19, 2013 2Remittances Prices Worldwide September 2013 Report

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Acknowledgments

This latest report was authored by Ricardo Valencia Córdoba, Africa Region Financial and Private Sector Development Consultant, the World Bank. Overall guidance and supervision was provided by Soheyla Mahmoudi, Task Team Leader, Senior Operations Officer, African Institute for Remittances (AIR) Project, Africa Region Finance and Private Sector Development (AFTFE). Key assistance was provided by Thilasoni Benjamin Musuku, Senior Financial Sector Specialist, AFTE; comments were also received by the following colleagues from the Financial Infrastructure and Remittances Service Line (FFIFI), Financial and Private Sector Development: Massimo Cirasino, Manager, Carlo Corazza, Senior Payment Systems Specialist and Marco Nicoli, Payment System Specialist. Comments and key assistance were also received from Pedro de Vasconcelos, Financing Facility for Remittances Coordinator, International Fund for Agricultural Development (IFAD); Kenneth Coates, Peer Reviewer, Global Remittances Specialist (Consultant); Hailu Kinfe, AIR Project Consultant and Ron Hendrix, Program Manager, Migration, Mobility, Employment and Higher Education, European Union (EU) Delegation to the AU, Addis Ababa.

The World Bank would also like to acknowledge and thank the African Union Commission (AUC) and other institutions: the European Commission (EC), the African Development Bank (AfDB), the Making Finance Work for Africa (MFW4A), the EU Delegation to the African Union (AU), IFAD, the International Organization for Migration (IOM), the European Central Bank (ECB), the Central Bank of Colombia (Banco de la República-BRC), the United States Agency for International Development (USAID), the Center for Latin American Monetary Studies (CEMLA) and Developing Markets Associates for their helpful insights, comments, and contributions. Comments were provided by the following colleagues from the AfDB: Bernadette Dia Kamgnia, Division Manager of Development & Policy Dialogue Division, and Habib Attia, Donor Relationship Officer; Yvon Resplandy, Senior Advisor for Diaspora and Remittances, USAID; the following colleagues from BRC: Enrique Montes, External Sector Chief and María Mercedes Collazos, Economist and Balance of Payments Specialist; the following colleagues from CEMLA: Jesús Cervantes, Real Sector and General Principles for Remittances Program Coordinator, and René Alberto Maldonado, Remittance Measurement Program Coordinator; Josiah Ogina, Head of Mission and Rep AU/UN Economic Commission for Africa (ECA)/Intergovernmental Authority on Development (IGAD), IOM; Leon Isaacs, CEO, Developing Markets Associates; and Elitza Mileva, Economist, European Central Bank.

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Abbreviations and Acronyms

ACP African, Caribbean, and Pacific Group of States ACH Automated Clearing House AECF Africa Enterprise Challenge Fund ADM African Diaspora Marketplace AFD Agence Francaise de Development AfDB African Development Bank AML/CFT Anti-Money Laundering/Combating the Financing of Terrorism API Arab Payments and Securities Settlement Initiative AIR African Institute for Remittances ARPI African Remittances Payment Initiative CAEMC Central African Economic and Monetary Community AU African Union AUC African Union Commission CEMAC Economic and Monetary Community for Central Africa BIS Bank for International Settlements BCEAO Banque Centrale des États de l’Afrique de l’Ouest BEAC Banque des Etats de l'Afrique Centrale BRCA Bilateral Remittance Corridor Analysis BMZ Bundesministerium für wirtschaftliche Zusammenarbeit und Entwicklung(Eng. German Federal

Ministry for Economic Cooperation and Development) CamCCUL Cameroon Cooperative Credit Union League CGAP Consultative Group to Assist the Poor CPSS Committee on Payment and Settlement Systems DEC Development Economics Group

DFID UK Department for International Development DIA Diaspora Investment in Agriculture DOS United States Department of State DRC Democratic Republic of Congo DRIL DFID Remittance Information Library EADI European Association of Development Research and Training Institutes EC European Commission EIB European Investment Bank EU European Union FAO Food and Agriculture Organization of the United Nations FAR Future of African Remittances FATF Financial Action Task Force FDI Foreign direct investment FedACH Federal Reserve Automated Clearing House FFIFI Financial Infrastructure and Remittances Service Line FFR Financing Facility for Remittances FINCA Foundation for International Community Assistance FIRST Financial Sector Reform and Strengthening Initiative FSAP Financial Sector Assessment Program FSS2020 Financial System Strategy 2020 (Nigeria)

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GDP Gross Domestic Product GIZ German Agency for International Cooperation (Formally GTZ-German Agency for Technical

Cooperation3) G8/G20 Group of Eight/Group of Twenty GRET Groupe de Recherche et d’Echanges Technologiques (Eng. Group For Research and Technology

Exchanges GRWG Global Remittances Working Group HIRDA Himilo Relief and Development Association IAMTN International Association of Money Transfer Networks ICT Information, Communications and Technology IDA International Development Association IDB Inter-American Development Bank IFAD International Fund for Agricultural Development IFC International Finance Corporation ILO International Labor Organization IFS International Financial System IMF International Monetary Fund

IOM International Organization for Migration IT Information Technology KFW Kreditanstalt für Wiederaufbau (Reconstruction Credit Institute) M-Banking Mobile Phone Banking MFI Microfinance Institution MFW4A Making Finance Work for Africa MIDA Millennium Development Authority MTO Money Transfer Operator NGO Non-governmental Organization ODA Official development assistance OECD Organization for Economic Co-operation and Development PARMEC Projet de Décret d'Application de la Loi Portant Réglementation des Institutions Mutualistes ou

Coopératives d'Épargne et de Crédit. PIN Personal Identification Number POS Point of Sale PSDG Payment Systems Development Group4 RPW Remittance Prices Worldwide SADC Southern Africa Development Community SAMP Southern Africa Migration Project SIDA Swedish International Development Agency SME Small and medium-size enterprise SROs Somali remittance organizations SWIFT Society for Worldwide Interbank Financial Telecommunications UN United Nations UNCDF United Nations Capital Development Fund UPU Universal Postal Union USAID United States Agency for International Development WAEMU West African Economic and Monetary Union WEPPN Worldwide Electronic Postal Payments Network

3 In January 2011 GTZ merged with the German Development Service and the International Training and Capacity-Building to form GIZ. 4 Now the Financial Infrastructure and Remittances Service Line

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Executive Summary

In recent years, much emphasis has been placed on the magnitude, growth and leveraging of remittances for development in the African continent. Remittances in Africa is a review that catalogues the main studies, policies and technical assistance programs on remittances in Africa that have been carried out by the World Bank, other multilateral and bilateral development agencies, and governments. These activities have lead up to and influenced, directly or indirectly, the initiative of creating an African Institute for Remittances (AIR). As one of five Africa’s Legacy projects, AIR is to be established with the objective of harnessing migrant remittances for social and economic development in Africa. The contents of Remittances in Africa should prove useful in undertaking further research in support of this goal.

The AIR Project5 is an initiative in which the World Bank and selected development partners European Commission (EC), African Development Bank (AfDB) and the International Organization for Migration (IOM), are cooperating with the African Union Commission (AUC) and its member states to facilitate the establishment of the institute. The Project is funded by a grant from the EC to the World Bank, which is responsible for the overall implementation. The Project was signed in December 2009 and launched in June 2010. The preparatory phase of the project will end in April 2014.

This review includes work on remittance costs and trends, the scope and the importance of remittances to Africa, financial markets and infrastructure that influence remittance costs, the impact of new technology on remittances, the legal and regulatory framework governing remittance flows, and the impact of remittances on households and national policy. The review is considered a “living” document and will be revised and updated periodically to reflect ongoing activities and trends.

Migrant remittances have become a major source of financing for developing countries and are particularly important in Sub-Saharan Africa. The increasing role of remittances, especially their ability to remain resilient during periods of economic and financial crises, has spurred an interest in development practitioners who wish to understand the nature, potential development impact, and policy implications of remittance flows.

The main findings from the review reveal that:

(a) Remittances are used mainly for household consumption and investment. The evidence from studies reveals remittances reduce the level and severity of poverty among households, but there have been very few attempts to channel remittances toward development activities; moreover the remittance market in Africa is largely undeveloped. This situation indicates that the potential exists for the improvement of remittance services and introduction of consumer products that will be valued by migrants and Diaspora.

(b) The cost of remittances to Sub-Saharan African countries is high, which makes regulated remittance channels unattractive to remittance senders.

5 The AIR Project covers the following eight (8) activities: (i) Providing technical assistance to government institutions (central banks, ministries, financial and nonfinancial institutions) on putting in place the necessary regulatory frameworks; (ii) Carrying out training and capacity building programs of relevant institutions and organizations (e.g., national statistical services departments); (iii) Studying remittances flows within Africa, which includes North Africa; (iv) Conducting policy research and dialogue and sharing information on how remittances can contribute to the development of African countries; (v) Developing content and technology platforms for country-based payment and settlement systems for remittances; (vi) Developing partnerships between African central banks and remittance service providers and non-bank correspondent agencies to improve financial access; (vii) Disseminating data and research findings; and (viii) Preparing annual reports, conferences and meetings of policy makers. The expected results from the AIR Project are: (a) Facilitation of the creation of the AIR; (b) Reduction of remittance transaction costs; (c) Dissemination of data on remittance fees in major corridors; and (d) Improvement of the development impact of remittances in selected African countries.

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(c) Estimates suggest that 45-65 percent of remittances in Sub-Saharan Africa are transferred through unregulated channels.

(d) Data on remittance flows to, from and within Africa need to be improved. Due to the large amount of remittances that are channeled through unregulated means, in some cases limited attempt is made to estimate these flows or include them in Balance of Payments statistics.

(e) The regulatory framework in many African countries is a hindrance to non-bank financial institutions such as microfinance institutions (MFI) and other money transfer operators (MTO)—the existing regulatory framework highly favors banking institutions. This leads to a lack of competition among remittance service providers, increases costs for remittance senders, and prevents access for rural dwellers that are not reached by existing MTOs.

(f) In Kenya, South Africa and other such countries, where the provision of payment services by non-bank financial institutions has been allowed, innovative payment services have grown and some providers are now potentially able to provide remittances services to millions of people in rural and remote areas.

(g) A key objective of various stakeholders such as governments, international organization, regional banks, privet sectors, and development partners is to reduce the cost of remittances through improvements in the payments systems infrastructure and the regulatory framework affecting remittance services.

In addition, it is generally held among remittance stakeholders that governments and multilateral organizations can help leverage the development impact of remittances on families and communities by assisting them in using these resources for purposes other than just consumption.

Note: The term remittance used throughout this document refers, in most cases, to international remittances, which are defined (in the General Principles for International Remittance Services prepared by the Committee on Payment and Settlement Systems (CPSS) and the World Bank) as typically recurrent cross-border person-to-person payments of relatively low value sent by migrant workers to their families in their home country.

1. Introduction

1.1 About the Document

This review has been prepared to help inform about the activities of the AIR project and other initiatives on remittances in Africa. Its purpose is to catalogue and report the most pertinent activities; it does not seek to provide in-depth analysis or be considered a formal publication. It is a practical tool for remittance practitioners who would like to know what is being done and by whom. Any further information should be requested from the authors or project implementers and/or researched on each partner’s individual website.

The methodology used includes desk reviews of reports, policy papers, research publications, project documents, interviews and academic literature on remittances in Africa. Each of the chapters of this report on the discussion of AIR-related activities provides an overview of the work on remittances conducted by the World Bank, divided regionally into East and Central Africa, Southern Africa, North Africa, and West Africa. Each chapter further reviews projects and research carried out by various development partners and organizations.

Following this introductory chapter, Chapter 2 provides an overview of the technical assistance to governments. Chapter 3 describes training, capacity building programs, and other pertinent projects that are carried out to enable governments in remittance-receiving countries to increase the development impact of remittances. Chapter 4 looks at the remittance flows within Africa, including their uses, and provides information on pertinent studies. Chapter 5 looks at the programs and literature that discuss the policy research and dialogue within the World Bank and development partners. Chapter 6 covers development of the technology platforms that are bringing innovation to the payment and settlement systems for remittances. Finally, Chapter 7 summarizes some examples of programs initiated by countries to maximize the impact of remittances and reduce remittance costs.

1.1 The African Institute for Remittances

The AIR is one of five AUC’s Legacy6 projects, to be established with the objective of harnessing migrant remittances7 for social and economic development in Africa. In recent years, countries, bilateral and multilateral donors, and international and regional organizations have put emphasis on the growth, size, amounts and leveraging of remittances for development in the continent.

The establishment of AIR was conceived within the framework of African Union (AU)-European Union (EU) Partnership on Migration, Mobility, Employment and Higher Education (MME) in the joint AU-EU Strategy (JAES) adopted in Lisbon in 2007.

1.2 The AIR Project

The AIR Project is an initiative in which the World Bank and selected development partners, AfDB, EC, and IOM, are collaborating to facilitate the AUC and its member states in establishing the AIR. The Project is funded by a grant from the EC to the World Bank, which is responsible for the overall implementation. The Project was signed in December 2009 and launched in June 2010. The preparatory phase will end in April 2014.

The core objectives of the AIR Project are to facilitate the process leading to the creation of the institute and develop the capacity of the member states of the AU, remittance senders and recipients, and other stakeholders to implement concrete strategies and operational instruments to use remittances as development tools for poverty reduction. The AIR will be specialized institute of the AUC. 6 Declaration of AU’s Global African Diaspora Summit, Sandton, Johannesburg, South Africa, 25 May 2012.The five project are: (i) The Skills Database of African Professionals in the Diaspora; (ii) The African Diaspora Volunteer Corps; (iii) The African Institute for Remittances (AIR); (iv) the African Diaspora Investment Fund; (v) The Development marketplace for African Development as a framework for promoting entrepreneurship and innovation. 7 Remittances sent by over 30 million African migrants reached a reported $31 billion in 2012, supporting at least 120 million family members living back home.

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1.3 General Background

According to the World Bank, remittances to developing countries have been steadily increasing in the past years. Aggregate global remittances are estimated to have reached US$401 billion in 2012, an increase of 5.3 percent compared with the previous year8. Remittance flows are expected to grow at an average of 8.8 percent annually during 2013-2015 to about $515 billion in 2015. These remittances are the lifeline of approximately 700 million people globally.

Migrant remittances to Africa have increasingly become a major source of financing for households and communities, and can prove an external source of capital for African countries. More than 31 million Africans living outside their countries of origin sent nearly US$40 billion to their families and communities back home in 2010. This is equivalent to 2.6 percent of Africa’s gross domestic product (GDP). In Sub-Saharan Africa alone 21.8 million emigrants sent an estimated US$21.5 billion, equivalent to 2.2 percent of GDP (World Bank 2011a). Remittances are the continent’s largest source of net foreign inflows after foreign direct investment (FDI). Remittance flows in many African countries are also larger than private capital flows, such as FDI and portfolio debt and equity flows. Private capital flows are more important for South Africa, the largest economy in Sub-Saharan Africa, and for oil and mineral producers (for example, Angola, Gabon, and Sudan) that receive substantial FDI flows. But for many low-income African countries, remittances exceed private investment flows and represent a lifeline to the poor (AfDB 2009a and World Bank 2011a). In Morocco, for example, remittances represent 637 percent of FDI and 452 percent of official development assistance (ODA); in Egypt, 467 percent of FDI and 225 percent of ODA; and in Cape Verde, 929 percent of FDI and 103 percent of ODA (AfDB 2009a).

African migrants residing in member countries of the Organization for Economic Co-operation and Development (OECD) were found to send twice as much as migrants in other developing countries—with those from poorer African countries more likely to remit than those from relatively wealthier African countries. In Ethiopia, remittances from migrants totaled US$513 million in 2011. Kenyans in the diaspora sent home nearly US$934million in 2011 while Ugandans in the diaspora sent US$949 million. Rwanda received US$171 million in 2011 from Rwandans abroad (World Bank 2011b). North Africa is the largest remittance recipient region in Africa, followed by East Africa, West Africa, Southern Africa, and Central Africa (Bollard and others 2010).

Actual remittance flows for Africa are likely to be much higher than the statistics suggest, as they are heavily under-reported. Less than two-thirds of African countries (one-third of Sub-Saharan countries) report remittance data; and most often, flows through unregulated channels are not captured at all. As mentioned in more detail in Section 1.5, Sub-Saharan Africa is believed to have the highest share of remittances channeled through unregulated modes of transfer, partly due to high formal transfer costs. Surveys of migrants and remittance recipients and other secondary sources suggest that unregulated remittance flows, which are not included in the International Monetary Fund (IMF) estimates, could be equal to or exceed official figures for Sub-Saharan Africa (Page and Plaza 2006; IFAD 2009a).

At the household level, remittances have become an important source of consumption and social investment. They help take care of daily consumption needs such as food, education, and healthcare. They also help households increase their savings and investments in small and medium-size businesses and play a significant role in financing housing construction and development. The use of household surveys, as a complement to direct reporting by the main intermediaries in the remittances market, could be a valuable tool to address the issues involved in improving the accuracy of the remittances statistics (Coates 2006).

Estimates suggest that 30-40 percent of all remittance flows go to rural areas. Studies show that households, which receive remittance transfers, are typically better off than those that do not have remittances as a source of income. Remittances are also sometimes known to be counter-cyclical —meaning that in times of crisis they can be relied on to stimulate the economy when there is a downturn, thus providing a stable source of finance. In times of natural 8Migration and Development Brief 20: Migration and Remittances Unit, Development Prospects Group

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disasters, they have been known to help households cope better with losses. They also have a substantial effect on improving balance of payments and increasing foreign exchange earnings at the national level in countries.

1.4 Migration Patterns

By 2012, the stock of migrants from Sub-Saharan Africa had reached an estimated 30 million. Among the countries with highest migration, Burkina Faso and Zimbabwe have sent approximately 1.6 million and 1.3 million migrants, respectively, to other countries. In addition to the two previously mentioned countries the top ten emigration countries of Sub-Saharan Africa are Mozambique, Côte d’Ivoire, Mali, Nigeria, Sudan, Eritrea, the Democratic Republic of Congo (DRC) and South Africa (World Bank 2011a).

The Burkina Faso – Cote d’Ivoire corridor is among the top 20 migration corridors in the world, with about 1.3 million migrants. Other important corridors within Sub-Saharan Africa are the Zimbabwe – South Africa corridor with 0.9 million migrants as well as Uganda–Kenya, Eritrea–Sudan, Mozambique–South Africa, Mali–Côte d’Ivoire, DRC–Rwanda, Lesotho–South Africa and Eritrea–Ethiopia In North Africa, Egypt - Saudi Arabia corridor is the largest, with about 1 million migrants, while the Algeria – France migration corridor constitutes about 0.9 million (World Bank 2011a).

The destination of African migrants varies. Most migrants from African countries stay within Africa, with over 69 percent of total migration flows from Sub-Saharan Africa occurring within the region. Ratha and Shaw (2007) estimate that the volume of South-South migration (i.e., migration between developing countries) is more than South-North migration in Sub-Saharan Africa. This is determined largely by social, family, ethnic, and religious networks; other factors are cultural proximity, seasonal migration opportunities, low travel documentation requirements and civil conflicts.

About 25.2 percent of migrants from Sub-Saharan Africa migrate to high-income OECD countries—with about 9 percent settling in other countries (1.5% developing and 7.5%unidentified) and 3% in non-OECD countries. Europe is the second-most popular destination for African migrants and is a particularly popular destination for migration from North Africa. Morocco and Algeria have their largest share of migrants in this region. Most African countries do not send many migrants to the Asia–Pacific or Middle East, regions, with the exception of Egypt, which has a large share of migrants in the Middle East. Migration to North America is also not very common, although a significant fraction of countries send 10–20 percent of their migrants to that corridor (Singh and others 2009).

Smaller countries tend to have higher rates of migration and of skilled migration. For example, The Gambia, Sierra Leone, Cape Verde, and Liberia have among the highest rates of emigration of tertiary-educated professionals (see Annex 1 for a list of the top emigration countries of tertiary-educated migrants). A significant number of migrants from Sub-Saharan Africa are also refugees fleeing conflict. Refugees and asylum seekers made up 16.3 million, or 8 percent, of international migrants in 2010. The share of refugees in the migrant population was 14.6 percent in low-income countries compared with 2.1 percent in high-income OECD countries. The Middle East and North Africa region had the largest share of refugees and asylum seekers among immigrants (65 percent), followed by South Asia (20 percent), Sub-Saharan Africa (17 percent), and East Asia and Pacific (8.8 percent) (World Bank 2011a).

1.5 Remittance Flows

Total remittances to Africa increased slightly from 2011 to 2012. In general, officially recorded remittance flows to Africa are estimated to have increased from $9.1 billion in 1990 to nearly $40 billion in 2010 and approximately $60 billion in 2012 (divided roughly equally between North Africa and Sub-Saharan Africa), benefitting approximately 120 million residents. The true size of remittances, including unrecorded flows, is believed to be significantly higher and African countries could benefit from a coordinated effort to improve the measurement of remittance flows. Yet, Sub-Saharan Africa still receives only 7.7 percent of total remittances received by developing countries and just 45

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percent of that received by India9. Nigeria was the only country within Africa among the top 10 remittance-receiving countries with an estimated $10 billion in 2010. These figures have since been updated and migrant remittance flows to Nigeria have now surpassed $20 billion in 2011. Outside Sub-Saharan Africa, Egypt and Morocco fall among the top 20 with $14.3 billion and 7.2 billion respectively in 2011.

Other countries receive a larger share of remittances as a share of their GDP (2011): Liberia (31 percent), Lesotho (26.8 percent), Senegal (10.3 percent), Togo (9.3 percent), Cape Verde (9.3 percent), Nigeria (8.7 percent), the Gambia (8.1 percent), Uganda (5.6 percent), Guinea-Bissau (4.7 percent), Mali (4.5 percent), Sierra Leone (3.4 percent) and Kenya (2.7 percent). See Annex 2 for a 2011 list of the top 10 remittance recipients in Sub-Saharan Africa.

1.6 Regulated Remittances

Remittances estimates would be even greater in Africa if the amount of flows going through unregulated channels were taken into account (See Annex 5 for more about terminology concerning Remittance Service Providers). Regulated remittance channels include banks, electronic payment systems, MFIs, MTOs, non-bank financial institutions, remittance service providers and post offices.

Remittances are often the only relationship that many poor people have with the formal financial system. If remittances are received through banks or other financial intermediaries (such as MFIs or savings cooperatives), there is a high likelihood that some part of the remittance will be saved (Aggarwal, Demirgüç-Kunt, and Martinez Peria, 2006; Gupta, Pattillo, and Wagh, 2009).

Remittance service providers (RSP) tend to be businesses that provide remittance services to clients and charge fees directly or through agents. Remittance recipients receive transfers in stores, banks, post offices or MFIs. The International Fund for Agricultural Development (IFAD) (2009a) reports that bank remittance service providers in Africa constitute over 50 percent of the businesses paying money transfers.

Banks in several African countries are the only financial institutions authorized to perform money transfers. This provides limited options for remittance services. Currently, 80 percent of the banks in 39 African countries disburse remittances, but the percentage jumps to 90 percent in countries where only banks are authorized to pay remittances. IFAD estimates that banks in partnerships with Western Union service about 41 percent of payments and 65 percent of all payout locations. In countries where only banks are authorized to pay remittances, half are agents of Western Union and MoneyGram, the largest MTOs in Africa. Teba Bank, a miners’ bank in South Africa, on the other hand offers low-cost transfers from South Africa directly to the accounts of migrant families that have bank accounts in Mozambique and Swaziland (Orozco 2003)

Non-bank financial institutions are not under bank regulation or supervision and do not require a banking license to operate. Examples of non-bank financial institutions include credit unions, cooperatives, and MFIs. However, in most cases they can only serve as payment agents for MTOs, as many are not authorized to pay remittances directly. They play a significant role in serving populations in rural areas in Africa. Authorizing MFIs to pay remittances directly would most certainly increase competition in the market and would also provide the MFIs with a source of cheaper capital to finance their lending operations. In addition to microfinance services, many MFIs also provide money transfer services. MFIs account for only 3 percent of remittance payout locations in Africa (McKay and Pickens 2010); however MFIs have large networks, in particular within the rural areas, and could substantially increase the share of the remittances market, but are hindered by regulatory requirements which tend to favor Banks. The DRC, Ghana, and Kenya are the only countries in which MFIs are allowed to carry out international money transfers. However, they serve as payout locations for other MTOs within Africa.

9 Based on US$401 billion Total Remittances received by developing countries, US$31 billion by Sub-Saharan African (2012e) and US$69 billion by India (2012e) - World Bank Development Prospects Group.

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MTOs offer both cash-to-cash transfers as well as electronic money transfer services. Annex 3 lists participating MTOs in the African remittance market by country and shows that the largest MTOs in Africa are Western Union and MoneyGram, which are estimated to control 65 percent of the remittance market in Africa (IFAD 2009a). Both companies have agreements with several banks, foreign exchange bureaus and post offices that act as payment agents in several African countries. In Nigeria, for example, nearly 80 percent of transfers are handled by one MTO whose exclusivity agreements with banks (the only authorized remittance disbursers in the country) prevent other MTOs from operating in the country (IFAD 2009a). The large market shares controlled by MoneyGram and Western Union create a de-facto oligopoly, which does not promote fair competition.

Post offices typically have strong networks in both urban and rural areas, with significant potential to reach poor populations. They also have the right business model of serving the poor. While commercial banks are inaccessible to the poorest in many countries, post offices are typically more familiar and more accessible. A study in 2011, Clotteau and Ansón (2011) of the Universal Postal Union (UPU) estimated that more than 80 percent of post offices in Sub-Saharan Africa are located outside the three largest cities, in areas where more than 80 percent of people in the country live. This provides postal networks a unique opportunity to become key players in both international and domestic remittances—and to bring the unbanked into the formal financial system (Mohapatra and Ratha 2011). However, in total, only about 20 percent of all post offices in Africa pay remittances, with the notable exception in Algeria where post offices account for 95 percent of remittance payments (IFAD 2009a).

New opportunities are also available for remittance transfers using mobile phones and SMS messages. The rapid adoption of innovative mobile-money transfer and branchless banking technologies is transforming the landscape for remittances and broader financial services in Africa (Morawczynski and Pickens 2009; Aker and Mbiti 2010). Although the adoption of these innovative technologies has been limited mostly to domestic money transfers (in part because of concerns about money laundering and terrorist financing related to cross-border remittances), the technologies have the potential to vastly improve access to both remittances and broader financial services, including low-cost savings and credit products, for African migrants and remittance recipients. Electronic payment systems, which involve the use of technology and other innovative mechanisms in the financial services arena is on the increase within Africa, but still represent a very minor fraction of the overall flows to the region. Increasing use of branchless banking and electronic payment systems could possibly increase competition, reduce costs, and reach underserved customers in rural areas. A study by the Consultative Group to Assist the Poor (CGAP) (McKay and Pickens 2010) shows that, on average, branchless banking is 19 percent cheaper than traditional banks, while smaller transactions are cheaper when using branchless banking than traditional banks. Remittances via electronic channels are also 54 percent cheaper than unregulated methods of money transfer. Currently, electronic payment channels are being used in Kenya (M-PESA and Google’s Beba), Tanzania, Uganda (Zap), Ethiopia (Z-Birr), South Africa and other countries within Africa.

1.7 Unregulated Remittances

Unregulated transfers between migrants are largely based on trust and confidence among customers. Sub-Saharan Africa is believed to have the highest share of remittances channeled through unregulated modes of transfer, partly due to high transfer costs. Estimates of unregulated remittances in Africa are difficult - if not impossible - because they are largely unrecorded. Surveys of migrants and remittance recipients and other secondary sources suggest that unregulated remittance flows, which are not included in the IMF estimates, could be equal to or exceed official figures for Sub-Saharan Africa (Page and Plaza 2006; IFAD 2009a). However, due to the high costs of regulated channels and financial services, it is well known that these flows are often transferred through unregulated channels such as friends and family members traveling home, or unregulated money-transfer networks such as the hawala system in Somalia.10 Other methods include the use of taxi services between South Africa and towns in Botswana,

10 A hawala service is a remittance service provided by an individual (rather than an incorporated entity). “Hawala” is Arabic for transfer. Hawala services are also known by other terms - eg hui kuan (Hong Kong) or

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Malawi, and Mozambique. The estimated remittances sent to Sub-Saharan Africa through unregulated channels could increase formal flows by 45–65 percent (Ratha and Shaw 2007). The most prominent exception to the view of domestic remittances in Africa being sent through mostly unregulated channels is Kenya, where nearly two-thirds (62 percent) of domestic remittance transfers were conducted through mobile phones at the time of the household survey in late 2009 (Mohapatra and Ratha 2011).

1.8 Costs

Remittance costs are one of the key determinants as to whether migrants use regulated or unregulated modes of transfer. Regulated channels of transferring remittances have been known to be more expensive and complicated. In general, the cost of sending money to Africa remains relatively high and subject to wider variations than other migration regions due to the lack of competition among remittance service providers. Transfer costs from the United States of America to Africa are generally among the lowest, followed by transfer costs from Europe. The cost of sending remittances within the African continent is far higher and the cost of sending remittances to Sub-Saharan Africa and within Africa is the highest among all developing regions. Data for select intra-African remittance corridors suggests that the average cost of sending remittances ranges from 7.48 percent in Sierra Leone to 26.01 percent in Malawi. Others are not far behind with Botswana averaging 18.06 percent and Mozambique at 22.34 percent. Additionally, Africa has 10 of the most expensive remittances corridors in the world ranging from 19.3 percent to 26.6 percent average cost, of which 6 originate in South Africa. Even though an analysis by the World Bank’s Financial Infrastructure and Remittances Service Line (FFIFI) showed that the yearly cost variation in Sub-Saharan Africa revealed a 0.11 percentage point decrease, with 14 out of the 27 countries evaluated showing cost decreases, only 6 of the 27 countries are currently below the global average (9.05 percent) and only Liberia and Somalia close to reaching 5 percent (RPW 2013). Large parallel market premiums between official and parallel market exchange rates in many African countries imply that the true cost is likely to be larger (Mohapatra and Ratha 2011). It is also estimated that if the cost of sending remittances decreases by 5 percentage points relative to the value sent, remittance recipients in developing countries would receive over $20 billion dollars more each year11.

1.9 Regulatory Framework

The high cost of remittances in Africa is due to several factors, not the least of which is the banking, regulatory, and monitoring framework. Reducing the cost of remittances and encouraging competition in the payment system market will thus be achieved also through the improvement in payments systems infrastructure and regulations affecting remittance services. Additionally, it is strongly encouraged that other aspects of the remittance market where weaknesses may emerge, such as transparency and consumer protection, market structure, competition, governance and risk management, should be addressed.

Regulations in several African countries highly favor banking institutions, which severely limits MFIs and other non-bank institutions from carrying out international money transfers. Typically, central banks and other such national institutions authorize foreign currency transactions and cross-border payments.

In countries where only banks are authorized to perform money transfers, the market for remittance service providers is small and tends to be concentrated in urban areas. A study of 50 countries in Africa shows that 8 countries authorize banks only, 32 authorize banks and foreign exchange bureaus to perform foreign exchange transactions. Six countries allow banks, foreign exchange bureaus and MFIs to pay out remittances directly, and 4 allow banks, foreign exchange bureaus, and MFIs plus retail locations to pay remittances (IFAD 2009a). Only the DRC, Ghana, and Kenya permit MFIs to carry out international money transfers. Even in those three countries, MFI participation is limited by a lack of technical capacity that prevents them from functioning as payers.

padala (the Philippines) - CPSS/World Bank - General principles for remittances 11 Financial Inclusion & Infrastructure Global Practice – The World Bank

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In countries where only MTOs are authorized to conduct international money transfers, MTOs have exclusivity agreements that limit the number of agents (microfinance and other non-bank financial institutions) they can conduct business with. Market competition would be enhanced by the removal of these exclusivity arrangements, which reduces the choices of many remitters and reduces the level of competition in the country.

The payment system infrastructure in some African countries is also not adequately developed to handle money transfers. Small value transfers are conducted using products and platforms of the Society for Worldwide Interbank Financial Telecommunications (SWIFT), which processes the payment through correspondent bank networks. However, the existing international correspondent banking networks in several African countries are not well adapted to process low-value retail flows. Therefore, it is important that regulatory frameworks are updated to allow non-bank players to enter the market. Changes in regulations encouraging the development of innovative products and other technology-based instruments and regulations governing access of remittance agents to clearing and settlement systems would foster competition among remittance service providers and encourage migrants to use regulated methods of transfer. The Making Finance Work for Africa (MFW4A) team and the World Bank found in their research notes that regionally integrated payment systems tend to be more efficient and stable than national ones (World Bank 2007). The study identifies the need for an appropriate framework to include laws and regulations of broad applicability to payment systems. The appropriate regulatory framework must also address insolvency and the enforcement of contractual relationships, rules, standards, and procedures in payments or securities system as well as the harmonization of laws and regulations governing the cross-border operations of financial sector firms and banks.

The legal and regulatory framework of Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) protects the integrity of remittance flows from these potential abuses. In principle, financial institutions should be required to undertake measures in customer due diligence to identify and verify customers. Particularly relevant to cross-border transfers and remittances in this context are regulations implementing AML/CFT recommendations such as those issued by the Financial Action Task Force (FATF). FATF is an inter-governmental body comprised of 36 member countries and provides 40 recommendations on the Prevention of Money Laundering and Terrorist Financing. The objectives of FATF are to set standards and promote effective implementation of legal, regulatory and operational measures for combating money laundering, terrorist financing and other related threats to the integrity of the global financial system. One FATF Recommendation on transfers allows countries to adopt a minimal threshold of no more than US$1,000 or Euro 1,000 in obtaining sender’s information. This threshold creates room for migrant remittance transfers, which are usually much less than US$1,000. The FATF Recommendations contain language that permits countries to some degree to adopt a risk-based approach to combating money laundering and terrorist financing. The risk-based approach enables competent authorities and obligated institutions to use measures to prevent or mitigate money laundering and terrorist financing commensurate with the risks identified. In February 2012 FATF published an updated version of the recommendations and grouped the 9 special recommendations into the 40 recommendations. See Attachment 1 for the list of FATF Recommendations 2012.

1.10 General Principles for International Remittance Services

The FFIFI, within the World Bank Financial and Private Sector Vice-Presidency, in partnership with the CPSS published the General Principles for International Remittance Services (BIS/World Bank 2007), which are recognized as the international standards on remittances. The document provides guidance on five general principles for analyzing the payment system aspects of remittances, in order to assist countries that want to improve their market for remittance transfers. The general principles include detailed guidance and implementation strategies on improving transparency, infrastructure, the legal and regulatory framework, competitive market conditions, sound and appropriate governance and risk management practices. The General Principles’ ultimate objective is the reduction of the cost of sending remittances by assisting counties in the improvement of their market for

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remittances. The Group of Eight (G8), Group of Twenty (G20) and Financial Stability Forum have endorsed the General Principles.

1.11 Partnerships in Remittance Programs

With the growing demand by governments for studies and policy advice on leveraging remittances for development, the World Bank intends to strengthen remittance flow measurement, assist countries to improve supervision and regulation of remittance markets, and facilitate collaboration with other development partners to improve financial service outreach, particularly to rural areas. One of the main implementing actions of the WB in this area was precisely the completion of the General Principles for International Remittance Services mentioned above. Additionally, the World Bank and development partners have conducted many conferences to discuss remittance issues and disseminate their research and studies (see Annex 4); and have entered into partnerships, in addition to the AIR project, as summarized below.

The MFW4A partnership to promote private and public sector initiatives held a partnership forum on Making Finance Work for Africa in 2008.

Southern African Development Community (SADC) Payments Systems Initiative, which was started in 1996 to improve national and regional payment systems in the region.

A Private-Public Sector Partnership on remittances was launched in 2008 under the General Principles for International Remittance Services to develop an actionable structure between regulators and the operators on implementing the general principles.

The Global Remittance Working Group comprises representatives from the World Bank Group and interested national authorities.

The Global Knowledge Partnership on Migration and Development (KNOMAD) is envisioned to be a global hub of knowledge and policy expertise on migration and development issues. KGNOMAD entered a 5-year implementation phase in May 2013.

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References: Chapter 1

AfDB. 2009a. Approach to African Migrant Remittances: The Migration and Development Initiative. OVIP. Tunis, Tunisia.

Aggarwal, Reena, Asli Demirgüç-Kunt, and Maria Soledad Martinez Peria. 2006.“Do Workers’ Remittances Promote Financial Development?” Policy Research Working Paper 3957, World Bank, Washington, DC."

Aker, Jenny C., and Isaac M. Mbiti. 2010. “Mobile Phones and Economic Development in Africa.” Working Paper 211, Center for Global Development, Washington, DC."

BIS (Bank for International Settlements)/World Bank. 2007. General Principles for International Remittance Services. Prepared by the CPSS and World Bank. BIS, Basel, Switzerland; and World Bank, Washington, D.C.

Bollard, Albert, David McKenzie, and Melanie Morten. 2010. The Remittance Patterns of African Migrants in the OECD. World Bank Policy Research Working Paper 5260. Washington, D.C.

Clotteau, Nils, and José Ansón.2011. ʺRole of Post Offices in Remittances and Financial Inclusionʺ.Migration and Development Brief 15, World Bank, Washington, DC. March.

Coates, Kenneth “Measurement Problems in Household International Remittances”, Irving Fisher Committee on Central Bank Statistics, BIS, Basel. (2006)

Gupta, Sanjeev, Catherine A. Pattillo, and Smita Wagh. 2009. “Impact of Remittances on Poverty and Financial Development in Sub-Saharan Africa.” World Development 37 (1): 104–15."

IFAD. 2009a. Sending Money Home to Africa: Remittance Markets, Enabling Environments, and Prospects. Rome, Italy: IFAD.

McKay, Claudia, and Mark Pickens. 2010. “Branchless Banking 2010: Who’s Served? At What Price? What’s Next?”CGAP Focus Note No. 66. CGAP. Washington, D.C. www.cgap.org.

Mohapatra, Sanket, and Dilip Ratha. 2011. Remittance Markets in Africa. Washington, DC: World Bank.

Morawczynski, Olga, and Mark Pickens. 2009. “Poor People Using Mobile Financial Services: Observations on Customer Usage and Impact from M-PESA.” CGAP Brief, CGAP, Washington, DC.

Orozco, Manuel. 2003. Worker Remittances: An International Comparison. Working paper commissioned by the Multilateral Investment Fund. IDB.

Page, John, and Sonia Plaza. 2006. “Migration Remittances and Development: A Review of Global Evidence.” Journal of African Economies 15 (Suppl. 2): 245–336."

Ratha, Dilip. 2003. “Worker's Remittances: An Important and Stable Source of External Development Finance.” in World Bank, Global Development Finance: Striving for Stability in Development Finance, Volume I: Analysis and Statistical Appendix. Washington, D.C.: World Bank

Ratha, Dilip, and William Shaw. 2007. South-South Migration and Remittances. Development Prospects Group. World Bank Working Paper No. 102. Washington, D.C.

Sander, Cerstin, and Samuel Munzele Maimbo. 2003. Migrant Labor Remittances in Africa: Reducing Obstacles to Development Contributions. Africa Region Working Paper Series No. 64. World Bank. Washington, D.C.

Singh, Raju Jan, Markus Haacker, and Kyung-woo Lee. 2009. Determinants and Macroeconomic Impact of Remittances in Sub-Saharan Africa.IMF Working Paper 9/216. Washington, D.C.

World Bank. 2011a. Migration and Remittances Factbook Second Edition. Development Prospects Group. Washington, D.C.

World Bank. 2011b. AnnualRemittances Data (Inflows, April 2013). Development Prospects Group. Washington, D.C.

2. Technical Assistance to Governments

Technical assistance provided to government institutions improves the regulatory and legal framework and expands and strengthens existing payment system infrastructure to increase the flow of remittances through regulated channels. The WB also performs missions aimed at providing local authorities with a review of their remittance markets on the basis of the CPSS-World Bank GPs. This chapter describes the activities of the World Bank and other development partners in providing technical assistance to governments in Africa.

2.1 World Bank

Many countries in Africa face difficulties in improving payment and remittance systems. A good and reliable payment system is crucial in providing dependable and efficient remittance systems and in helping flows of remittances through regulated channels. For this reason, the WB set up a series of initiatives to address the significance of remittances to African countries, and assess the importance of improving payment systems infrastructure in order to make effective and functional transfer systems accessible to all populations.

The World Bank is engaged in various projects and programs across the continent and has actively supported reforms of the national payment systems in the last 15 years. It has been working on reforms of the national payment systems in Rwanda, Angola, South Africa, Nigeria and Ethiopia; and the countries served by the regional banks, Banque Centrale des Etats de l'Afrique de l'Ouest (BCEAO), and Banque des Etats de l'Afrique Centrale (BEAC). In addition to grants and loans for supporting payment system development, the Payment Systems Group of the World Bank has provided specific technical advisory services to develop payment systems components with a financial sector/payment systems component.12 In addition, four FFIFI assessment missions were completed by February 2012 in Malawi, Tanzania, Liberia and Sierra Leone with the objective of supporting these countries to improve their national markets for remittances, based on the GPs.

Liberia: The Central Bank of Liberia (CBL) is undertaking an overall reform of the National Payment Systems and is looking for support in the legal and regulatory field for the drafting of relevant laws and regulation. They expressed interest in receiving assistance in this field and any other kind of support to implement actions based on the report that will be delivered.

Malawi: The Reserve Bank of Malawi (RBM) is undertaking a modernization of the legal and regulatory framework and has requested immediate support. In addition to a draft Payment Systems Act, they are also reviewing the new AML/CFT legislation and might be open to also review the Exchange Control Act. Also in Malawi the modernization of the retail payment systems infrastructure is at the center of the discussion between the RBM and the industry.

Sierra Leone: The assessment of the national market for remittances against the General Principles for International Remittances Services was completed in February 2012.

Tanzania: Bank of Tanzania (BOT) expressed strong interest in (i) receiving support in the revision of the legal and regulatory framework and in particular of the draft Payment Systems Act; and (ii) upgrading its Automated Clearing House (ACH) to allow the provision of a wider ranges of services and the straight through processing of the payments among the participants in the system.

The Finance and Private Sector Development unit within the World Bank Africa Region provided technical advice and analysis to governments, central banks, and MFIs through the Future of African Remittances (FAR) project for helping improve financial capacity in countries in promoting transparent and fair pricing and the use of technology to improve operational services, and strengthening the quality of financial services—thereby lowering remittance costs, increasing flows and encouraging innovation. The FAR Program launched a series of country-specific initiatives in May 2010 with engagements in Ethiopia, Kenya and Uganda and has now closed. The lessons learned

12By requests of the Governments of Libya and Mauritius.

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during the program’s existence are now being used as inputs in other operational work across the Africa region involving the retail aspects of payment services.

On a larger scale, the AIR Project, which is being carried out by the World Bank – in cooperation with the AUC, EC, AfDB and IOM- will provide the technical support to build and strengthen the capacity of remittance senders and recipients, as well as financial intermediaries, to develop and implement strategies and operational instruments. This support will be designed to use remittances as development and poverty reduction tools among AU member states. The AIR Project has completed several relevant projects in this area.

Technical Assistance Project for Remittance Operations of Postal Operators. The key objective of this project is to provide technical assistance to post offices in different countries in Africa for the implementation of the International Financial System (IFS) remittance technology provided by UPU. The technical assistance under this proposal furthers the key objective of the AIR. The UPU Project enables Postal Operators to enter the remittance market and provide remittances services in rural areas where they were previously unavailable. This will make receiving remittances more efficient and cheaper for the recipients, saving them time and money for travel to the next city where remittance payments would otherwise only be available.

Technical Assistance and Training for the Ethiopian Postal Service. The mission team consisting of FFIFI experts, and supported by the AIR Project, addressed different issues by setting up an operational and customer support desk at EPS that will function as a central processing hub for the post addressing operational problems (lack of connectivity of branches, lack of computers, lack of training of branch staff etc.) and deal with customer requests. The mission team designed operational procedures (disaster recovery, customer service, user support) and provided training on these procedures and training on a helpdesk software for the support desk. As part of the process leading up to the establishment of AIR, the partners desired to open a dialogue between key stakeholders from AU member states. To that end, it was decided to establish online consultations with key stakeholders, including government agencies, financial institutions, beneficiaries and members of the African Diaspora.

The overriding purpose of these consultations was to involve the broadest possible spectrum of stakeholders from Africa and the African Diaspora in building consensus as to the best form for the proposed AIR and determining what sort of role such an institute should play. Mango Production, an Addis Ababa based media company, was selected as the implementing partner for the online consultations.

The Africa Region is also working with national authorities to strengthen the financial system by modernizing the financial sector infrastructure and payment systems. Through the World Bank’s Financial Sector Assessment Program (FSAP), recommendations were made to produce a comprehensive clearing and settlement infrastructure, which includes the automation of small-value transactions (checks and transfers) within an electronic clearing system and a real time gross settlement system for large transactions.

In 2011, the Global Remittances Working Group (GRWG) from the World Bank, in consultation with the members of the Public and Private Partnership on Remittances, put together a special purpose note intended to provide guidance to reform efforts in the remittances arena both nationally and globally called Working Toward a Legal and Regulatory Framework: Identifying Standard Approaches (GRWG 2010). Specific technical assistance programs conducted in regions of Africa are discussed below.

2.1.1 East and Central Africa

Central African Economic and Monetary Community (CEMAC) Regional Institutions Support Project. The World Bank provides credit and grant support to CEMAC. The Project support is used to strengthen the capacity of the telecom and information technology (IT) sector. The Bank-financed project, launched in 2003, supports measures to encourage the use of a regional payments system to expand access to financial services through banks

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and MFIs by simplifying access to the system, encouraging the use of the systems by MFIs, discouraging paper-based transactions and encouraging electronic means of payment.

Burundi. The Africa Region is working with national authorities to strengthen the financial system by modernizing the financial sector infrastructure (payment systems) and improving financial sector regulations in ways that create synergies among different service providers such as commercial banks and the country’s postal service, including inter-operability of payment processing platforms.

Ethiopia. Enhanced Regulatory Framework for Remittances. The project aims to improve competition and product innovation in Ethiopia’s remittance market through targeted regulatory reforms to address the limited participation of non-bank Remittance Service Providers (RSPs) in the market, to enable new delivery channels (e.g. via non-bank agents) and to encourage product innovation (e.g. remittance-linked saving, insurance, direct education or health payments, etc.). In the longer term, these reforms should lead to increased competition in the remittances market and ultimately to improved services, lower costs, and greater financial inclusion for remittance recipients.

In addition, the World Bank supports national efforts to build a more transparent, well-governed, well-regulated, and competitive financial sector through implementation of an automated transfer system in Ethiopia.

Rwanda. The World Bank provides support for the implementation of new payment and securities settlement systems, and creation of a new legal framework and oversight department. The Bank also supports the Central Bank of Rwanda on advancing the branchless banking model and on various issues relating to the modernization of payment systems infrastructure with particular emphasis on ensuring the involvement of “buy-in” by all stakeholders.

As part of Rwanda’s Financial Sector Development Program, the Africa Region diagnosed and recommended solutions for a number of weaknesses in the financial sector—the key component being recommendations related to strengthening the national payment systems by improving processing efficiency.

Kenya. Financial and Legal Sector Technical Assistance Credit (2004) facility provides support for the review and amendment of Kenya’s financial sector laws, including the acquisition of an integrated real time gross settlement system and Scripless Securities Settlement System and Central Depository System to facilitate safe, secure, and efficient transfers in Kenya.13 A technical assistance project aimed at creating a sound financial system and strengthening legal and judicial capacity will ensure broad access to financial services. Kenyan authorities have used the project to identify measures to upgrade all aspects of the national payment system and consult on improving the regulation of mobile and electronic payments.

Tanzania. Through the Second Financial Institutions Project, the World Bank issued a credit of US$27.5 million through the IDA aimed at increasing financial sector competition by enhancing the national payment system. A component on financial education was included to address low awareness of available financial products and benefits promoting increased household access to financial and payment services and to facilitate efficient financial intermediation.

Uganda. The report “Making Finance Work for Uganda” reviews the performance of the Bank of Uganda in improving payments and remittance systems.14 The report identifies several legal and regulatory constraints facing the Bank of Uganda and suggests swift enactment of payment systems legislation in order to increase the

13A Scripless Securities Settlement System is an electronic means of conducting transactions that enable the electronic settlement of transactions without the use of a paper certificate, through a computer-based central depository and settlement system. 14 For more on Making Finance Work in Africa, see World Bank website, http://go.worldbank.org/WVFPF5CYJ0.

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effectiveness and competition among financial institutions. The report builds on earlier efforts in strengthening the financial sector and ensuring increased access to formal financial services by rural savers and micro-entrepreneurs.

2.1.2 Southern Africa

Botswana. The FSAP of Botswana (2008) provided guidance to formalize and publicize the Botswana Interbank Settlement System governance arrangements. The Botswana Interbank Settlement System is an electronic interbank payment system that allows funds to be transferred between participating institutions on an irrevocable and real time basis. The FSAP helped to expand the real time gross settlement system and introduce an expanded set of settlement mechanisms.

Malawi. The Financial Sector Reform and Strengthening Initiative (FIRST) in Malawi provided technical assistance to help prepare the Financial Sector Development Strategy, which targeted the creation of an efficient retail payment system with banking sector involvement, and the improvement of the legal and regulatory framework to enable contractual efficiency. As part of efforts to increase rural access to financial services, the Africa Region of the World Bank provided technical advice to Malawian authorities on harmonizing competing switching infrastructure and thus strengthening the payment system by establishing communications platforms and inter-operable networks to facilitate efficient transmittal services.

SADC Payment System Project. This project provided assistance to SADC countries to define domestic payment systems reform strategies and plans that would contribute to the development of harmonized policies and systems for cross-border payments. The project was broadly in line with the economic integration strategy for member states with a significant positive impact on strengthening regional cooperation and economic integration. Authorities are using the basic structure of the project to facilitate an ongoing assessment of development needs, strategic plans, and policy approaches to payment systems. In recent years, attention has been focused on the cost of remittances in the SADC region. National authorities are seeking re-engagement with the World Bank to assess the practical use of existing transmittal infrastructure and application of the resulting payment instruments, procedures, processes, and market practices as well as the enforcement issues in existing legislation and regulatory guidelines to reduce costs and promote financial access.

2.1.3 West Africa

West African Economic and Monetary Union (WAEMU). The Private Sector Development Rural Finance Study assesses the effectiveness of the PARMEC15 Law (1993), a law governing mutual or cooperative savings and credit institutions enacted by the WAEMU on MFIs in WAEMU countries. CGAP was involved in adjusting the PARMEC Law in order to make it more acceptable to international standards.

Nigeria. By leveraging ongoing policy dialogue with the authorities under the Making Finance Work for Nigeria project, the Finance and Private Sector Group of the World Bank applied its technical expertise in payment system development and provided policy advice to improve the country’s remittance market as part of its implementation support for the country’s financial sector reform strategy called the Financial System Strategy 2020 (FSS2020). In this regard, the authorities limited exclusivity clauses in contracts between banks and MTOs.

2.1.4 North Africa

Algeria. In partnership with the IMF, the World Bank conducted a Financial System Stability Assessment to strengthen the AML/CFT regime in all sectors.

15PARMEC: Projet de Décret d'Application de la Loi Portant Réglementation des Institutions Mutualistes ou Coopératives d'Épargne et de Crédit.

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Morocco. The Financial Sector Development Policy Loan Project aims to strengthen the enabling legal and institutional environment for financial intermediation and risk management, and to increase the private sector’s role and participation in the provision of financial services.

In the context of the Arab Payments and Securities Settlement Initiative (API), a World Bank-led team conducted a review in November 2006 of the remittance market in Morocco on the basis of the General Principles for remittances.16 The mission team provided local authorities with a broad analysis of the remittance market and specific comments on proposed regulations for MTOs. In particular, the Central Bank of Morocco adopted a regulation for MTOs based to a large extent on the General Principles.

2.2 Development Partners

Development partners have been playing a significant role in providing technical assistance on both small and large scale to various African countries. The development partners IFAD, the EU and the German Agency for International Cooperation (GIZ) have initiated the projects described below.

2.2.1 CGAP

A comprehensive Microfinance Institution Guideline was developed by CGAP in 2008 for MFIs wishing to introduce money transfer payments into their operations. Guidelines include understanding the business environment of financial and regulatory issues, assessment of operational strategy for increasing profits and staying in business, product development, and marketing services.17

2.2.2 IFAD

IFAD has provided technical assistance for several projects in West Africa.

Strategic Framework 2007-2010. The Strategic Framework includes guidelines on integrating rural finance institutions into national payment systems, developing inclusive financial systems, and fostering innovations to increase the rural poor people’s access to remittances (IFAD 2007).

The Rural Finance Policy 2009. The Rural Finance Policy 2009 (IFAD 2009c) builds on the Rural Finance Policy of 2000 and provides guiding principles to develop and improve rural finance systems. The policy report provides advice to governments on public-private partnerships as well as an operating framework on how to use information and communication technologies, such as mobile phones, to provide remittance services, and ways to leverage the growth in migrants’ capital and remittances flows to rural areas.

Financing Facility for Remittances (FFR). In partnership with the EC, IDB, CGAP, the Government of Luxembourg, the Government of Spain, and the United Nations Capital Development Fund (UNCDF), IFAD launched a FFR with a US$28 million investment to increase competition in the remittance market, especially in rural areas (IFAD 2009b). The FFR supports the development of innovative, cost-effective, and easily accessible international or domestic remittance services within African, Asian, European, Latin American, and Middle Eastern countries.The FFR combines its expertise in the field of migrant remittances with the experience of almost 50 projects in more than 40 countries around the world. Furthermore, it acts as an information broker to facilitate the dissemination; replication and scaling up of remittance-related best practices. In conjunction with its operational

16Refer to the following study (p. 5), which makes reference to assessment and operations carried out in Morocco: http://siteresources.worldbank.org/FINANCIALSECTOR/Resources/282044-1260476242691/PaymentsWeek2009Cirasino.Remittances.pdf

17See more on microfinance guidelines at CGAP website, www.cgap.org/p/site/c/.

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activities, the Facility fosters strategic cooperation among governments, international development institutions, and leading organizations in the field of migrant remittances.

Expansion of Tele-cash in Rural Cameroon. A €133 000 grant by IFAD introduced tele-cash remittance systems to 24 low-income, underserved localities that rely mainly on remittances (using costly unregulated means) from their relatives in urban areas in Cameroon. This tele-cash remittance system, operated through the Cameroon Cooperative Credit Union League network, reduced transaction costs by almost 20 per cent, catalyzing US$1.8 million in remittance transfers during the 18 months of the project.18

Sierra Leone Remittances Plus Grant. In Sierra Leone, the African Foundation for Development (AFFORD), supported by IFAD, worked closely with three local MTOs, facilitating use of an innovative online remittance platform and creating strong and tangible links between remittances, enterprise development, investment and personal savings. The RemitPlus™ product enabled Finance Salone, the local MFI with the largest network of rural branches, to become a remittance-paying agent and to seek a deposit-taking license from the Central Bank. The project helped Fadugu, a diaspora-owned MTO, develop the capacity to operate in 20 countries. It also helped Afro International, the largest independent MTO in Sierra Leone, link remittances to enterprise development.

IDF Grant for Strengthening the Africa Union Commission’s Diaspora Program in North America. The grant is part of the World Bank’s support in enhancing capacity of AUC, specifically the AU’s Representational Mission to the United States of America, to carry out its core functions of developing and maintaining productive institutional relationships with the African Diaspora in the Americas.

Implementing a User-Owned, Low Cost Remittance Service. IFAD has provided the funding and support to the International Network of Alternative Financial Institutions (INAFI International) for this project. The Project aims to harness the development potential of remittances by Senegalese migrants for social and economic development in Senegal through a user-owned, low-cost remittance service that will become an enabling platform for local social and economic development. The Project intends to implement a user-owned remittances service platform using the Universal Method of Value Access (UMVA) solution. This system will substantially reduce the cost of remittance to Euro 1 per month per user, which is very low compared to charges levied by MTOs. In addition, the project builds the capacity of MFIs to handle and leverage remittances for development, by leveraging on networks of migrants, migrant organizations, remittance beneficiaries, MFIs, and Project partners.

2.2.3 EU

EIB Regmifa Microfinance Fund for Africa. This fund from the European Investment Bank (EIB) provides technical assistance in the form of equity and direct lending to regulated and non-regulated MFIs, local banks, and other financial institutions, which provide financing to micro, small, and medium-size enterprises in Sub-Saharan Africa. The support is targeted to the growth of MFIs in Africa; improvement of the quality, availability, and accessibility of financial services; and development of modern financial institutions and sustainable microfinance operations.

Tunisia. The EIB is providing technical assistance to the Government of Tunisia to increase savings and the use of banking services for transfer purposes by Tunisian migrants. The desired impact is to channel remittances into small-scale and infrastructure projects financed by public-private partnerships.

18The Cameroon Cooperative Credit Union League Tele-cash Remittance System, in partnership with MTN Cameroon, will provide SIM cards and assist in solving network problems for the municipalities served. The League also partners with a local company, SoftTech.

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2.2.4 GIZ

Uganda: Financial System Development. The GIZ has provided technical assistance and training to support Uganda’s financial sector development program. The effort addresses issues that deal with the lack of access to suitable financial services for the rural population, particularly women and small-scale farmers. The program provided policy advice and training to MFIs to improve their efficiency and performance, and supported financial service organizations with product development.

Remittances in Development Cooperation: Guidelines for Practice. These guidelines bring together experience from recent years of German and international cooperation in the field of remittances. They aim to identify the conditions for utilizing the development policy potential of remittances, discuss the risks of economies’ dependence on remittances, and present openings for practical treatment of the issue in the context of DC (GIZ 2010).

Partnership for Economic Growth in Namibia. The GIZ Program on Sustainable Economic Development in Namibia advises the Central Bank of Namibia in the regulation of mobile financial services, agents and E-Money. The project has undertaken a thorough analysis of the current regulatory framework and supports the implementation of the adaption of regulation to international standards.

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GIZ. 2010. Remittances in Development Cooperation: Guidelines for Practice. Eschborn, Germany.

IFAD. 2009b. FFR Update: FFR. IFAD Newsletter. 4th Quarter 2009. Issue 1. http://www.ifad.org/remittances/newsletter/1.pdf

IFAD. 2013. The FFR Brief. Five years of the FFR. Rome, Italy.http://www.ifad.org/remittances/pub/fiveyears.pdf

IFAD. 2009c. Rural Finance Policy 2009. Rome, Italy.www.ifad.org/ruralfinance/policy/index.htm

IFAD. 2007. Strategic Framework 2007-2010. Rome, Italy. www.ifad.org/sf/strategic_e.pdf

3. Carrying out Training, Capacity-Building Programs and other projects

Training and capacity-building programs are carried out to enable governments in remittance-receiving countries to increase the development impact of remittances by building and strengthening their remittance capacity. This chapter discusses other key projects and programs supported by the World Bank and development partners.

3.1 World Bank

The African Migration Project conducted pilot surveys of migrant households in Ghana. The Migration, Remittances, and Development in Africa Household Survey (World Bank 2010a) will be replicated in other African countries to fill the knowledge gap on the magnitude, causes, and impacts of migration and remittances in the targeted country—and to build and strengthen the capacity of countries in conducting surveys. Other regional capacity-building programs are discussed below.


Tanzania: The Financial Institutions Development Project. This project’s component on financial education addressed low-level awareness about available financial products. The project included benefits to promote increased household access to financial and payment services and to facilitate efficient financial intermediation.

East African Community Regional Financial Integration Study. The World Bank (2007) study on the East Africa community identified the use of retail payment systems as an important tool in leveraging greater connectivity at the wholesale level.19

Uganda. The Making Finance Work for Uganda study focused on increasing the breadth and depth of the Ugandan financial sector.20 The report included recommendations focused on improving access by strengthening payment and remittance systems—building up on earlier work on financial sector strengthening and ensuring increased access to formal financial services by rural savers and micro-entrepreneurs. In addition, other studies on Uganda have explored the role of cost-effective technology in increasing outreach and reducing the trade-off between outreach and cost.21 This includes the use of MFIs, post offices, and other shared platforms through which migrants receiving remittances can access financial and payment services from different MTOs.


The Mobile Banking in Southern Africa Study. The objective of this regional study was to positively influence the expansion of access to finance through the rapid but safe takeoff of domestic and cross-border branchless banking (Maimbo and others 2010). The key focus of the study is on cross-border payment services in Angola, Malawi, Mozambique, South Africa, and Zambia. The findings from the study will be discussed at a policy discussion workshop bringing together a select group of policy champions from each of the focus countries to discuss appropriate incentives that encourage innovating bank and non-bank led domestic and international mobile banking solutions.

3.1.3 Global

Knowledge Partnership on Migration and Development (KNOMAD).The Global Knowledge Partnership on Migration and Development is a four-year initiative launched in May. The objective is to highlight the benefits and

19 For additional information on East Africa, see www.africaremittances.org. 20 For more on Making Finance Work in Africa, see World Bank website, http://go.worldbank.org/WVFPF5CYJ0. 21 For more studies on Uganda, search World Bank website under Access Finance newsletters and Financial and Private Sector Development (FPSD Uganda).

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challenges of migration for sending and receiving communities, as well as for migrants. The Knowledge Partnership will provide an open, multidisciplinary platform to debate, discuss and exchange knowledge on migration issues, generate a menu of policy choices based on evidence and peer-review, and will assist sending and receiving countries in implementing a few pilot policy operations and capacity building efforts to evaluate and mainstream some policy choices.

The Knowledge Partnership will be a resource for policy makers, the member agencies of the Global Migration Group (GMG), regional development banks, donors, different organizations involved in mainstreaming migration and remittances into national development plans, country strategies and projects/programs on migration and remittances, and will build on existing partnerships involving the World Bank, IOM, other members of the Global Migration Group, Global Forum on Migration and Development, AU, EU, World Economic Forum, Africa Economic Research Consortium, ADB, AfDB, IDB, the G8 and the G20, universities, research institutes and think-tanks on migration and remittances.


The AfDB, UK Department for International Development (DFID), EU, IFAD, Credit Suisse Bank, the United States Agency for International Development (USAID), Netherlands Ministry of Foreign Affairs and Opportunity International UK have supported various training and capacity-building programs on remittances in Africa through projects and initiatives.

3.2.1 AfDB

The Migration and Development Initiative. The objectives of this AfDB initiative are (a) to set up a multi-donor trust fund to support projects initiated by migrants and diasporas, (b) initiate and support the development of innovative financial products, (c) support pilot projects with high success potential but still considered too risky by financial institutions because of their innovative character, (d) support the development of local infrastructure projects sponsored by migrants and (e) facilitate sharing knowledge and experiences among African countries.

Migration and Development Fund (MDF). The MDF aims to promote and support local initiatives and those from the diasporas aimed at improving knowledge of remittances, reducing the costs of transfers, optimizing the use of the resources transferred and supporting local development in migrant home countries. In a first phase the Migration and Development Fund will finance activities in North Africa, West Africa, and Central Africa. In a second phase, it will expand financing to the entire African continent.

3.2.2 Credit Suisse Bank

The Credit Suisse Microfinance Capacity-Building Initiative. The main objective of this initiative is to support enhanced human resource capabilities of MFIs by setting up structures that will foster innovation among MFIs, finding new ways to facilitate poor people's access to financial services, and providing staff training to build capacity and facilitate financial innovation and learning in these institutions.

3.2.3 DFID

Africa Enterprise Challenge Fund (AECF). The AECF is part of the larger Financial Deepening Challenge Fund of DFID to stimulate the private sector to develop innovate ways of improving agriculture and financial markets for the poor in rural areas. The AECF will be launched in 10 African countries. It will ultimately improve access to financial services and livelihoods in rural areas through grants to private companies and NGOs in amounts between US$150,000 and US$1.5 million.

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3.2.4 EU

Leveraging remittances to promote Migrant Entrepreneurship Program has been set up in the Netherlands, Ghana, and Suriname to facilitate the creation of new businesses by entrepreneurial and enterprising migrants. Its services are primarily offered to migrants who wish to set up a business in their countries of origin.

Migration and Asylum Thematic Program. The EU has provided assistance with funding through the Migration and Asylum Thematic Program. It is implemented by various organizations and agencies.

Profiles in selected countries in West and Central Africa. A tool for strategic policy development in Cameroon, Cape Verde, DRC, Ghana, Ivory Coast, Mali, Mauritania, Niger, Nigeria, and Senegal, the program is implemented by the IOM to strengthen administrative capacity to collect and analyze policy-relevant migration data and to improve the utilization of migration data and policy analysis within and between the selected countries of West and Central Africa.

Returning Enterprising Migrants Adding Development and Employment (REMADE) in Ghana. REMADE has been designed to strengthen the link between migration and development through the development of the private sector in Ghana. The project aims at fostering the diaspora (in the Netherlands and UK) to strengthen bonds with the communities of origin, make their remittances more effective, promote circular migration and counter brain drain by development of the private sector in Ghana. Also, the establishment of healthy small and medium enterprises (SMEs) by returning migrants through a more effective use of remittances for economic development and adequate business support structures.

Linking MFIs. Organizations in the EU are harnessing the potential of migration for development by linking MFIs with immigrant associations in Benin, Burkina Faso, Ethiopia, Ghana, Kenya, Mali, Nigeria, Senegal, Tanzania, and Uganda.

Successful Paths, Supporting Human and Economic Capital of Migrants in Senegal. This initiative for migration, implemented by the Italian Veneto Region, takes aim at strengthening the institutional cooperation between sending and receiving countries. It has been derived to eradicate difficult access to credit for migrants by improving the system of guarantees needed to promote entrepreneurship and business start-ups in Senegal. It is also promoting innovative paths to support the return of human and economic capital to Senegal through successful implementation of adequate tools.

Global initiative. Promoting innovative migrant remittances in Africa, Asia, Eastern Europe, and the Middle East aims to support remittance services that are cost-effective, easily accessible, and offer broader economic opportunities to the rural poor.

Harnessing the Potentials of Migration for Development: Linking MFIs and Immigrant Associations. The overall objective of the project was to contribute to improved capacity of immigrant associations based in ten EU countries to actively support the development of their countries of origin and to enable MFIs to facilitate the transfer of migrant remittances in a safer and cheaper manner. The project trained and enabled MFIs located in 10 Sub-Saharan Africa (SSA) countries(Benin, Burkina Faso, Ethiopia, Ghana, Kenya, Mali, Nigeria, Senegal, Tanzania, and Uganda) to increase their competitive edge in money transfers services and other financial-driven instruments. The project was implemented by Oxfam Novib and International Network for Alternative Financial Institutions (INAFI International).

“FACE Morocco” Project. Funded by the EU, FACE Morocco was launched in 2009 in collaboration with AFD, the Dutch IntEnt foundation, CIM (Centrum für internationale Migration und Entwicklung) and IntEnt in Morocco. Implemented in Germany, the Netherlands and France, the project aims at facilitating the creation of new businesses by the Moroccan Diaspora living in these countries.

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3.2.5 IFAD

Postal financial services. IFAD seeks to build capacity for the use of postal services in rural areas of Western Africa. Extension of international and domestic postal financial services, including remittance-related services, will be extended to rural areas of French-speaking countries in Western African partnership with postal organizations and related ministries. The extended postal service would increase the number of remittance recipients by linking them with rural post offices, which will have the ability to deliver remittances through postal checking or savings accounts, and other non-postal financial institutions.

Expanding the availability of remittance services in rural Malawi. Through an IFAD co-funded project, Opportunity International upgraded its existing technology in rural branches in Malawi and trained MFI staff to conduct remittance services through a new software platform. Thanks to this upgrade, its customers in rural areas are now able to send and receive domestic remittances not only through bank offices, but also through electronic access outlets such as Point of Sale (POS) terminals, automated teller machines (ATMs) and mobile vans. All the newly equipped kiosks will provide a full range of financial services to remittance senders and receivers (account opening, deposit, withdrawal, funds transfer, loan, insurance, and savings).

Improving Access to Remittances in Madagascar’s Rural Malagasy Highlands. In collaboration with AccèsBanque Madagascar (ABM) and co-funded by IFAD, the project seeks to contribute towards improving access to professional domestic and international remittances services mainly for the rural population in the Malagasy highlands by extending domestic and international transfer services in this area to enable the population to access remittance services. The target groups are people living in the highlands of Madagascar, the majority of who are remittance recipients and who have limited or no access to the formal banking sector. All ABM branches will be connected online in real time and will offer all basic products such as loans, deposits (current accounts, saving accounts and term deposits), and domestic and international money transfer services to micro- and SMEs.

Enhancing Migrants’ Savings. The project is being implemented by Appui au Développement Autonome (ADA) and supported by IFAD. The goal is to improve the living conditions of the migrants and their families and communities of origin through a more productive use of remittances, thus increasing the contribution of migrants to the socio-economic development of Mali. The project will direct remittances both at migrant and beneficiary level towards more productive activities by offering a remittances system and financial products that are adapted to the needs of the Project’s Target Group. The Project will increase the membership and awareness of the MFI “Réseau des Caisses d’Epargne et de Crédit du Mali – Nyèsigiso. In addition, it will carry out a sensitization campaign to build awareness of savings as a productive investment for generating long-term income, and will provide information on ADA’s real-estate financing products.

Support to AfDB Migration and Development Fund. IFAD, in conjunction with the French government, participated in the joint launch of the AfDB program in 2009. The seed funding of this initiative is aimed at jointly promoting and addressing core issues in the migration and remittance field in Africa.

Diaspora Investment in Agriculture (DIA). IFAD and the United States Department of State (DOS) have launched the DIA initiative that seeks to foster job growth in local communities, contribute to poverty reduction and reduce the need to migrate. The initiative will focus its efforts on supporting sustainable agricultural projects and stimulating the agricultural industry in fragile countries including Afghanistan, Angola, Burundi, Congo, Côte d’Ivoire, the Democratic Republic of the Congo, Egypt, Haiti, Iraq, Liberia, Sierra Leone, Somalia, Sri Lanka, the Sudan and Tunisia.

African Postal Financial Services Initiative. The African Postal Financial Services initiative is a joint regional program launched by the IFAD and the EC in collaboration with the World Bank, the UPU, the World Savings Banks Institute/European Savings Banks Group (WSBI/ESBG) and the UNCDF. The partnership seeks to enhance competition in the African remittance market by promoting and enabling post offices in Africa to offer remittances

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and financial services. The objectives are to reduce the cost of remittance in the African region, reduce transaction times, broaden the network of rural locations and deepen the range of financial services.

3.2.6 The Government of the Netherlands

Financial Sector Development. The project seeks to improve the financial and economic infrastructure (e.g. payment systems) in countries of origin in order to simplify the remittance process and improve access to financial services (via World Bank/IMF donor funds FIRST and the International Finance Corporation (IFC); work to make more people financially literate (particularly women) by making information available (through Dutch Microfinance Platform); strengthen financial institutions through technical assistance (e.g. increase opportunities to open saving accounts) (via IFC, FIRST); and exploit technological advances such as mobile banking (e.g. through FMO, the entrepreneurial development bank of the Netherlands).

Enterprising Migrants. Funded by the Dutch Ministry of Foreign Affairs, the IntEnt foundation launched the “Enterprising Migrants” project in April 2012. The aim of the project is to support Dutch migrants in starting new business in their countries of origin including Angola, Ghana, Ethiopia, Suriname, Morocco, Sierra Leone and Burundi.

IS Academy: Migration and Development. The main objective of the IS Academy is to strengthen the quality of policies in the area of development cooperation through the interaction between policy makers and academia. The program aims at stimulating new approaches to development cooperation using the available knowledge on sustainable development and poverty reduction and creating new evidence on effective policies. Research is conducted on different topics in the migration and development field including remittances.

3.2.7 Opportunity International UK

Opportunity International UK supports several African countries through MFIs. It does this by enhancing the institutional viability of seven of its network partners in Ghana, Malawi, Mozambique, Uganda, Zambia, and Zimbabwe. By strengthening the capacity of MFIs in product development, the network partners can better respond to client demands and financial transparency requirements, and secure access to larger amounts of domestic and international capital needed for expansion. Opportunity International UK helps MFIs develop new credit, savings, insurance, and remittance-related products.

3.2.8 USAID

African Diaspora Marketplace Competition (ADM-II). In collaboration with Western Union, ADM (www.diasporamarketplace.org) is an initiative that encourages sustainable economic growth and employment by supporting U.S.A based African Diaspora entrepreneurs. The project takes the form of a Business Plan competition, which promotes economic development in Sub-Saharan Africa by facilitating diaspora direct investment in viable start-up companies.

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World Bank. 2010a. Africa Migration Project. Website: go.worldbank.org/V6Y4QOL7A0

4. Study of Remittance Flows within Africa By using the resources from various studies of remittance flows within Africa, the lessons learned and good practice examples can help improve financial services and access to banking products and services for remittance senders and recipients. This chapter provides an overview of major studies conducted on patterns of remittance flows, players and uses of remittances in Africa prepared by the World Bank and development partners.

4.1 World Bank

Various units and departments within the World Bank have conducted studies to understand migratory patterns, costs, and modes of remittance transfer within Africa.

4.1.1 Migratory patterns

In Supporting Remittances in Southern Africa, Truen and others (2005) estimate that approximately 2.1 million migrants from the SADC region reside in South Africa due to working opportunities in the mining sector, the relative economic stability, and other opportunities. This study categorizes legal migration to South Africa into 4 components: (a) migrants employed by mining companies and sub-contractors, (b) migrants with work permits, (c) seasonal agricultural workers, and (d) asylum seekers and refugees. Estimates suggest that there are about 280,000 Mozambicans who remained in South Africa after fleeing the civil war in Mozambique in the 1980s.

South-South Migration and Remittances (Ratha and Shaw 2007) highlights migration patterns between developing countries using census data and methodology developed by the World Bank in 2005. Their study claims migration patterns between developing countries are quite significant and tend to occur between countries of different income levels (e.g., South Africa attracts migrants from Lesotho, Mozambique, Namibia, and Zimbabwe) and between low-income countries of different levels (e.g., migration from Mali, Niger, Cote d’Ivoire, and Ghana). South-South migration also tends to be influenced by proximity and costs (which are usually lower because most of the migration between these regions is cross border); by the lack of documents needed to travel across these borders; and, to an extent, by ethnic, family, and religious ties.

The Migration and Remittances Factbook (World Bank 2008) presents numbers and facts behind the stories of international migration and remittances, drawing on authoritative, publicly available data. It provides a snapshot of statistics on immigration, emigration, skilled emigration, and remittance flows for 194 countries and 13 regional and income groups. The current edition of the Factbook 2011 updates the information in the popular 2008 edition with additional data for 71 countries collected from various sources, including national censuses, labor force surveys, population registers, and other national sources. In addition, it provides selected socioeconomic characteristics such as population, labor force, age dependency ratio, gross national income (GNI) per capita, and poverty headcount for each country and regional grouping (World Bank 2011).

Leveraging Migration for Africa: Remittances, Skills, Investments is a joint effort led by the AfDB and the World Bank and is considered the first comprehensive publication on harnessing migration, remittances, and other diaspora resources for the development of Africa. It comes at a time when countries in Africa and elsewhere are grappling with difficult choices on how to manage migration. Policy makers can help leverage the contributions of migrants to the development of Africa, reduce remittance costs, improve the efficiency of remittance markets in both origin and destination countries, and address the needs of the origin countries without restricting the emigration of high-skilled professionals. Innovative financing mechanisms such as issuance of diaspora bonds and securitization of future remittance flows can help finance big-ticket projects, such as railways, roads, power plants, and institutions of higher learning that will, step by step, help to transform Africa. It contributes to a greater understanding of migration and its potential role in Africa’s development (AfDB and World Bank 2011).

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4.1.2 Remittance Flows

Outlook for Remittance Flows 2012-14 notes an increasing trend in remittances over the years within Sub-Saharan Africa due to strong south-south flows and weaker currencies in some countries that attracted larger remittances. Despite the crises in North Africa, the civil conflict and unrest related to the “Arab Spring” and the difficult economic situation in Europe, remittance flows to Sub-Saharan Africa are estimated to have increased by 7.4 percent in 2011. Remittances from Kenyan migrants grew to $644 million in the first nine months of 2011. Inflows surged by 45 percent on a year-on-year basis in part because the weak Kenyan shilling made it more attractive to invest in local currency assets. Remittance flows to Ethiopia are reported to have increased to more than $1.5 billion in the 2010-11 fiscal year (Ratha and others 2011).

Supporting Remittances in Southern Africa (Truen and others 2005) highlights how remittance flows between developing countries, or the South-South corridor, are quite significant. A good example of South-South remittances is discussed in this work, which assesses remittance patterns, flows, regulatory framework and latest technological advances in the remittance market in the South Africa corridor. Characterized by high levels of migration, both short term and long term, the study on remittances flows between SADC members found that the volume of remittances is quite large but with only about 41.9 percent carried by formal financial service providers. The volume of unregulated remittances may be the result of extremely severe foreign exchange restrictions in South Africa, which is highly regulated and allows only banks to handle foreign transactions. This increases the incentive of sending transfers through unregulated remittances.

Remittance Markets in Africa is a companion volume to Leveraging Migration for Africa: Remittances, Skills, and Investments (AfDB and World Bank 2011) and presents findings of surveys of remittance service providers conducted in eight Sub-Saharan African countries and in three key destination countries. It looks at issues relating to costs, competition, innovation and regulation, and discusses policy options for leveraging remittances for development in Africa (Mohapatra and Ratha 2011).

Outlook for Remittance Flows 2011-13. Migration and Development Briefs are prepared by the Migration and Remittances Unit, Development Economics Group (DEC) and Poverty Reduction and Economic Management (PREM) network of the World Bank. These briefs are intended to be informal briefing notes on migration, remittances, and development.

A study by the Development Prospects Group, Migrant Remittance Flows (Irvine and others 2010) based on a survey of 33 central banks in Africa, sets out to find how data on remittances is collected. The study shows a need for better coordination between both sending and receiving countries. It also suggests that countries must consider new channels and technologies (including mobile networks) for collecting data. The study also noted that African countries have made progress in removing some regulatory obstacles, including rendering exclusivity agreements illegal, which will help spur competition in the remittance transfer market and decrease costs.

Migrant Remittances and Development in the Global Economy. This work analyzes the way that migrant remittances operate worldwide and the implications of these inflows for developing countries. It focuses on the main trends and characteristics of remittance senders and recipients, the context in which migrants send money, and the relationship of these transfers to development—in particular to asset building, trans-nationalism, and migrant philanthropy (Orozco 2013).

4.1.3 Costs

Remittance flows through regulated channels are defined by many factors, including costs, cultural familiarity, convenience, and speed. The cost of sending remittances is one of the key influencing factors, and the use of regulated channels is likely to increase when costs go down. South-South Migration and Remittances (Ratha and Shaw 2007), in estimating the cost of remittances, finds it is more costly to send US$200 between the South-South

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remittance corridor than the South-North and North-South corridors. These findings reveal that the high cost of remittances between the South-South corridors may be due to the lack of competition in sending and receiving countries in developing countries.

In 2008, the World Banks Payment Systems Development Group (PSDG), now FFIFI, launched the first Remittance Prices Worldwide (RPW) Database (updated July 2013). The database, covering 220 “country corridors” from 32 remittance-sending countries to 89 receiving countries, provides information on the cost of sending and receiving small amounts of money from one country to another. It highlights the efforts by the World Bank to increase transparency and competition among remittance service providers by allowing comparisons among countries, supporting consumers’ choices, and putting pressure on service providers to improve their services22. Research on the cost of sending US$200 across various country corridors, for example, shows that three of the five corridors with the highest cost of sending remittances are in Africa.

The RPW Reports23 is a series of policy notes by the FFIFI that uses the data from the RPW database’s current iteration to analyze the global, regional and country specific trends in the average total cost of migrant remittances during the past 6 months period and the factors influencing these movements.

What Explains the Cost of Remittances? (Beck and Martínez 2009), exploring the characteristics of 119 remittance sending and receiving countries, reports that countries with a higher number of migrants, a higher number of market players and greater bank competition (larger numbers of banks) in receiving countries, show lower average costs of transferring remittances.

4.1.4 Regulated and unregulated means of sending remittances

Remittances may be sent through regulated or unregulated channels. Regulated channels for sending remittances include the use of banks and non-bank institutions, MFIs, MTOs, credit unions and cooperatives and post offices. Western Union and MoneyGram have been identified as the two main regulated MTOs within Africa.

New and unconventional methods are being developed to make regulated remittance transfers cheaper, faster, and safer. Mzansi money transfer (South Africa) allows users to send and receive money anywhere in South Africa without the need for a bank account. This service is not restricted to Standard Bank branches but is available at any of the participating banks and the South African Post Office. Evidence suggests that technological innovations in remittance payments and transfers can increase competition in the market and significantly lower the costs of transfers (CGAP 2010).

The use of mobile money schemes to facilitate the delivery of financial services is on a steady increase in Africa. Mobile users of M-PESA24 in Kenya find branchless banking easy to use, accessible, and safe The CGAP study, Poor People Using Mobile Financial Services (Morawczynski and Pickens 2009) further notes that the introduction of M-PESA has enabled easier money flows in Kenya and the ability to penetrate previously underserved rural areas. Furthermore, women in rural areas reported using M-PESA to solicit funds from their husbands (and other contacts) in cities and urban areas, requiring less frequent visits home. M-PESA is used in Kenya to save money (for consumption) or to transfer to their relatives. On average, users make about 15 deposits per month into their accounts. M-PESA now reports more than 11,000 agents (four times the combined number of bank branches and ATMs in Kenya).

Evidence from Branchless Banking Pricing Analysis (McKay and Pickens 2010) notes that the cost of using branchless banking for money transfer is 54 percent cheaper than using unregulated remittance channels. Branchless 22RPW can be accessed at remittanceprices.worldbank.org and SMA can be accessed at sendmoneyafrica.worldbank.org 23These can be found at http://remittanceprices.worldbank.org/Remittance-Resources 24Mobile payment service provided by SAFARICOM has millions of users since it was launched in 2007.

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banking is also found to be cheaper when the transaction is smaller, encouraging the need to improve branchless banking models in other African countries.

Unregulated channels. Due to the relatively high costs of remittance through regulated channels, many migrants prefer to remit through unregulated channels for their ease and lower costs. Remittances: Transaction Costs, Determinants, and Informal Flows (Freund and Spatafora 2005) notes that migrants prefer unregulated channels because they are faster and more convenient, are not constrained by any regulatory banking and foreign exchange regulations, and do not require remitters to have bank accounts. Using a theoretical econometric model, the study reports that, as expected, bank concentration, financial development and dollarization have a positive and significant effect on the cost of remittances and suggests that an improvement in financial services and greater competition will decrease transaction costs.


Studies in East and Central Africa have analyzed remittance transfers, including the improvement of the regulatory framework and payment systems at the country level.

Uganda. In 2005 a joint team from the World Bank and the IMF conducted a review of the financial sector in Uganda to determine the progress made and impediments to implementation of the FSAP. Recommendations were made to identify concrete additional proposals to improve efficiency and outreach of the financial system. A 2008 mission prepared a detailed report on the national market for remittances, and provided the authorities with an assessment and recommendations.

Uganda's Remittance Corridors from United Kingdom, United States and South Africa (Endo, Namaaji and Kulathunga 2010) gathers and analyzes a broad spectrum of remittance data related to Uganda and the three remittance corridors. The comparison highlights similarities and differences and the significance of the remittance-sending countries to Uganda in terms of volume, corridor formality, risks, and vulnerability to money laundering. It also describes Uganda as a remittance-receiving country and outlines the remittance flows, market players, distribution network, access and usage of remittances, regulatory framework, and measures taken toward AML/CFT. The issues and challenges faced by Uganda are identified and policy recommendations are made for both Uganda and remittance-sending countries. Being the first Bilateral Remittance Corridor Analysis (BRCA) report to be conducted with the partnership of a local authority adds to the significance of the endeavor.


Flagship Study on Migration and Remittances. In collaboration with the AfDB, the study aims at improving the understanding of migration and remittances in Sub-Saharan Africa and providing informed policy recommendations by analyzing the results of technical surveys launched in over 50 African countries. These surveys collected information from households, central banks and diaspora communities on remittances and migration flows, remittances transfer mechanisms, the uses and impact of remittances.

Migration and Remittances in Africa. In partnership with the AfDB, the Migration and Remittances in Africa research project intends to study remittance trends and flows into Africa using household surveys and analysis to strengthen the research capacity for policy makers in six African countries: Burkina Faso, Kenya, Nigeria, Senegal, South Africa, and Uganda.

Role of Post Offices in Remittances and Financial Inclusion describes the efforts being made in Sub-Saharan Africa to increase access to remittance services through post offices in small towns and rural areas, and discusses how this improved access could be used to develop crucial savings and other financial services for the poor (Clotteau and Ansón 2011).

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4.1.7 West Africa

Mali. Seeking to bridge existing knowledge gaps in the area of rural finance, an Africa Region study of Mali rural finance was conducted covering the supply of financial services, including case studies of rural finance providers and the legal environment within which rural financial markets operate and the constraints this represents for improving access to financial and payment services in rural areas.


Development partners, including the African, Caribbean, and Pacific Group of States (ACP), AFD, AfDB, DFID, EC, FAO (Food and Agriculture Organization of the United Nations), French Ministries of Economy, Foreign Affairs and Interior, G8, IMF, Ministry of Foreign Affairs of Denmark and the Center on Global Counterterrorism Cooperation, GIZ, IFAD, IOM, and USAID have conducted various studies and projects on remittance flows within Africa.

4.2.1 ACP Group of States

ACP Observatory on Migration. In October 2010 the Secretariat of the ACP Group of States launched the ACP Observatory on Migration, mainly funded by the EU through the Intra-ACP Migration Facility. The aim of the project is to establish a network of research institutions and governmental entities dealing with migration in the six regions of the ACP Group of States, namely West Africa, Central Africa, East Africa, Southern Africa, the Caribbean, and the Pacific. Activities will be centered in 12 pilot countries, 8 of which are in Sub-Saharan Africa (Angola, Cameroon, the DRC, Kenya, Lesotho, Nigeria, Senegal, Tanzania); it is foreseen that other countries will join the process. The Observatory will be able to produce much needed data on South-South ACP migration flows for migrants, researchers, civil society, general public, governments and policy-makers.

The Remittances Framework in Lesotho: Assessment of Policies and Programs Promoting the Multiplier Effects. With the assistance of the Southern Africa Migration Project (SAMP), this ACP Observatory study contributes to the better understanding of the type and volume of remittances inflows and how their development impact can be enhanced through policy support, mainstreaming remittances into development planning in Lesotho. More specifically, it aims at improving the programmatic and policy framework on remittances in Lesotho by elaborating a short- and long-term policy strategy facilitating the potential multiplier effects of remittances on the development of Lesotho (Nalane, Chikanda and Crush 2012).

4.2.2 AFD

Study on productive collective investment by Senegalese diaspora living in France. The main purpose of this study is to provide the Senegalese diaspora and government with the essential tools to identify investment' opportunities in the region and provide the necessary support to advance these opportunities.

MIDDAS Research Project. The MIDDAS project, led by a team of scholars and by Flore Gubert, aims at identifying the links between migration, remittances and development, focusing on Senegal.

4.2.3 AfDB

Alliance for Improving Remittance Flows to Africa. The AfDB, in partnership with the Multilateral Investment Fund of IDB, has launched the Alliance for Improving Remittance Flows to Africa with the aim of sharing knowledge of remittance good practice from Latin America to African countries. The initiative, which focuses on Uganda, also seeks to strengthen the AfDB operations with improved sector strategies, policies, and project design and implementation, as well as capacity building for the AfDB in the areas of microfinance, financing of small and medium-size enterprises (SME), and remittances.

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The Migration and Development Initiative. The aim of the initiative, launched in 2009, is to maximize the development impact of remittances by increasing their productive use, promoting business opportunities, and creating jobs. The AfDB intends to contribute to mobilizing remittances to recipient countries and increasing the flow of resources to the end beneficiaries while allowing better control on the amount transferred by the migrants, promoting more effective uses of funds for social consumption (by supporting mutual schemes in health, and public private partnership in education and health), and supporting productive use of available resources with the involvement of local entrepreneurs.

Migrant Remittances: A Development Challenge. This study report was prepared at the request of France’s Inter-ministerial Committee for International Cooperation and Development and analyzed remittance trends in four country corridors in Africa: the Comoros, Mali, Morocco, and Senegal. In its profile of the corridors, the study examined trends in the volume of flows, the modes of transfer of remittances, the mechanisms governing the remittances market, and the supply and demand determinants of remittances. Results indicated that remittances represent between 9 and 24 percent of GDP and between 80 and 750 percent more than ODA. Remittances tend to benefit poor households, mainly in remote areas by helping to meet their basic needs and allowing them to purchasing critical goods and services, including food, education, and healthcare (AFDB 2007).

Remittances to Uganda and Rwanda. The study (2008-9) conducted by the AfDB assesses flows of regulated and unregulated remittances in Uganda and Rwanda, and highlights the differences between its results and official figures. In Uganda, the Central Bank statistics have recorded a significant increase over the past few years (tripling from 2005 to 2007) after a 2006 AfDB survey of recipients.

International Remittances and Income Inequality in Africa. This paper presents empirical evidence of the link between international remittances and income inequality (Gini coefficient) in African countries (Sub-Saharan and North Africa) in the light of the financial crisis. The paper examines income inequality and inflow and characteristics of international remittances to African countries, provides a brief literature review of the income inequality impact of international remittances and explores some resulting policy implications (Anyanwu 2011).

Reducing the cost of migrant remittances to optimize their impact on development: Financial products and tools for the Maghreb Region and the Franc Zone. This study, conducted by the AfDB and the French Government, looks at the cases of Morocco, Tunisia, Senegal, Cameroon and Comoros. More specifically, it studies the regulated markets and their players, presenting the regulatory and legal measures governing the remittances market and analyzing their use by the financial sector in the recipient countries. It also analyses the bank and non-bank products developed for this market, and proposes, on this basis, innovative financial products and services incorporating recent developments, especially those associated with the use of information and communication technologies. (AfDB 2011b).

4.2.4 DFID

Informal Remittance Systems in ACP Countries. Using a survey of remittance corridors connected with the United Kingdom, including Ghana, Kenya, and Nigeria, DFID identified challenges facing the remittance market in the United Kingdom. These challenges included the inability of remittance service providers to identify potential customers, uncertainty in the transfer corridors regarding the size of the market, consumers’ preferences and behavior, and the lack of coordination between the regulators of the market. The survey makes recommendations to help increase the flow of remittances through registered channels (DFID 2004).

Sending Money Home? A Survey of Remittance Products and Services in the United Kingdom. This survey was conducted on money transfer products offered to Diaspora members in the United Kingdom to address information asymmetry between senders and remittance companies. The primary remittance-receiving countries, including Ghana and Nigeria, were included in the survey. Results showed that fees for sending remittances ranged between

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2.5 percent and 40 percent, with banks and building societies charging higher fees than MTOs. Banks also required several forms of identification while MTOs were more convenient and offered better service (DFID 2005).

Cash Transfers Evidence Paper. This paper provides global evidence on the impact of cash transfers in developing countries, and the impact cash transfers can have in achieving different social and economic policy objectives. In general, the main focus is specifically on cash transfers as a form of social assistance to empower the poor to use remittances in more productive ways and improve their quality of life (DFID 2011).

4.2.5 EC

EU Remittances for Developing Countries, Remaining Barriers, Challenges and Recommendations. The report addresses many different topics pertaining to remittances in Europe and developing countries and aims at providing recommendations to the EC (Isaacs, Vargas and Hugo 2012).

4.2.6 FAO-UN

A Rapid Situation Assessment of Migration and its impact on agriculture and rural development in Gambia, Guinea and Senegal. The objective of the project was to assess the impact of migrations and remittances on agricultural production and productivity, and food security in these three countries. The study aims at enhancing the impact migration and remittances have on sustainable food security and agricultural and rural development. It also supports and promotes policy recommendations by providing information on migration and remittances (FAO 2010).

4.2.7 French Ministries of Economy, Foreign Affairs and Interior (former Ministry of

Immigration)

Action Group on Migrant Remittances; ESF study and international Seminar. Experts from the Ministry of Economy, the Ministry of Foreign Affairs, the Ministry of Interior, the AFD and the Banque de France had worked to raise awareness on regulatory issues, new technologies, innovative tools and financing opportunities related to remittances, to formalize and increase the liquidity of remittances and the part of remittances dedicated to investments, while reducing costs. After regional workshops in Casablanca and Bamako in November 2009 on remittances in Africa and Maghreb, this group decided in January 2011 to start a new operational study on remittances in Africa (Zone Franc) and Morocco. This study was financed by AfDB and AFD and had three main goals: inventory of possible financial products for migrants (for instance, through promoting partnerships between Banks and MFI's to get to the final beneficiaries), inventory of the legislation and its possible improvements and inventory of new payment technologies (looking at obstructions and opportunities; experimenting with new electronic banking products; developing and testing innovative payment systems in remittances receiving countries like pre-paid cards and mobile banking). The results were disseminated during an international Seminar on the 21st and 22nd of February 2012 and dissemination workshops took place during the 1st semester of 2012 in Maghreb and Africa25.

4.2.8 GIZ

Remittances from Germany and their Routes to Migrants' Origin Countries: A Study on Five Selected Countries. A GIZ study, focusing on five country corridors, including Ghana and Morocco, was conducted to determine the cost of money transfers from Germany to Ghana and Morocco in order to find out the reasons for the high cost of remittances. The results of the study indicate that the cost of sending transfers through regulated channels (MTOs and banks) were high; the difficulty in getting information about transfer services and conditions for transfer (passport, identification) discouraged people from sending transfers through regulated channels. The findings of the

25 Description provided by MFW4A - AfDB

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study have encouraged the entry of three new Moroccan banks, which operate financial transfer services in Germany, into the market (Holmes and others 2007).

4.2.9 IFAD

Design and testing of a housing loan product for Senegalese migrants living in Italy. The main purpose of this project was to design and test an innovative housing finance product for Senegalese migrants in Italy. The product was adapted to the specific constraints of the clients but also aiming at financial profitability of the Financial Institutions implementing it. The project was implemented by the Groupe de Recherche et d’Echanges Technologiques (GRET) and resulted in 100 families opening a housing savings account. By the conclusion of the project 10% of the families went on to sign housing savings plans tailored to the purchase of land, construction, purchase of pre-existing housing, and home improvement.

Fund for Rural Development emigrants in Senegal (Fonds des émigrés pour le développement rural au Sénégal). The project offers a low-cost remittance transfer service across the Italy-Senegal remittance corridor and is being implemented by the Mutuelle d’Epargne et de Crédit des Emigrés in partnership with the private MTO Telegiros S.A. Through the involvement of partner MFIs, a portion of remitted funds will be channeled to savings and investment in small enterprises.

The FFR Brief: Five years of the Financing Facility for Remittances and the road ahead. The objective of this report is to provide an overview of the importance of remittances to development, the strategy that the Facility has implemented to date, and the lessons learned from the projects it has financed. Looking forward, the report highlights the opportunities offered by large-scale distribution networks, adoption of new technologies, mobilization of migrant capital and partnering with the private sector (IFAD 2012).

4.2.10 IMF

Rainfall, Financial Development, and Remittances: Evidence from Sub-Saharan Africa. This working paper examines the impact that negative variations of income that external events have on remittances. The study uses annual variation of rainfall in a panel of 42 Sub-Saharan African countries during the period 1960-2007 (Arezki and Brückner 2011).

4.2.11 IOM

Angola: A Study of the Impact of Remittances from Portugal and South Africa. The IOM commissioned the report on the impact of remittances on Angolans living in Portugal and South Africa. The report highlights the differences in migratory patterns of Angolans in South Africa, the majority reportedly from poor socio-economic backgrounds and working in low-skilled jobs, while Angolan migrants in Portugal were reported to have been from middle- and lower-middle-class backgrounds. Migrants reportedly used two main types of transfer channels: recorded services (remittance and courier companies) and hand delivery. Remittances were used for consumption and to meet the household needs (IOM 2010).

Econometric Analysis of The Remittance Determinants Among Ghanaians and Nigerians in the United States, United Kingdom and Germany. This IOM study measures the effects that different variables have on the remittance amount sent. The variables used include: Home Country (Ghana or Nigeria), Host Country (United States, United Kingdom or Germany), Remittance Fees, Relationship to the Receiver, Purpose of Remittance, Financial Obligations in the Host Country, and Demographics (Ecer and Tompkins 2010).

Gallup World Poll: The Many Faces of Global Migration. This report provides insight to the results found during a Gallup poll of over 750,000 adults around the world. Data was gathered since 2005 and involved asking migrants about their own lives. The paper has a strong focus on remittances by looking at social networks and remittances; remittances and financial help within countries; remittance flows, etc (IOM 2011).

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Research Project on Remittances - Benin, Senegal (RPRB). The goal of this project was to create a database for gathering knowledge on the use of remittances sent by Benin nationals to their families in Benin. Another objective was to inform the Global Remittances Workgroup on fund transfers (Presidency of the Republic) in order to create an observatory for remittances.

4.2.12 Ministry of Foreign Affairs of Denmark and the Center on Global Counterterrorism

Cooperation

Capitalizing on Trust: Harnessing Somali remittances for Counterterrorism, Human rights and state Building. This report provides an insight into the operations and organization of Somali remittance organizations (SROs). Additionally it reviews SRO current regulations and presents regulation recommendations (Cockayne and Shetret 2012).

4.2.13 USAID

West African Financial Flows and Opportunities for People and Small Businesses. This USAID-commissioned report comprised interviews with 120 individuals, both migrants and traders. The report studied the nature, practices, and challenges of intra-regional cross-border payments in West Africa(USAID 2006).

West Africa Cross-Border Remittances Pilot. This 2006/2007 USAID-initiated pilot supports the introduction of cross-border, multi-currency transactions using mobile telephone technology in West Africa, beginning with Ghana, Nigeria, and Senegal/UEMOA. The project seeks to equip intra-regional traders, intra-regional remittance senders, and the unbanked with legal options to effectively transfer money over mobile phones across the West African region. The project identifies barriers to implementation and organizes a pilot program for money transfers between Ghana, Nigeria, and Senegal/UEMOA.

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AfDB and World Bank. 2011. Leveraging Migration for Africa: Remittances, Skills, and Investments. Washington, DC: World Bank.

AfDB. 2007. Migrant Remittances, A Development Challenge. Tunis, Tunisia.

AfDB. 2011b. Reducing the Cost of Migrant Remittances to Optimize their Impact on Development. Tunis, Tunisia.

Anyanwu, John C. (2011), International Remittances and Income Inequality in Africa, Working Paper Series N° 135, AfDB, Tunis, Tunisia.

Arezki, Rabah and Markus Brückner. 2011. Rainfall, Financial Development, and Remittances: Evidence from Sub-Saharan Africa. IMF Working Paper 11/153

Beck, Thorsten, and María Soledad Martínez Pería. 2009. What Explains the Cost of Remittances? World Bank Policy Research Paper.

CGAP, 2010. Update of (2008) Notes Regulation of Branchless Banking in South Africa. CGAP. World Bank. Washington, D.C.

Clotteau, Nils, and José Ansón.2011. "Role of Post Offices in Remittances and Financial Inclusion". Migration and Development Brief 15, World Bank, Washington, DC. March.

Cockayne, James with Liat Shetret. “Capitalizing on Trust Harnessing Somali Remittances for Counterterrorism, Human Rights and State Building”. Center on Global Counterterrorism Cooperation. March 2012.

CPSS. 1999. “Green Book”. Payment Systems in SADC.CPSS Publication No. 30. BIS. Basel. Switzerland.

DFID. 2005. Sending Money Home: A Survey of Remittance Products and Services in the United Kingdom. www.eldis.org/vfile/upload/1/document/0708/DOC17981.pdf

DFID 2004. Informal Remittance Systems in Africa, Caribbean and Pacific (ACP) Countries. Research project under EC-PREP. http://www.dfid.gov.uk and www.ec-prep.org

DFID 2011. Cash Transfers Evidence Paper. DFID Evidence Paper: April 2011.

Ecer, Spencer, and Andrea Tompkins. 2010. 2010. Econometric Analysis of The Remittance Determinants Among Ghanaians and Nigerians in the United States, United Kingdom and Germany. IOM. Onlinelibrary.wiley.com.

Endo, Isaku, Jane Namaaji, Anoma Kulathunga. 2011. “Uganda's Remittance Corridors from United Kingdom, United States and South Africa.” Working Paper 201, World Bank, Washington, DC.

FAO. 2010. A Rapid Situation Assessment on Agriculture and Migration in Nepal. Pulchowk, Nepal.

French Government and AfDB (2011), Reducing the costs of migrants’ remittances and optimizing their impact on development: Financial products and tools for North Africa and the franc zone.

Freund, Caroline, and Nikola Spatafora. 2005. Remittances: Transaction Costs, Determinants, and Informal Flows. World Bank Policy Research Paper No. 3704. Washington, D.C.

Holmes, Elizabeth, Carola Menzel, and Torsten Schlink. 2007. Remittances from Germany and their Routes to Migrants' Origin Countries: A Study on Five Selected Countries. Eschborn, Germany: GIZ. www2.gtz.de/dokumente/bib/07-1374.pdf

IFAD. 2012. The FFR Brief: Five years of the Financing Facility for Remittances and the road ahead. Rome, Italy.

IOM. 2010. Angola: A Study of the Impact of Remittances from Portugal and South Africa. IOM Migration Research Series No. 39. Geneva, Switzerland.

IOM. 2011. Gallup World Poll: The Many Faces of Global Migration. IOM Migration Research Series No. 43. Geneva, Switzerland.

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Irvine, Jacqueline, Sanket Mohapatra, and Dilip. 2010. Migrant Remittance Flows: Findings from a Global Survey of Central Banks.World Bank Working Paper No. 194. Washington, D.C.

Isaacs, Leon, Carlos Vargas-Silva, Sarah Hugo, 2012. EU Remittances for Developing Countries, Remaining Barriers, Challenges and Recommendations, EC, EDF Funding, EuropeAid/129783/C/SER/multi, Project No. 2011/266478. http://ec.europa.eu/europeaid/what/migration-asylum/documents/eu_remittances_for_developing_countries_final_19-11-2012.pdf

McKay, Claudia, and Mark Pickens. 2010. “Branchless Banking 2010: Who’s Served? At What Price? What’s Next?” CGAP Focus Note No. 66. CGAP. Washington, D.C. www.cgap.org.

Morawczynski, Olga and Mark Pickens. 2009. Poor People Using Mobile Financial Services: Observations on Customer Usage and Impact from M-PESA. CGAP Brief August 2009. World Bank. Washington, D.C.

Nalane, Lefeela J., Chikanda, Abel and Jonathan Crush. The remittances framework in Lesotho: Assessment of policies and programmes promoting the multiplier effect. IOM. 2012.

Orozco, Manuel.2013. Migrant Remittances and Development in the Global Economy. Lynne Rienner Publishers. Boulder, Colorado (USA)

Ratha, Dilip, and William Shaw. 2007. South-South Migration and Remittances. Development Prospects Group. World Bank Working Paper No. 102. Washington, D.C.

Ratha, Dilip, Sanket Mohapatra, and Ani Silwal. 2011. Outlook for Remittance Flows 2012-14: Remittance flows to developing countries exceed $350 billion in 2011. World Bank, Washington DC.

RPW. 2013. Retrieved from the Remittance Prices Worldwide Database.

Truen, Sarah, Richard Ketley, Hennie Bester, Ben Davis, Hugh-David Hutcheson, Kofi Kwakwa, and Sydney Mogapi. 2005. Supporting Remittances in Southern Africa: Estimating Market Potential and Assessing Regulatory Obstacles. Prepared for Finmark Trust and CGAP by Genesis Analytics (Pty) Ltd. Johannesburg, South Africa.

USAID. 2006. West African Financial Flows and Opportunities for People and Small Businesses. Prepared by CARANA Corporation and Dr. Manuel Orozco of the Inter-American Dialogue.

World Bank. 2008. Migration and Remittances Factbook. Development Prospects Group. Washington, D.C.

World Bank. 2011. Migration and Remittances Factbook Second Edition. Development Prospects Group. Washington, D.C.

5. Policy Research and Dialogue on How Remittances Contribute to the

Development of Sub-Saharan Africa

Remittances have been identified as having the potential to contribute to the development of Sub-Saharan Africa through various means. This chapter looks at research that addresses the need for a strong regulatory framework and the work done by the World Bank and development partners in the research and dialogue that helps target appropriate policy that could increase the development impact of remittances.

5.1 World Bank

The World Bank has led efforts to study the impact of remittances on development in Sub-Saharan Africa, leading to the analysis of the impact of remittances at the national, household, community and regional levels, as discussed in this section.

The Diaspora for Development in Africa (World Bank 2011) expands on how the diaspora of developing countries can be a potent force for development through remittances, but also through the promotion of trade, investment, and knowledge and technology transfers. It aims to consolidate research and evidence on these issues with a view to formulating policies in both sending and receiving countries in order to maximize the benefits of the diaspora.

5.1.1 National level

World Bank studies of impact on poverty and growth suggest that remittances generally have a positive effect on economic growth and poverty in Africa. In their statistical analysis, Adams and Page (2005), using 74 developing countries (including 33 from Africa), estimate that on average a 10 percent increase in the share of international remittances in a country’s GDP will lead to a 6.1 percent decline in the share of people living in poverty. A later study by Adams (2006) using household survey data in Ghana shows that both internal and international remittances reduce the hardship of people living in poverty by increasing household income (expenditure), with international remittances having a more significant impact on both the level and depth of poverty than internal remittances. Ratha and Mohapatra (2009) also suggest that remittances may have reduced the share of poor people in the population by 11 percent in Uganda.

The growing role of remittances as a source of external financing has been highlighted in various studies. Remittances have been identified as a stable, resilient, and more dependable source of income for countries. Botswana, Cote d’Ivoire, Lesotho, Mauritius, Swaziland, and Togo, for example, receive more remittances than total ODA or FDI. Ratha, Mohapatra, and Plaza (2008) also note that grants from the United States of America and European foundations—known as “institutional remittances” to finance development programs—have focused on HIV/AIDS, malaria, and other such issues in Africa and have increased in recent years.

The evidence that remittances are counter-cyclical and a more resilient source of external financing during economic shocks is supported by research by the Development Prospects Group (Mohapatra and Ratha 2010), which observes that remittances to Sub-Saharan Africa during the global financial crisis of 2008 remained resilient and moderately flat compared to other flows. The authors explain that the counter-cyclical nature of remittances could be due to the fact that remittances constitute a small part of the migrants’ income and therefore will continue even in times of financial hardships.

However, in an earlier work, Ratha and Mohapatra (2009) caution that the evidence on the long-term growth effects of remittances is mixed. This is due to the lack of proper instrumentation to measure the effects and the challenge of finding a correlation between growth and income, even though there exists causality between growth and remittances.

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African Financial Sectors and the European Debt Crisis: Will Trouble Blow across the Sahara? The paper reviews potential financial and real sector transmission channels of the crisis and their likely impact on African financial systems. The European debt crisis will pose some challenges to financial sector development in Africa, but not on a systemic scale. Most factors that helped financial sectors in Sub-Sahara Africa withstand the impact of the global financial crisis are likely to continue to keep the region out of harm’s way. The region is significantly less exposed to European banking sector risks than other regions. In particular the growing depth of domestic financial markets has reduced the importance of European bank funding for African borrowers. The impact of reduced global investor confidence will be more important, especially in those countries where portfolio flows add to local market liquidity. The most significant risk for Africa associated with the European debt crisis is that it might trigger domestic, homemade financial sector risks.

5.1.2 Household level

Remittances have effects on households through consumption and investment in social and economic goods. Lindley (2006) shows that households receiving international remittances in Somalia improved their livelihoods and helped finance education, in some cases allowing the family to choose higher-cost forms of education. Children in the households of people receiving remittances also had relatively good school attendance rates.

Similarly, female-headed households in Ghana that received remittances spent more on education and health than male-headed households (who tended to spend on consumption and durable goods). International remittances lowered the expenditure share for food and increased the expenditure share for all other categories except education. Internal remittances on the other hand increased the share of expenditure for health and education (Guzmán and others 2007).

Remittances also contribute to the growth of financial services in a country. Using data from Somalia, Waldo (2006) demonstrates the importance of remittances as the only provider of financial services during a period of political strife in Somalia and the absence of financial institutions for most households. With the absence of banks and inflationary pressures caused by the lack of monetary control on foreign printed currency, Somalia witnessed the emergence of private activities in trade, money transfer services, transport, and telecommunications, funded by remittances from the Diaspora (Kulaksiz and Purdekova 2006). Waldo (2006) also notes remittance companies specializing in global transfers in Somalia grew in response to the need for financial services to deliver money to a country in conflict.

Remittances have a role in times of economic and political shocks and natural disasters and as a buffer against household consumption and income. In Somalia, a country without access to international capital markets and a long history of political instability, remittances in the range of US$50 to US$100 served as a cushion against economic shocks when economic activity came to a standstill as a result of civil war. The households that received these remittances were able to consume outside their production-possibility frontier (Kulaksiz and Purdekova, 2006).

In Ethiopia, Burkina Faso and Ghana, remittances served as insurance during natural disasters. Countries with a higher emigrant-to-population ratio (10 percent) had a larger increase in remittances (0.5 percent of GDP) in the year following a natural disaster and an increase by 1 percent of GDP over the period of two years after the disaster (Mohapatra and others 2009).26 In the case of Burkina Faso and Ghana, the evidence suggests that households that received remittances from high-income OECD countries built houses made of concrete rather than mud to help cope with natural disasters, while those receiving remittances in Ethiopia relied on cash reserves during natural disasters for food security rather than sell productive assets such as livestock.

26Estimates are based on Living Standards in Burkina Faso (2003), Ghana (2005), and the 2004 Welfare Monitoring Survey in Ethiopia.

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5.1.3 Community level

Lindley (2006) provides an example of community-level effort by the Somali Diaspora in Australia, New Zealand, North America, Europe, the Middle East, and Africa. This community is held together by family and clan connections that make regular contributions to the Irro Primary School in Bursalah in Puntland. These funds go toward the education of 400 students ranging in ages 5 to 16 years. Similarly a survey of 175 Somali remitters in London showed that half of them had made average donations of about US$150 for educational purposes in Somalia in 12 months (Maimbo 2006).

5.1.4 West Africa

Nigeria. The Making Finance Work for Nigeria project in the Africa Region provided policy advice to improve the country’s remittance market as part of its implementation support for the country’s financial sector reform strategy referred to as FSS2020. Due to this report, the Nigerian authorities are aware of the impact on competition and transfer costs caused by exclusivity clauses in contracts between banks and MTOs. The authorities are further considering an appropriate role for non-bank networks, such as the postal system, in the delivery of financial and payment services downstream.27

Mali. Seeking to bridge existing knowledge gaps in rural finance, the Africa Region study covered the supply of financial services and included case studies of rural finance providers and the legal environment within which rural financial markets operate. The study also covered the constraints this represents for improving access to financial and payment systems in rural areas.

Remittance Service Providers Survey. Through the Africa Migration Project in the Development Prospects Group, a Remittance Service Providers Survey was implemented in Burkina Faso, Cape Verde, Ethiopia, Ghana, Kenya, Nigeria, Senegal, Uganda, the United Kingdom, and France to understand the challenges faced by remittance service providers.

Migration and Remittances Households Surveys. The surveys seek to improve the current methods of collecting migration and remittances survey data on households. Surveys have been implemented with the assistance of local research partners in Burkina Faso, Kenya, Nigeria, Senegal, South Africa, and Uganda.


The ACP Group of States, AfDB, DFID, EC, Finmark Trust, GIZ, IFAD, IOM, IMF, International Labor Organization (ILO) and USAID have conducted studies on the impact of remittances on development and made policy recommendations on maximizing the potential impact of remittances in Africa.

5.2.1 ACP Group of States

Research of the impact of South-South migration on development in Cameroon. The ACP Observatory on Migration commissioned this study to contribute to the understanding of the development impact caused by South-South migration in Cameroon and to research appropriate development policies that can be implemented to address the migration rate increase in the country.

5.2.2 AfDB

Leveraging Human Capacity and Financing from the Diaspora. This brief looks into the dilemma of whether African governments, in response to the development-financing deficit, should encourage migration to increase the remittances accruable from the diaspora or put in place policies to reverse brain drain to reduce the chronic human

27 For the Nigeria study, seehttp://siteresources.worldbank.org/INTAFRSUMAFTPS/Resources/Making_Finance_Work_for_Nigeria.pdf.

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capacity deficit. The paper then makes some recommendations as to the mobilization of migrants for the development of their countries of origin (AfDB 2011).

Making Finance Work for Africa. The Partnership for MFW4A is an initiative to support the development of Africa’s financial sectors, overcome fragmentation and increase aid efficiency by addressing key constraints to efficient development partner support within country-owned development programs. Launched at the Heiligendamm G8 summit in October 2007, MFW4A’s mission is to establish a common platform for the harmonization and facilitation of financial sector development and knowledge sharing in Africa. The Partnership brings together donor partners, African governments, the private sector, and other financial sector stakeholders with the aim of unleashing the full potential of Africa’s financial sector in order to drive economic development and reduce poverty across the continent.

In line with its principles, the MFW4A Partnership operates as an open and dynamic platform to encourage better coordination among key stakeholders, including country and regional officials, the private sector and development partners, and better knowledge management and generation. It also contributes to increasing support for financial sector development at the country and regional levels.

The AfDB hosts the MFW4A Secretariat, which acts as the Partnership’s coordinating body. The Secretariat’s activities broadly include: (i) Knowledge management and dissemination; (ii) Donor coordination; (iii) Stakeholder engagement; and (iv)Advocacy and networking.

One of the objectives of the MFW4A partnership is to improve donor coordination and provide a platform for donors and development partners to exchange experiences and better synchronize their intervention in the financial sector. To that effect, the MFW4A Secretariat has developed two initiatives (i) the MFW4A Remittances Donor Working Group and (ii) the Remittances Donor Mapping, as part of the MFW4A Donor Projects Database.

The Remittances Donor Mapping is an important tool in the remittances area as it offers an overview on the projects across Africa and provides extensive information to all development partners on the ongoing projects on the continent. It helps to build bridges between donors and promotes more joint approaches to tackling remittances-related topics. In 2012 the MFW4A Secretariat launched the Donor Coordination Portal (DCP), a referential tool accessible through the MFW4A Platform (www.mfw4a.org) which aims to leverage knowledge sharing and enhance coordination of the development partners’ activities. It has two components (i) the Donor Projects Database and (ii) the Online Collaborative Platform, dedicated to Working Groups’ members.

With inputs and contributions from most of the donors and development partners involved in African remittances issues, the Remittances Donor Mapping includes (end of May, 2013), 82 remittances-related projects from 21 donors and development partners, and spread across the entire continent as regional projects and/or country-specific projects. Partners’ contribute to the value of the mapping through regularly sharing information and updating of the database.

5.2.3 DFID

Constraints in the UK to Ghana Remittance Market. This report assesses the UK to Ghana remittance corridor, addressing the UK and Ghanaian regulatory environments, the products and services available on the market and the remittance patterns of the UK-based Ghanaian Diaspora (DMA and DFID 2011).

5.2.4 EC

In 2012 the EC commissioned a study with the overall objective of analyzing the state of implementation of the EU commitments with regard to remittances and of developing recommendations. The study shows that there has been progress, but at the same time, that there is still significant room for improvement in all remittances related areas, with initiatives required from EC services, EU Member States and partner countries. The report confirms the

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significant importance of remittance transfers for recipients and their communities, as a source of income, and for developing country governments, as a source of foreign exchange. The report shows that there has been significant progress towards facilitating remittance transfers from Europe. For example, the regulatory and operational environment for remittance transfers has been significantly improved, and the price of transfers has reduced by a small amount. Another finding of the study shows that the remittances-related initiatives funded so far by the Thematic Program for Migration and Asylum (and by its predecessor) have tended toward flows from Member States to Southern States.

5.2.5 Finmark Trust

Understanding the last mile in cross-border money transfers from South Africa to Zambia. This focus note seeks to answer the question of how easy is it for a Zambian beneficiary of a remittance, sent from Johannesburg, South Africa to obtain disbursement in Lusaka, Zambia and at what cost. The study’s findings are that, whilst issues have been raised regarding “hidden costs” and losses to the beneficiary through the application of exchange rate margins, it is clear that the first mile (the South African side of the transaction) is the main cost driver and that the legislative and regulatory framework that governs the remittance space in Zambia is sound, predictable, non-discriminatory and proportionate (Langhan 2011).

5.2.6 GIZ

Migration and Employment. This discussion paper on migration and employment notes that remittances provide new insurance and private investment capital opportunities for those who do not migrate (Dayton-Johnson and others 2008). In especially poor countries, the paper argues that migrants’ remittances reduce risk by enabling households to undertake risky but profitable investment projects once remittances are received.

Diaspora in Germany: Its Contributions to Development in Ghana. This GIZ study finds that Ghanaian immigrants contributed to non-profit activities through individuals, churches, and community groups (Schmelz 2009). These contributions went toward financing health and education projects in rural areas of Ghana. The GIZ also supports family businesses, investment in real estate, and other businesses started by Ghanaian migrants living in Germany.

Analysis of mobility management systems in technical cooperation partner countries. The purpose of the study is to analyze and assess policies and individual measures to steer labor migration in Egypt, China, India, Indonesia, Kosovo, the Philippines, South Africa and Viet Nam, paying attention both to the legal and institutional regulations on labor migration. As a further area, the comparative study is intended to take stock of relevant strategies, instruments, measures and programs to manage labor migration. Finally, the country case studies are to be compared and analyzed to determine the impact of the individual policies on the development performance of these countries (GIZ 2010).

5.2.7 IFAD

Sending Money Home: Worldwide remittance flows to developing and transition countries. The IFAD report presented the first global estimate of remittances to developing countries, helping to bring the topic to the top of the agendas of business, policymakers and development institutions. The methodology developed and used in the report allowed the creation of the first African continent estimate of both regulated and unregulated remittances flows (IFAD 2007a).

Sending Money Home to Africa: Remittance Markets, Enabling Environments and Prospects. The IFAD report highlights the regulatory issues, market competition, and financial access in 50 African countries, using results of a survey of MFIs. The report finds that low levels of competition between remittance institutions unduly limits the presence of transfer operators in rural areas—with Western Union and MoneyGram controlling about 65 percent of all remittance payout locations. The regulatory framework and exclusivity arrangements of about 80 percent of the

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countries in Africa restrict the type of institutions able to offer remittance services since only banks are permitted to pay remittances. The report notes the importance of MFIs in remittance transfer but observes they play a limited role in the money transfer market. The report suggests that while post offices have a strong geographical presence and could play a potentially significant role in transferring remittances, they have yet to be put to use for remittance purposes (IFAD 2009a).

RemittanceGateway.org. This is IFAD’s one-stop shop for information on remittances and development from international organizations, the private sector, government institutions and the media. Specific regional contents are addressed, including Africa.

Enhancing Microfinance and Remittance Services for Ethiopia In line with reducing the cost of remittances for remittance senders and recipients through increased competition and innovation, the IFAD Enhancing Microfinance and Remittance Services for Ethiopia project has fostered the use of improved electronic transfer systems. The ARIAS transfer system allows more efficient real-time remittance processing, simultaneously cutting transfer times and lowering costs. As a direct result of the project, fees are now as low as half what is charged by major competitors.

Transfers and microfinance rural in Madagascar. With the funds provided by IFAD to PlaNet Finance the project seeks to improve the standard of living of rural populations through extending money transfer services to rural areas in Madagascar and increasing the impact of remittances on the local economy. The objective of this project is to foster access to remittances and financial services such as savings, credit, and micro-insurance services, while ensuring lower transfer costs through a broad distribution network in rural areas. The project will enable the development of new technologies for efficient money transfer services using mobile banking where Internet services are unavailable. The new money transfer solution will be progressively deployed in some 300 branches of partner MFIs and a massive marketing campaign implemented to reach 750,000 rural micro-entrepreneurs, 48,000 members of the MFI implementing partner networks and 72,000 members of other institutions.

5.2.8 ILO

Linkages between migration, remittances, and insurance. The ILO has conducted a study on the potential linkages between migration, remittances, and insurance commissioned by the Micro-insurance Innovation Facility of the ILO. The study evaluates the feasibility of using remittances from France to cover health insurance costs of recipient families in Mali, Senegal, and Comoros.

5.2.9 IMF

Evidence from IMF research supports the relationship between remittances and economic growth. Giuliano and Ruiz-Arranz (2005) use a sample size of 73 developing countries for the period 1975-2002 in estimating the relationship between remittances, financial development, and growth. They find a strong positive and significant relationship between remittance flows and a negative interaction between remittances and financial depth—suggesting that the marginal impact of remittances on growth decreases with the level of financial development.

Gupta and others (2007), using data from 233 poverty surveys in 76 developing countries, including 24 in Sub-Saharan Africa, confirm the poverty-reducing effect of remittances. What their research shows is a 10 percent rise in the remittances-to-GDP ratio is associated with a fall of a little more than 1 percent of people living on less than US$1 a day and the poverty gap (i.e., how far below the poverty line for the average poor person’s income). The research on Sub-Saharan Africa also shows that remittances contribute positively to financial development regardless of the size of the country in part by facilitating the entry of remittance-receiving households into the formal financial market (Gupta and others 2007).

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The evidence on the counter-cyclical nature of migrant remittances finds the relationship between migrant workers’ remittances to movements of GDP in Sub-Saharan African countries (Côte d’Ivoire, Lesotho, Senegal) to be a-cyclical—suggesting no correlation between the level of remittances during higher economic activity (Sayan 2006). In Morocco, however, workers increase remittances during periods of higher economic activity at home and cut them during downturns and crises. Similar research by Singh and others (2009) is consistent with the literature on the counter-cyclical behavior of remittances and finds that remittances are larger for countries that have a bigger Diaspora and smaller for those in which the Diaspora is located in a wealthier country.

Recent research forecasting the effect of remittances on a country’s GDP during the financial downturn predicts little effect in many Sub-Saharan African countries (Barajas and others 2010). This is evident because most of these African countries do not have large migration ties to Europe and the United States of America, where the financial crisis was most severely felt, but would have severe effects on countries in North Africa that have strong ties to Europe.

Do Remittances Reduce Aid Dependency? In 2002, the United Nations (UN) Report of the International Conference on Financing for Development recognized that ODA (henceforth aid) is, with trade and FDI, an essential tool for development financing. At that conference, the international community reached a consensus on increasing ODA to help countries reach the Millennium Development Goals. However, international aid has fallen short of expectations, and many countries, in particular in Sub-Saharan Africa, will not be able to meet the goal of halving extreme poverty by 2015.This paper investigates how remittances affect aid flows and how this relationship varies depending on the channel of transmission from remittances to aid. This paper mainly contributes to assessing the link between remittances and aid while controlling for reverse causation and simultaneous effects, and taking into account the different channels of transmission.

5.2.10 IOM

Migrant Remittances as a Development Tool: The Case of Somaliland. This report examines the type of remittance transfers made by Somalis in the Diaspora, their function and distribution of remittances among different categories of household income groups (Hansen 2004). It observes that remittances received by urban households trickle down to rural areas in the form of consumption of food crops and charcoal and other such rural goods and investment in livestock and seasonal crops produced in rural areas. The study also notes that the efficiency of remittance companies in Somalia has enabled them to build trust among Somalis even though unregulated systems still exist openly to serve relatives and friends.

The Future of Migration Policies in Africa. The key objective of this paper is to assess current capacities to cope with changing migration patterns and processes in formulating comprehensive migration policies in Africa, to identify existing gaps and to make recommendations concerning capacity‐building in the future (IOM 2010).

The Migration and Development Pendulum: A Critical View on Research and Policy. This paper aims at demonstrating that migration and development is not necessarily a new topic, and that the debate on migration and development has swung back and forth like a pendulum between optimistic and pessimistic views. Also, the paper argues that shifts in the migration and development debate have been part of more general shifts in development theory, which, in their turn, largely reflect ideological shifts (de Haas 2012).

5.2.11 USAID

The role of remittance payments across borders is an important component in regions of Africa where migration between corridors is high.

West African Financial Flows and Opportunities for People and Small Businesses. This USAID-commissioned report examined the scope, extent, and challenges of intra-regional, cross-border payments in West Africa using

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interviews with individuals, migrants, and traders (USAID 2006). The study estimates that the aggregate value of financial transactions in West Africa amounts to over US$2 billion annually, and notes that the region is vastly under-banked, comprised largely of MFIs and credit unions. This type of service forms a part of the unregulated market and operates under financial regulations that make it difficult to fully serve the clients’ needs. The study also finds that although intra-regional payments are taking place, they operate within a domestic and regional framework caused by weak institutions.

Diaspora Networks Alliance. The Diaspora Networks Alliance is a framework set-up to engage development partners in activities to increase the development impact of remittances (USAID). The Alliance works to encourage traditional money transfer organizations and banks to develop and market their services to remittance clients and promote linkages with MFIs. The objectives are to deepen outreach; develop regional and domestic payment systems to meet the needs of migrants and their families and facilitate international transfers; support pilot programs that link remittances to financial products (housing loans, health insurance, consumer loans, student loans, education funds, pension plans, enterprise loans, indigenous rotating saving schemes); explore technological innovations (such as mobile banking) that could reduce transaction costs; increase security; and provide remittance clients with a range of convenient services.

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Adams, Jr., Richard H. 2006. Remittances and Poverty in Ghana. World Bank Policy Research Working Paper No. 3838. World Bank. Washington, D.C.

Adams, Jr., Richard H., and John Page. 2005. “Do International Migration and Remittances Reduce Poverty in Developing Countries?” World Development 33: 1645-69. October

AfDB. 2011. Leveraging Human Capacity and Financing from the Diaspora.

Barajas, Adolfo, Ralph Chami, Connel Fullenkamp, and Anjali Garg. 2010. The Global Financial Crisis and Workers ‘Remittances to Africa: What’s the Damage? IMF Working Paper 10/24.

Cirasino, Massimo, and Jose Antonio Garcia. 2008. Measuring Payment System Development Survey. Payment Systems Development Group. Washington, D.C.: World Bank.

Dayton-Johnson, Jeff, Antje Pfeiffer, Kirsten Schüttler, and Johanna Schwinn. 2008. Migration and Employment Discussion Paper. GIZ.

de Haas, H. (2012), The Migration and Development Pendulum: A Critical View on Research and Policy. International Migration, 50: 8–25.doi: 10.1111/j.1468-2435.2012.00755.x

DMA (Developing Markets Associates Ltd) and DFID. 2011. Constraints in the UK to Ghana Remittance Market.

Giuliano, Paulo, and Marta Ruiz-Arranz. 2005. Remittances, Financial Development, and Growth. IMF Working Paper 05/234. IMF. Washington, DC.

GIZ. 2010. Analysis of mobility management systems in technical cooperation partner countries. Eschborn, Germany.

GRWG. 2010. Working toward a Legal and Regulatory Framework. Special Working Note. Washington, DC: World Bank.

Gupta, Sanjeev, Catherine Pattillo, and Smita Wagh. 2007. “Making Remittances Work for Africa.” Finance and Development, Volume 44, Number 2. IMF.

Guzmán, Juan Carlos, Andrew R. Morrison, and Mirja Sjöblom. 2007. “The Impact of Remittances and Gender on Household Expenditure Patterns: Evidence from Ghana. Gender.” In The International Migration of Women. Edited by Maurice Schiff, Andrew R. Morrison, and Mirja Sjöblom. Washington, D.C.: World Bank.

Hansen, Peter. 2004. Migrant Remittances as a Development Tool: The Case of Somaliland. Working Paper Series No. 3, June 2004. Migration Policy Research. Department of Migration, Policy, Research, and Communications. IOM.

IFAD. 2007a. Sending Money Home: Worldwide remittance flows to developing and transition countries. Rome, Italy: IFAD.

IFAD. 2009a. Sending Money Home to Africa: Remittance Markets, Enabling Environments, and Prospects. Rome, Italy: IFAD.

IFAD. 2009b. FFR: Call for Proposals 2009. Rome, Italy: IFAD.

IFAD. 2010. FFR:http://www.remittancesgateway.org/

IOM. 2010. The Future of Migration Policies in Africa. IOM WMR Background Paper. Geneva, Switzerland.

Kpodar,Kangni, and Maëlan Le Goff. 2011. Do Remittances Reduce Aid Dependency? IMF Working Paper 11/246.

Kulaksiz, Sibel, and Andrea Purdekova. 2006. “A Macroeconomic Perspective”. In Maimbo, Samuel Munzele (ed).Remittances and Economic Development in Somalia: An Overview. Working Paper Series No. 38. Social Development Papers, Conflict Prevention and Reconstruction. World Bank. Washington, D.C.

Lindley, Anna. 2006. “The Influence of Migration, Remittances and Diaspora Donations on Education in Somali Society”. In Maimbo, Samuel Munzele (ed). Remittances and Economic Development in Somalia: An

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Overview. Working Paper Series No. 38. Social Development Papers, Conflict Prevention and Reconstruction. World Bank. Washington, D.C.

Maimbo, Samuel Munzele (ed). 2006. Remittances and Economic Development in Somalia: An Overview. Working Paper Series No. 38. Social Development Papers, Conflict Prevention and Reconstruction. World Bank. Washington, D.C.

Maimbo, Samuel, Tania Saranga, and Nicholas Strychacz. 2010. Facilitating Cross Border Mobile Banking in South Africa. Africa Trade Policy Notes #1. May 2010. World Bank. Washington, D.C.

Mohapatra, Sanket, and Dilip Ratha. 2010. “Forecasting Migrant Remittances During the Global Financial Crisis.” Migration Letters, Volume 7, No. 2, pp. 203-213. www.migrationletters.com

Mohapatra, Sanket, George Joseph, and Dilip Ratha. 2009. Remittances and Natural Disasters: Ex-post Response and Contribution to Ex-ante Preparedness. World Bank Policy Research Working Paper 4972. Global Facility for Disaster Reduction and Recovery Unit and Development Prospects Group. Migration and Remittances Team. World Bank. Washington, D.C.

Ratha, Dilip, and Sanket Mohapatra. 2009. Revised Outlook for Remittance Flows 2009-2011: Remittances Expected to Fall by 5 to 8 Percent in 2009.Migration and Development Brief 9.Migration and Remittance Team, Development Prospects Group. World Bank.

Ratha, Dilip, Sanket Mohapatra, and Sonia Plaza. 2008. Beyond Aid: New Sources and Innovative Mechanisms for Financing Development in Sub-Saharan Africa.Policy Research Working Paper 4609. World Bank. Washington, D.C.

Langhan, Sarah. 2011. Understanding the last mile in cross-border money transfers from South Africa to Zambia. Prepared for Finmark Trust by Exact Consult. Johannesburg, South Africa.

Sayan, Serdar.2006. Business Cycles and Workers' Remittances: How Do Migrant Workers Respond to Cyclical Movements of GDP at Home? IMF Working Paper 06/52.

Schmelz, Andrea. 2009. The Ghanaian Diaspora in Germany: Its Contribution to Development in Ghana. Eschborn, Germany: GIZ.

Singh, Raju Jan, Markus Haacker, and Kyung-woo Lee. 2009. Determinants and Macroeconomic Impact of Remittances in Sub-Saharan Africa.IMF Working Paper 9/216. Washington, D.C.

USAID. 2006. West African Financial Flows and Opportunities for People and Small Businesses. Prepared by CARANA Corporation and Dr. Manuel Orozco of the Inter-American Dialogue.

USAID. nd. Diaspora Networks Alliance.pdf.usaid.gov/pdf_docs/PDACM860.pdf.

Waldo, Mohamed Abshir. 2006. “Somalia Remittances: Myth and Reality”. In Maimbo, Samuel Munzele (ed). Remittances and Economic Development in Somalia: An Overview. Working Paper Series No. 38. Social Development Papers, Conflict Prevention and Reconstruction. World Bank. Washington, D.C.

World Bank. 2007. “Financial Sector Integration in Two Regions of Sub-Saharan Africa: How Creating Scale in Financial Markets Can Support Growth and Development”. Prepared by the Africa Region, World Bank, for the Making Finance Work in Africa. Washington, D.C.

World Bank. 2011. Diaspora for Development in Africa, ed. Sonia Plaza and Dilip Ratha. Washington, DC.

6. Development of Content and Technology Platforms for Remittances

Advanced technology platforms and payment systems have the potential to reduce the cost of remittances through innovative products and services, and fast, efficient remittance transfers. This chapter summarizes the work of the World Bank and development partners in improving payment systems and developing new technology platforms for remittances.

6.1 World Bank

Making Money Transfers Work for Microfinance Institutions: A Technical Guide to Developing and Delivering Money Transfers. This CGAP-issued report (Isern and others 2008) helped financial service providers determine whether offering money transfer services was in their interests, and to determine what strategy, products, and institutional structure were needed to support a successful money transfer operation.

Send Money Africa (http://sendmoneyafrica.worldbank.org): Making markets more transparent. Funded by the AIR project, Send Money Africa provides data on the cost of sending and receiving relatively small amounts of money from selected countries worldwide to a number of African countries, as well as within the African continent. The objective of the database is to increase transparency in the market and provide migrants with complete and reliable information on all the components of the transaction. Send Money Africa allows the users to compare the costs applied by several providers to send and receive money from 16 major sending countries to 28 African receiving countries. On April 2013 the FFIFI of the World Bank completed a report that identifies and analyzes trends in the cost of sending money to Africa utilizing Send Money Africa (SMA) remittance prices database data28.

Also applicable are the four assessment missions completed by the FFIFI team in Malawi, Tanzania, Liberia and Sierra Leone mentioned in Section 2.1.

Measuring Payment System Development Survey (Cirasino and Garcia 2008) identifies two types of payment systems: (a) retail payment systems and (b) large value payment systems. Retail payment systems deal with small value transfers. The potential benefits of a well-developed retail payment system include access for the underserved population, especially in rural areas, and efficient services for consumers. However, retail systems in several Sub-Saharan African countries are characterized by a low degree of interoperability due to the lack of appropriate infrastructure to process electronic payments of retail value. The Retail Payment Systems Sub-Component 1 of the Survey, which measures the infrastructural ability of a country to process retail payments, showed that only South Africa scored high on this account.

Large-value payment systems process individual payments of larger value and requiring higher speed. The real time gross settlement system was developed in response to the growing awareness of the need for sound risk management in large-value funds transfer systems. A real time gross settlement system offers a powerful tool to the reduction of settlement risk in securities and foreign exchange transactions and to increase financial stability. Most countries in the Measuring Payment System Development survey reported using the real time gross settlement system for handling large-value payments. A few countries in Sub-Saharan Africa reported using the check-clearing system or other central bank systems in parallel with the real time gross settlement system.


Burundi. The Africa Region is working with the national authorities in Burundi to strengthen the financial system by modernizing the financial sector infrastructure (payment systems) and improving financial sector regulations in

28 A copy of the report can be found here: https://sendmoneyafrica.worldbank.org/sites/default/files/Send%20Money%20Africa%20Report%20remittance%20prices%20April%202013.pdf

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ways that create synergies among different service providers such as commercial banks and the country’s postal service, including interoperability of payment processing platforms.

Rwanda. As part of Rwanda’s Financial Sector Development Program, the World Bank diagnosed and recommended solutions for a number of weaknesses in the financial sector, a key component being recommendations related to strengthening the national payment systems by improving processing efficiency.

Ethiopia. The World Bank supports efforts of the national authorities to build a more transparent, well-governed, well-regulated, and competitive financial sector, including implementing support for an automated transfer system.

BCEAO Regional Payment Systems Project received support to introduce modern payment instruments and clearing and settlement processes in the WAEMU. Also, to establish and install an appropriate set of regional payment mechanisms that would make payments safe, secure, convenient, and deliverable in a timely manner in accordance with international standards. The BCEAO Regional Payment Systems Project broadly met its goals. Results from the project included an upgrading of the basic payment systems infrastructure.


Development partners have undertaken studies and initiatives to support the development of technology platforms for country-based systems.

6.2.1 CGAP

Scenarios for Branchless Banking in 2020. This CGAP-published report (Pickens and others 2009) provides four scenarios for government and private sector to identify strategies in branchless banking that can maximize the spread and depth of branchless banking as a means to improving poor people’s access to financial services. It also highlights key uncertainties, including the regulatory framework, market competition, and businesses (existing and new) and consumers that could significantly affect the outcomes or attractiveness of new channels to providers and consumers.

WIZZIT payments Ltd. CGAP supports WIZZIT (a division of the South African Bank of Athens) to deliver banking services to poor people in South Africa’s small towns and rural areas. WIZZIT is a branchless banking business that enables customers to use mobile phones to access bank accounts and conduct transactions.29 The payment service for wholesalers serves more than 500 micro-entrepreneurs, known as “spaza shops”30 in the township of Motherwell, where 3 out of 5 people are unbanked.

6.2.2 BIS

The BIS has worked in partnership with other development organizations to serve as a guide to improve payment systems worldwide.

General Guidance for National Payment System Development. A CPSS task force on Payment System Principles and Practices was established in May 1998 to consider principles to govern the design and operation of payment systems in all countries. In 2006, the BIS published the General Guidance for National Payment System Development to provide an analysis of the remittances payment system and general principles to guide countries in improving the market for remittance services. The 14 guidelines also include sections and examples on various ways in which payment systems could be implemented (BIS 2006).31 The CPSS (1999) published the “Green Book”, which covers the SADC countries: Angola, Botswana, Lesotho, Malawi, Mauritius, Mozambique, Namibia, South Africa, Zambia, and Zimbabwe. The report provided an overview of the payment systems in the respective countries and assessed the role of non-bank and bank financial

29More information on WIZZIT at http://www.wizzit.co.za. 30Spaza shops are informal convenience shop businesses in South Africa, usually run from a home. 31CPSS also co-operated with the World Bank on the publishing of General Principles for International Remittance Services (BIS/World Bank 2007).

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intermediaries, infrastructure to support the system, and the role of the Central Bank in interbank transfers for both domestic and international transactions.

6.2.3 BMZ (German Federal Ministry for Economic Cooperation and Development)

Mobile Banking Platform-Ghana. In collaboration with the Reconstruction Credit Institute (KFW), the Project concerns the deployment of a countrywide, biometric payment system (“e-zwich”) in rural areas, in partnership with financial institutions and through a network of agents and merchants. The purpose of the Project is the improvement of access to financial services for the rural population that had no or only limited access so far. In the long-term, the payment system is supposed to be able to link with the European payment system to ease international remittances transfers.

Mobile Banking Platform-Senegal. The goal of the project is for a private Mobile Banking Operator to establish and operate, on a commercial basis, a mobile banking IT-platform and a countrywide retail network of agents to serve as POS. The system shall be interoperable with all Telecom providers.

6.2.4 DFID

SendMoneyHome.org. In 2005, DFID initiated the SendMoneyHome.org platform to provide migrants with information and advice on fees, exchange rates, and speedier methods for transfer of remittances. The website provides access to the necessary knowledge to help users make informed choices when remitting through MTOs and banks, as well as information on any suspected fraudulent activity. The platform is now called fxcompared.com and currently focuses primarily on exchange rate information.

Mobile Phone Banking (M-banking). DFID has supported M-banking by providing a one-off grant to Vodafone through its subsidiary Safaricom to pilot and launch a mobile banking solution in Kenya called M-PESA (“mobile money”). The grant helped to bring about a substantial shift in Vodafone’s internal strategy toward mobile banking. Mobile payments through M-PESA provide a potential solution to unbanked areas of the country, and efforts are being made to use the system to also distribute social payments to poor families in remote areas of Kenya.

Kenya Social Protection Program. The aim of this project is to establish a government-led national system for long-term and guaranteed cash transfers to the poorest and most vulnerable 10 percent of households in Kenya.

6.2.5 GIZ

geldtransfair.de: Remittance website. The GIZ has developed and operates a website that enables migrants to compare remittance costs across various institutions. The service is available for migrants from Algeria, Egypt, Ethiopia, Ghana, Mali, Nigeria, and Senegal and is aimed at lowering the costs of remittance transfers by increasing the transparency of the money transfer market and fostering competition among money transfer institutions.

Partnership MFW4A. The GIZ supports the Partnership MFW4A on behalf of the German Federal Ministry for Economic Cooperation and Development. The Partnership draws on a wide range of contributors, including African governments and major partners that include AfDB, CGAP, DFID, EIB, FIRST, French Development Agency, Swedish International Development Agency (SIDA), and World Bank.

6.2.6 IFAD

Building Remittance Services for the Poor in Ghana through Mobile Technology. In partnership with Opportunity International Inc. (OI), the goal of this IFAD co-funded project is to help increase standards of living in Ghana by providing easy access to international and domestic remittances and other financial services mainly in rural areas in Ghana, and reduce remittance costs and increase the number of banked persons from Ghana’s rural population. The project will enhance the ability of families in Ghana to remit funds to recipients by means of a safe, cost-effective, fast and secured platform. This will enable rural and semi-urban poor families to access domestic and international

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remittances as well as savings and micro-loan facilities in a cost effective, physically secure and reliable manner. The project will address the challenges of inadequate infrastructure through capacity assessment and installation of power generators in branches with intermittent access to electricity.

Expansion of Telecash in Rural Cameroon. Supported by IFAD, the Cameroon Cooperative Credit Union League (CamCCUL) demonstrated that investing in electronic cash transfer systems could be sustainable even with low transaction volumes. The implementation of a new electronic cash transfer system, ‘Telecash’, reduced transaction costs by almost 20 per cent. US$1.8 million was mobilized during the 18 months of the project. A critical success factor was CamCCUL’s promotional strategy, which focused on traditional markets, credit unions, village churches, schools and meeting points.

Enabling affordable remittance services using card-based technology-Uganda. Through an IFAD co-funded project, the microfinance pioneer Foundation for International Community Assistance (FINCA) introduced a card-based solution and piloted the use of POS terminals in its branches in rural Uganda. FINCA issued nearly 3,000 debit cards to its clients, enabling real-time authorization and processing of transfers at fees among the lowest in the country. Almost 35 per cent of the cards were in active use by the end of the project, and FINCA reports that this share continues to increase. The project also generated a number of important lessons about what drives account usage. In order to be successful, deployment of new technologies requires intensive in-person sales, training and on-site servicing. FINCA’s customer care officers travelled to the field to familiarize clients with card activation and the use of POS terminals. The successful model piloted in Uganda will now be replicated in the DRC and Ecuador.

Somalia Banking Groceries. Somalia lacks banking and financial services to serve its population. Often rural remittance recipients must travel to city and commercial centers in order to receive their remittance payments. This adds to the increasing cost of sending and receiving remittances. Supported by IFAD, Himilo Relief and Development Association (HIRDA) sought to develop an online remittance transfer platform that would reach rural remittance recipients in three villages of the Gedo region of Somalia. Through the innovative system set up by HIRDA, shop owners periodically travel to urban areas to cash remittances, rather than individual recipients needing to travel. Remittance recipients simply pick up their transfer in the form of groceries and other vital goods directly from local stores. This arrangement ensures that family members can safely pick up their daily necessities without being exposed to potential security issues, while at the same time providing remittance senders with a higher degree of control over how their hard-earned money is spent

6.2.7 Finmark Trust

The Cross-border Money Transfer Experience: Why taxis and buses are still preferred to banks is a study that explicitly sets out to challenge the commonly accepted paradigm that it is safer and more efficient to make use of regulated remittance channels (banks and MTOs). The focus note highlights the authors’ experience as “mystery shoppers”, presents pricing data collected from banks, the Post Office and SWIFT, highlights various process flows and seeks to document South Africa’s performance from the customer’s perspective against the 2007 CPSS / World Bank General Principles for International Remittance Services (Langhan and Kilfoil, 2011).

6.2.8 Government of France

Envoidargent.fr. The Ministry of Foreign Affairs, the Ministry of Interior and the Ministry of Economy and Finance, with support from AFD, have launched a website to compare the cost of remittances for 21 countries with the objective of "promoting transparency of costs and knowledge transfer methods" in order to reduce the cost of migrant remittances.

6.2.9 Government of Italy

www.mandasoldiacasa.it. The Government of Italy launched the website that provides comparative information on the costs of sending remittances. The World Bank has identified 12 key minimum mandatory requirements of a national remittance price database and certifies only the databases that meet the minimum requirement. This website is the first to have received certification from the World Bank.

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Ghana/Senegal Project. The Government of Italy supports the Millennium Development Authority (MIDA) Ghana/Senegal Project in cooperation with IOM. The project aims to encourage innovative mechanisms for remittance transfers and lower the costs of remittances. In line with the proposed objectives, the project promotes the use of rechargeable credit cards, a flexible system that is already being utilized in Italy by other migrant networks, and the dual bank accounts as instruments to reduce the cost of remittances. It also proposes the use of the savings accumulation product, guarantee fund, and certificates of deposit, along with the creation of a foundation to pool together migrants' remittances and channel remittances toward productive use. The project recommends replicating the Ecuador Cooperative Credit Banks Project, which supports local entrepreneurship in rural areas in Ecuador through the creation of small local cooperative credit banks to encourage direct Diaspora involvement.

6.2.10 Government of the Netherlands

geldnaarhuis.nl is as a comparison website for money transfer costs originated by the Netherlands government and includes information on the costs to several African countries.

6.2.11 Opportunity International UK

Banki Mmanj, Malawi. Opportunity International UK launched Banki Mmanj, a strategy using mobile phone banking in Malawi, with grant support from Credit Suisse. Targeting rural communities, Banki Mmanj relies on the country’s huge network of mobile phone users who will be able to use cash-back banking products that employ technology to reduce banking transaction costs when utilizing financial services. These services include savings accounts, small business loans, insurance and any training available to people living in poverty. This will enable clients in rural areas without a bank presence to have a cash point where they can make withdrawals and deposits.

Mobile ATMs, Malawi. Opportunity International UK is also piloting a project in Malawi to bring mobile banks to rural areas without banking infrastructure. Opportunity International designed a mobile banking system using two bulletproof, all-terrain, 4-wheeldrive vehicles (a five-ton truck fitted with an ATM and a three-ton truck without an ATM to reach farms and other more remote areas). The trucks travel with two bank employees, and two armed Police Mobile Force guards. Using solar power, the trucks use a GPS tracking system and satellite technology for real-time transactions. The vehicles will cover 26 service points in five districts on a weekly basis. Operating through open windows, the mobile banks will visit designated market places on market days. For a small fee, which is less than a bus fare to the nearest town, clients will then be able to deposit or access funds using their own bank cards.

6.2.12 UPU

Development of worldwide electronic postal payments network (WEPPN). Funded by the EC, the UPU partnered with PlaNet Finance to launch a project aimed at developing the WEPPN in Mali, Burkina Faso, Côte d'Ivoire and Cameroon. The objective of the project is to expand access to remittances in rural areas of the target countries and to reduce remittances prices. UPU also partnered with IFAD, the WB's FFIFI, UNCDF and WSBI to develop a similar project in 10 additional countries, which was officially launched in December 2012.

6.2.13 Others

Financing Africa: Through the Crisis and Beyond is a joint collaboration between the AfDB, BMZ and the World Bank, with support by the Secretariat of the MFW4A Partnership. This publication looks at Africa’s financial systems after the financial crisis and all subsequent regulation reforms and technology changes, at the challenges of expanding the outreach of financial systems, at lengthening financial contracts and at safeguarding financial systems (Beck, Maimbo, Faye and Triki 2011). Cell phone companies are also developing new and innovative products to capture remittance transfers in several countries in Africa:

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CelPlay by Celtel. This M-banking technology is available in Zambia, DRC, and Tanzania. Customers are provided with a secure Celpay SIM for any GSM mobile that loads a new menu onto the phone. Funds are deposited into a Celpay account, using the mobile phone to transfer money from a bank account or, if the user is unbanked, to deposit cash at a partner bank. Purchases can be made via text by entering the amount to be paid into the phone and authenticating the transaction with a Personal Identification Number (PIN). The service provider instantly transfers the money to the merchant’s Celpay-enabled account. Merchants pay a commission of the total transaction amount.

ZAP M-banking by Zain. This service will allow ZAP users across Kenya, Tanzania, and Uganda to use their mobile phones to manage their bank accounts, pay bills for goods and services, make remittances to other mobile users or bank accounts, top up airtime, and send airtime to other Zain customers within the three countries.

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Beck, Thorsten, Samuel Munzele Maimbo, Issa Faye and Thouraya Triki. 2011. Financing Africa: Through the Crisis and Beyond. AfDB, BMZ and World Bank. Washington, DC.

BIS. 2006. General Guidance for National Payment System Development. Prepared by CPSS. Basel, Switzerland.

Cirasino, Massimo, and Jose Antonio Garcia. 2008. Measuring Payment System Development. Payment Systems Development Group. Washington, D.C.: World Bank.

Isern, Jennifer, William Donges, and Jeremy Smith. 2008. Making Money Transfers Work for Microfinance Institutions: A Technical Guide to Developing and Delivering Money Transfers. Washington, D.C.: CGAP/World Bank.

Langhan, Sarah, and Craig Kilfoil. 2011. The Cross-border Money Transfer Experience Why taxis and buses are still preferred to banks. Prepared for Finmark Trust by ExactConsult. Johannesburg, South Africa.

Pickens, Mark, David Porteous, and Sarah Rotman. 2009. “Scenarios for Branchless Banking in 2020”. Focus Note 57. Washington, D.C.: CGAP.

7. Examples of Country Programs

This chapter discusses examples of work being done by three Governments—Ethiopia, Zambia and Uganda—to leverage the development impact and increase the flow of remittances. These four governments have used different instruments to maximize remittance flows. Some of these include the use of direct initiatives such as Diaspora bonds and bank accounts to target remittances, as well as indirect instruments, through reforms in the banking and regulatory framework of financial institutions. Box 1 looks beyond Africa for lessons learned on migrant remittances in Mexico.

7.1 Ethiopia — Leveraging Remittances through Diaspora Bonds and Securitization

Large and stable remittance flows have been known to improve the creditworthiness of countries. Banks and at times national authorities use future remittances in the form of bonds to raise money for financing. The use of bonds for financing has the potential to be used to finance development projects since they tend to be a stable source of financing. The World Bank estimates that African countries can raise between US$5 billion and US$10 billion a year by issuing Diaspora bonds. The State of Israel, Sri Lanka, and India have successfully raised funds for development by issuing Diaspora bonds.

In December 2009, the Ethiopian government issued Millennium Bonds targeted at Ethiopian nationals and foreign nationals of Ethiopian origin living and working outside Ethiopia to raise funds to invest in the Ethiopian Electric Power Corporation for a project that would increase power supply to the country. With a minimum purchase of US$500, the bond could be bought through SWIFT transfer, a Diaspora foreign currency account, or with cash. The Millennium bond was not successful and has been replaced by the new Grand Ethiopian Renaissance Dam Bonds, which can now be purchased as small as 50 US dollars/ Euros/ Pound Sterling.

Ethiopia has also made it easy for its Diaspora members to open foreign currency accounts in domestic commercial banks. The minimum balance on these accounts is US$5,000 and the maximum permitted is US$50,000 (or equivalent in Euros or Pound Sterling). Banks are permitted to accept other currencies provided they convert them to anyone of the three permitted currencies. Account holders can also make payments locally in local currency. The bank accounts can be used to serve as collateral or guarantees for loans or bids.

7.2 Zambia — Improving Payment Systems through Technology

The Bank of Zambia 2006 report of the National Payment Systems Self-Assessment Workshop on the Observance of the CPSS Core Principles for Systemically Important Payment Systems assessed the National Payment Systems in Zambia, particularly the real time gross settlement system. The report notes that significant progress has been made with regards to the observance of the Core Principles, particularly in integrating the National Clearing and Settlement Systems to credit unions, which was formerly restricted to commercial banks. With passage of the National Payments Act before Parliament, central banks will be able to oversee the payment systems and introduce technology-based payment instruments to increase competition in the remittance market. The report also notes that the relatively well-developed telecommunications infrastructure in the country has enabled banks to automate their branch networks and provide platforms for technology-based payments such as the direct debits and credits clearing, and the real time gross settlement system.

7.3 Uganda — Improving the Regulatory Framework for Payment Systems

Uganda is a strong reformer in the area of mobile payment services and somewhat of a model for remittance markets in Sub-Saharan Africa. The authorities permit non-bank remittance service providers to disburse remittances but not to contract directly for services from international MTOs. There also exists scope for improvement by focusing on the retail payment system aspects of the market in order to move beyond mere access to a disbursement (payment) service and improve the potential for remittances to contribute to financial deepening. Uganda will need to step up

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its efforts on reforming the remittance markets by encouraging greater integration of remittance services with the domestic payment system and opening up the domestically focused remittance services market to competition.

Bank of Uganda’s regulatory framework takes cognizance of the diverse nature of remittance service providers and provides licenses under the Foreign Exchange Act 2004 and Foreign Exchange (Forex Bureaus and Money Remittance) Regulations 2006 in four classes: International money transfer agency license (class A); Foreign exchange bureau de change and money remittance license (class B); Direct entrants license (class C); and Sub-agency license (class D). This is important in ensuring that markets are contestable.

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Box 1. Migrant Remittances to Mexico: Lessons for Africa

In terms of value, Mexico receives the largest flow of remittances to any country in Latin America. In 2011, remittance flows to Mexico were estimated atUS$23.6 billion, representing about 45 percent of total remittance flows to Latin America. Remittances to Mexico are currently the second highest earner of foreign exchange for the country after oil.

The World Bank’s Migration and Remittances Factbook estimates that there are over 11.8 million international immigrants from Mexico, representing over 10 percent of its population. The majority of Mexican migrants is in the United States of America and represents the largest immigrant population in that country. Migrants to the United States of America tend to be at the low end of the income and educational distribution, and typically work in the restaurant or hotel industries. Remittance recipients also tend to be from poor households in rural areas of Mexico. Studies show that remittance recipients usually receive between US$280 andUS$370 per month.

Even with the majority of remittance recipients from poor households in rural areas, the means of sending remittances make it relatively easy for migrants to remit to Mexico. Many migrants use regulated means of remittances because they are cheap, safe, and fast. Channels for remittances include banks, credit unions, post offices, money transfer operators, individual businesses and chain stores that have the license to serve as independent operators or as agents for money transfer operators. The cost of sending US$200 to Mexico through either a money transfer operator, or a bank account, using the World Bank’s Remittance Prices Database is US$11.68 and represents one of the least costly corridors in the world.

A large share of remittance collection points in Mexico are at commercial bank branches—showing that banks can play a significant role in the distribution on remittances. Over the past few years, remittances through the United States of America – Mexico remittance corridor have been increasing (except in the last 2 years of the global financial crises) due to the declining costs of sending remittances.

The following points illustrate some reasons for the declining costs of remittances:

Entry of new market competitors. Banking institutions have revolutionized remittances in Mexico. The remittance market was typically run by Western Union and MoneyGram and used exclusivity agreements with banks to monopolize the market for remittances. However, once banks began to move away from these contracts and became transfer operators, prices fell and more remittance recipients enjoyed reliable transactions.

Impact of technology. New technology has made it faster and easier to send remittances across the United States of America – Mexico corridor. The introduction of card-based products which can be used at ATM terminals has made it possible for recipients to receive a transfer as soon as it is processed.

Bilateral cooperation. The United States – Mexico corridor has benefitted tremendously from the bilateral cooperation between the United States and Mexican authorities, which has encouraged the use of regulated remittance systems. Through bilateral agreements, for example, the U.S. Federal Reserve System is working to expand its Federal Reserve Automated Clearing House (FedACH) to support two-way credit transactions between the United States and Mexico.

Source: Hernández-Coss (2005).

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Hernández-Coss, Raúl. 2005. The U.S.–Mexico Remittance Corridor: Lessons on Shifting from Informal to Formal Transfer Systems Washington, D.C.: World Bank

Annex 1. Countries Originating Most Tertiary- Educated Migrants, 2000 Number of migrants, thousands

Source: Docquier, Frédéric, and Abdeslam Marfouk. 2006. “International Migration by EducationAttainment 1990–2000.” In International Migration, Remittances, and the Brain Drain,ed. Caglar Özden and Maurice Schiff, 151–99. Palgrave Macmillan: New York; andthe World Bank: Washington, DC.

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Annex 2. Top 10 Remittance Recipients (Sub-Saharan Africa), 2011

US $ millions

Source: Development Prospects Group, World Bank (Remittance Data Inflows, April 2013)

360

373

473

513

649

934

949

1,212

1,478

20,619

Liberia

Côte d'Ivoire

Mali

Ethiopia

Lesotho

Kenya

Uganda

South Africa

Senegal

Nigeria

Annex 3. MTOs in Sub-Saharan Africa

Source: IFAD. 2009a. Sending Money Home to Africa: Remittance Markets, Enabling Environments, and Prospects. Rome, Italy: IFAD

Annex 4. Venues for Dissemination of Remittance Research and Studies

Research and studies conducted by the World Bank and other development partners on remittances have been disseminated and discussed at conferences and seminars.

World Bank

Listed are recent conferences on remittances hosted by the World Bank.

Reforming Payment and Securities Settlement Systems in the Middle East and North Africa, Manama, Bahrain, March 15-17, 2005.

Panel discussion of the role of migration and globalization, March 2008. A debate of migration experts was organized on the occasion of the Factbook launch.

Mobile Money Summit, Cairo, Egypt. May 14–15, 2008. The two-day conference was designed for senior executives from financial services institutions, mobile network operators, development organizations, solutions vendors and regulatory and policy makers. Organized IFC, CGAP, DFID and Global System for Mobile Communications.

Remittances Public–Private Partnership Meeting, Vienna, Austria. September 12, 2008. The first meeting of the Remittances Public–Private Partnership took place in the context of the Global Payments Week 2008, organized by the World Bank. Working sessions were held on legal and regulatory issues, industry codes of conduct, and information disclosure mechanisms.

Panel discussion of the role of remittances in development financing, October 2008. Organized on the occasion of the launch of the publication, Innovative Financing for Development.

Banking on Mobiles: Why, How, for Whom? Washington DC. October 1, 2008. The promise of mobile banking is well known; harder to find are examples of solid implementation and mass rollout beyond payments and transfers. The CGAP-organized meeting examined the business case and deployment options for smaller banks and MFIs.

Mobile Banking for Poor People: Pioneer Perspectives, Washington D.C., December 11, 2008. A CGAP-organized roundtable and webinar on how mobile phone banking can deliver a range of financial services to poor people and change lives for the better.

Regulating Branchless Banking, Kigali, Rwanda. March 30-31, 2009. A CGAP and World Bank workshop on the regulation of access to financial services using mobile phones, retail agents, and other innovative technology-based approaches.

Redefining the Landscape of Payment Systems, Cape Town, South Africa. April 7-10, 2009. The World Bank is intensifying its commitment to promote and disseminate the policy and research debate on these and other topics within the scope of financial infrastructure. For this purpose, the World Bank Group organized the third global conference for payment system specialists.

Mobile Money Summit 2009, Barcelona, Spain. June 22-25, 2009. The conference focused on what is new in the mobile money ecosystem and how the community has evolved in the past year. Organized by IFC, CGAP, DFID, and Global System for Mobile Communications.

International Conference on Diaspora and Development, July 2009. The DEC sponsored the event, focusing on how the Diaspora can be leveraged for trade, investments, skill and technologies transfer.

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International Conference on Remittances. Rome, Italy, November 9, 2009. The Conference represents the output of an intense activity that the World Bank and the G8 have undertaken during the last year in the framework of the G8 GRWG. Organized by the World Bank and Italian Ministry of Foreign Affairs.

Third International Conference on Migration and Development, Paris School of Economics, Paris, September 10 -11, 2010. Organized by the World Bank International Migration and Development Research Program, together with the Research Department of the French Development Agency and the Paris School of Economics.

Global Payments Week 2010, Amsterdam, The Netherlands, October 19-22, 2010. The event gathering central banks and securities commissions from all over the world. Organized by the World Bank.

Financial Infrastructure Week, Rio de Janeiro, Brazil, March 14-17, 2011. The World Bank Group gathered financial infrastructure practitioners from around the World for a full day of common plenary sessions and three different streams: Payment Systems - "Expanding the Horizons of Payment System Development"; Credit Reporting - "Moving beyond the Crisis – The Role of Credit Reporting"; and Secured Transactions - "Increasing Access to Credit through Secured Transactions Reform".

Consultative and experience sharing forum on remittances leverage for development. Addis Ababa, Ethiopia, July 07-08 2011 that discussed and shared experiences on policy and regulatory frameworks for the remittance sector and provided recommendations leading to a concrete action plan and road map for the establishment of the AIR. More than 150 participants have attended the forum from 30 AU Member States.

Global Remittance Working Group Meetings. Bi-Yearly event that convenes governmental authorities, other international organizations and members of the private sector to discuss the highly relevant policy issues.

Global Forum on Remittances: Sending money home to Asia – GFR2013. Bangkok, Thailand, May 20-23, 2013

Global Payments Week, Lisbon, Portugal, October 23-26, 2010. The event gathering central banks and securities commissions from all over the world. Organized by the World Bank.

Development Partners

Tools and resources were provided by development partners, and at conferences organized to disseminate data on remittances.

The DFID Remittance Information Library (DRIL) includes links to over 600 articles. It is a tool to be used by money transfer companies, development organizations, governments and academic facilities to look for information by subject, author, or title. Many of the texts contain data or information on specific money transfer markets or on migration. DRIL will continue to be updated as information becomes available.

IFAD International Remittances Forum (2005, 2007, and 2009) brought together key players to explore the links between remittances and banking, technology, and microfinance; and to discuss ways to integrate development agencies’ agendas on remittances.

Pan African Remittances Conference: Enhancing the Investment and Development Capacity of Remittances to Africa, London, UK. February 8, 2007. This conference developed products and strategies and exchanged ideas among financial service providers, central banks, MFIs, policy makers, and sector-specific companies on the methods of transferring money to and within Africa. Organized by Africa Recruit.

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Annual Global Forum on Migration and Development. The Global Forum on Migration and Development (GFMD) is an initiative of the UN Member States to address the migration and development interconnections in practical and action-oriented ways.This Forum serves as an informal intergovernmental consultative body to distill possible options for international co-operation on migration. The Forum looks into ways to facilitate remittances, engage diasporas, and integrate migration into poverty reduction strategies.

International Forum on Remittances 2007, Washington D.C., October 18-19, 2007. The forum explored the links among remittances and banking, technology, and microfinance and discussed ways to integrate development agencies’ agendas on remittances. The two-day event included a series of roundtable discussions and working groups devoted to an in-depth exchange of ideas and business models for urban and rural remittances worldwide. Organized by IFAD, IDB, and the Multilateral Investment Fund.

Global Diaspora Forum: Annual celebration of diaspora communities held in the US since 2010 and organized by the US State Department.

The African Remittances Conference 2009, organized by the AfDB with support of MFW4A32 and gathered representatives from central banks, commercial banks, non-financial institutions.

G8 Meeting on Remittances, Federal Ministry of Finance of Germany, November 28-30, 2007. The high-level meeting had two objectives: (a) assess the progress of measures to facilitate remittances agreed at the Sea Island Summit in 2004; and (b) initiate a dialogue on new channels for transferring funds, instruments to promote remittances, and other potential measures.

Remittances, the Macro-economy, and Public Policy, Atlanta, Georgia, February 21–22, 2008. The conference was intended to provide a forum for discussing innovative research on remittances and to facilitate the exchange of views among researchers and policymakers. Organized by The Americas Center at the Federal Reserve Bank of Atlanta.

Remittances – Creating Value, Johannesburg, South Africa, February 25–26, 2008. This intensive 2-day course provided an insight into the payment system aspects of remittances and was designed to assist financial institutions that want to improve their understanding of this important market as well as develop the many business opportunities that present themselves. Organized by Citadel Advantage.

Payments 2008. Nevada, USA, May 18–21, 2008. The event presented the latest research, industry pilot results, insights, trends, and forecasts delivered by payments system experts representing financial institution, regulatory, provider, and customer perspectives. Organized by NACHA, the Electronics Payment Association

SWIFT Regional Conference for Africa, Durban, South Africa, May 19-22, 2008. A leading forum for the exchange of ideas and opinions on key issues facing the financial services industry. A unique showcase for financial technology. The theme for 2008 was “Growing Community Reach in Africa and Beyond”.

Worker's Remittances, Creating New Markets Opportunities. Rome, Italy. June 2008. Over 100 attendees gathered for the first annual conference on Workers' Remittances organized by the International Center for Business Information. All the key players in the industry were represented, including MTOs, banks, national and government organizations, academics, research organizations, and lawyers and regulators. The issues covered ranged from the scale and potential for business opportunity of workers’ remittances to new delivery channels for remittance.

32 The MFW4A Partnership, a G8 initiative to support the efforts of African countries to accelerate economic growth and reduce poverty by promoting financial sector development in Africa.

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Mobile Money Transfer, Dubai, UAE, November 10-11, 2008. The conference drew on the experiences of the people who have “got their hands dirty” launching and marketing mobile money transfer programs to millions of customers. Sponsored by SEMOPS-UAE.

Money Transfers London 2008, London, UK. November 17-18, 2008. Participants discussed the business development, investment opportunities, and service standards in money transfers. The leaders of the industry shared their views on how the remittances are evolving. Regulators and governmental agencies from around the world revealed recent and forthcoming changes in the money transfers and financial services regulatory environment. Organized by International Association of Money Transfer Networks.

Fundamentals of Smart Cards for Payment. November 18, 2008. The second webinar, "Fundamentals of Smart Cards for Payment”, provided a foundation on the basics of smart card technology, applications, and standards. The webinar covered contact and contactless versions of smart cards; applications for payments (such as credit, debit, EMV, mobile, and transit); and other applications and standards. Organized by the Electronic Transactions Association and the Smart Card Alliance.

Global Payment Strategy 2009, Paris, France, February 22-23, 2009. Designed by payments professionals, for payments professionals, the Global Payments Strategy Conference 2009 provided not only the most current information and differing perspectives but also established a dialogue with leading industry experts on current and future business lines and opportunities.

Mobile Payments and Commerce, Brussels, Belgium, March 17-18, 2009. A focus on the recent developments of mobile payments to sustain commerce and other economic activities.

Banking & Payment Technologies West Africa, 2009, Lagos, Nigeria, May 4-6, 2009. The event engaged with bank customers by inviting them to attend the exhibition and experience the new services available through the wide range of new payment technologies being offered by banks.

International Payments Summit 2009, London, UK, May 11-14, 2009. Driven by extensive research with the payments community, the conference covered topics at the top of the payment systems agenda.

SWIFT Regional Conference for Africa, Marrakech, Morocco, May 18-21, 2009.

Mobile Banking and Financial Services Africa, Johannesburg, South Africa, July 20-22, 2009. The conference delivered timely insights into key business and technical security considerations that all players in the mobile banking industry and payments industry in Africa must address. Organized by IIR Telecoms & Technology.

Alliance for Financial Inclusion (AFI) Global Policy Forum 2009, Nairobi, Kenya, September 14-16, 2009. More than 100 policymakers from over 50 developing countries met at the first Global Policy Forum to identify and answer key questions that are essential for making breakthroughs in financial inclusion. The Central Bank of Kenya and Alliance jointly hosted the forum for Financial Inclusion.

Global Forum on Remittances 2009, Tunis, Tunisia. October 22-23, 2009The Forum focused on the African remittance market and the role of regulatory frameworks and the private sector in maximizing the micro, local and national impacts of remittances. A Remittances, Business Models and Technology Fair took place in parallel with the Forum and provided private-sector entities and other stakeholders with an opportunity to exhibit their products and services. More than 200 participants from the region and experts from around the world attended. The “Tunis recommendations” resulting from the Forum were presented to the Global Working Group on Remittances.

Virtual Global Forum on Remittances – Africa.The virtual Forum will be the continuation of the Global Forum on Remittances 2009 on African remittances market and closely follow up on the recommendations of the Tunis declaration.

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MENA Microfinance Forum 2009, Amman, Jordan. October 26-27, 2009. The conference, organized by Uniglobal Research, discussed questions that still remain unanswered: When and how will the legal framework be changed? What kind of opportunities in microfinance will be available? What new products will be developed? How fast will improvements be seen?

Mobile Money Transfer, Dubai, UAE, October 26-27, 2009. The Mobile Money Transfer conference drew on the experiences of the people who “got their hands dirty” launching and marketing mobile money transfer programs to millions of customers.

Smart Cards in Government 2009, Washington, DC, October 27-30, 2009. As part of a continuing partnership, the CTST conference is the official annual meeting of the Smart Card Alliance. Over 120 speakers covered a range of topics, including contactless payment, identity management, physical and logical access security, government-issued credentialing, mobile payments, near field communication, and new emerging technologies that will be reshaping the smart card industry in the future.

Prepaid Cards Summit 2009, Rome, Italy, November 12-13, 2009. This event focused on the dynamic and competitive prepaid market. Leading industry experts on market analysis informed participants on good practice and new opportunities. Organized by VRL Prepaid Government in association with MasterCard.

World Cards & Payments Summit 2010, Dubai, UAE, February 1-3, 2010. This event brought together over 250 senior executives representing world players in financial cards and retail payments industry. Discussions, case studies and good practice were highlighted in this three-day world conference.

Remittances and Financial Inclusion Conference, London, UK. February 9, 2010. The UK Remittances Task Force and the Financial Inclusion Task Force have been collaborating to consider the risk of financial exclusion among migrant groups and the opportunities to use remittance services as a gateway to financial inclusion for this group. This conference was co-sponsored by HM Treasury, DFID, the UK Remittances Task Force, the Financial Inclusion Task Force, and the Payments Council.

2010 Payments Summit, Salt Lake City, Utah, February 23-25, 2010. This meeting focused on new trends and projects that are accelerating the widespread acceptance, usage, and application of contactless and near field communication mobile payments technology for transportation and general retail payment applications. Organized by Smart Card Alliance.

International Payments Summit, London, UK, March 8-11, 2010. Now in its 18th year, International Payments attracts 500+ senior executives from around the globe, including banks, corporations, regulatory authorities, new payments providers, technology, and infrastructure and service providers.

Mobile Financial Services, London, UK, March 9-10, 2010. An evolution from Mobile Payments Conference, this event focused on such crucial subjects as the effect of the current climate on the development and rollout of mobile financial services, the importance of mobile to the banking and retail sector, and the role of payments in emerging markets. Organized by Informa.

Money Transfer Dubai 2010, Dubai, UAE. March 22, 2010. Delegates from money transfer companies, banks, and regulators took part in a one-day program that addressed the key issues in the remittance world. Organized by IAMTN.

Payments 2010, Seattle, Washington, April 25-28, 2010. Rapidly evolving technological advances in products and services are creating the need for more oversight. This conference equipped participants with the tools and information that are vital for all organizations—whether as a provider or end-user of payment services—to strike the proper balance between innovation and risk management. Organized by NACHA, the Electronics Payment Association.

SWIFT Regional Conference Africa. Johannesburg, South Africa, May 4-6, 2010.

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Mobile Money Transfer Africa, Nairobi, Kenya. May 4-7, 2010. Africa is recognized as the most significant hub for mobile money activity. Mobile Money Transfer Africa sharply focused on this rapidly evolving market.

Tenth Annual Payments Conference, Chicago, Illinois, May 20-21, 2010. The Federal Reserve Bank of Chicago hosted its tenth Annual Payments Conference. This year's theme was “Payment Innovations in the Wake of the Financial Crisis”.

Mobile Money Summit 2010, Rio de Janeiro, Brazil, May 24-27, 2010. This conference agenda included the cutting-edge topics and issues affecting the mobile money marketplace: Operator Heavyweights Embrace Mobile Money; The Case for Banks Investing in Mobile Money; Emerging Business Models for Mobile Money; and New Success Stories - Untapped Areas of Growth and Opportunities for Mobile Money.

9th Regional Payment Systems Workshop, Özdere, İzmir, Turkey, May 26-29, 2010. The workshop aimed to provide a platform for the central banks of the region to exchange views on the payment system reform process in their individual countries, on the role of the respective central banks in managing change in payment systems, and on how developments in the region link with broader global trends. Organized jointly by the BIS/CPSS and the Central Bank of the Republic of Turkey.

InfoDev Annual Symposium 2010: Clean, Green and Mobile, Making Technology Work for the Poor, Washington, DC. June 9, 2010. The Mobile Phone Applications Panel discussion focused on how mobile services can effectively serve the poorest strata of populations.

5th Annual Under banked Financial Services Forum. Miami, Florida, June 9-11, 2010. This forum focused on credit, payments, and deposits.

Money Transfer & Migrant Remittances: In the New Financial Landscape - Where Do the Opportunities Lie? Barcelona, Spain. June 23-24, 2010. The third annual event organized by the International Center for Business Information. Among the topics: the latest news on the World Bank 5x5 objective; how the industry has responded to the financial crisis; and mobile money – who will be the winners and losers?

Prepaid Cards & Mobile Payments 2010 Conference, Denver, Colorado, June 28-30, 2010. This event examined innovative payment technologies and forecasted the prepaid role in the evolution, updated regulatory and legal developments, and shared good practice on mobile payment technologies. Organized by the International Quality and Productivity Center.

Effective Oversight of Payments, Clearing and Settlement Systems, Cambridge, UK, August 31-September 3, 2010. This 4-day program aimed to equip payment systems experts in central banks to formulate an oversight framework for ensuring the safety and reliability of the payments and clearing and settlement systems, and for addressing the issues of competition, accessibility, efficiency, and fraud prevention. Sponsored by Central Banking.

Global Money Transfers Summit,London, UK. November 15-16, 2011. Organized by International Association of Money Transfer Networks (IAMTN).

Tenth Coordination Meeting on International Migration, New York, USA, February 9-10, 2012. Organized by Department of Economic and Social Affair of the UN.

Africa Remittances and Money Transfer Markets Forum.Prai, Cape Verde, To be held in November, 2013. Organized by the Ministry of Communities, Cape Verde with the support of the AUC and AfDB.

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Annex 5: Some terminology concerning RSPs

A distinction is often made between the regulated and unregulated sectors of the industry and also between the formal and informal sectors.

The distinction between those RSPs that are subject to regulation and those that are not is reasonably clear in itself, but the implications are less so. In some countries the whole industry may, in theory, be regulated but some RSPs may ignore or manage to evade the law, in which case they operate illegally. In other countries the existing regulations may be drafted so that they only apply selectively (e.g. to deposit-takers), in which case the unregulated sector is legal and the incomplete nature of the regulatory regime is permitted by design.

The distinction between formal and informal is frequently made, with a preference for encouraging use of the formal sector. However, the difference between formal and informal is often not clear. Sometimes the terms are used synonymously with regulated and unregulated. At other times, the terms seem to be used instead to differentiate by size and legal form - i.e. to distinguish those RSPs that are small and unincorporated (e.g. individuals) from the rest (e.g. global banks). Or they are used as a way to distinguish those RSPs, which only provide remittance services (e.g. specialist MTOs) from other institutions that provide a wider range of financial services (e.g. banks and credit unions, which also take deposits and provide credit). The latter distinction may be important from a developmental point of view (insofar as a developmental objective may be to increase access to other financial services, and encouraging people to make remittances using RSPs that also provide those services may be one means of doing this). However, from a payments point of view, neither of these two other definitions of formal/informal is particularly relevant, nor can there be a presumption that the formal sector (however defined) is in some sense “better”. Indeed, it may well be the case that small or specialized RSPs actually offer cheaper and faster remittance services and, provided they do so in keeping with relevant laws, regulations and good practices, they may thus be a useful source of competition in the market.

CPSS/World Bank - General principles for remittances

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Attachment 1. FATF Recommendations 2012

A – AML/CFT POLICIES AND COORDINATION

1 - Assessing risks & applying a risk-based approach

2 - National cooperation and coordination

B – MONEY LAUNDERING AND CONFISCATION

3 - Money laundering offence

4 - Confiscation and provisional measures

C – TERRORIST FINANCING AND FINANCING OF PROLIFERATION

5 - SRII Terrorist financing offence

6 - SRIII Targeted financial sanctions related to terrorism & terrorist financing

7 - Targeted financial sanctions related to proliferation

8 - Non-profit organizations

D – PREVENTIVE MEASURES

9 - Financial institution secrecy laws

Customer due diligence and record keeping

10 - Customer due diligence

11 - Record keeping

Additional measures for specific customers and activities

12 - Politically exposed persons

13 - Correspondent banking

14 - Money or value transfer services

15 - New technologies

16 - Wire transfers

Reliance, Controls and Financial Groups

17 - Reliance on third parties

18 - Internal controls and foreign branches and subsidiaries

19 - Higher-risk countries

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Reporting of suspicious transactions

20 - Reporting of suspicious transactions

21 - Tipping-off and confidentiality

Designated non-financial Businesses and Professions (DNFBPs)

22 - DNFBPs: Customer due diligence

23 - DNFBPs: Other measures

E – TRANSPARENCY AND BENEFICIAL OWNERSHIP OF LEGAL PERSONS AND ARRANGEMENTS

24 - Transparency and beneficial ownership of legal persons

25 - Transparency and beneficial ownership of legal arrangements

F – POWERS AND RESPONSIBILITIES OF COMPETENT AUTHORITIES AND OTHER INSTITUTIONAL MEASURES

Regulation and Supervision

26 - Regulation and supervision of financial institutions

27 - Powers of supervisors

28 - Regulation and supervision of DNFBPs

Operational and Law Enforcement

29 - Financial intelligence units

30 - Responsibilities of law enforcement and investigative authorities

31 - Powers of law enforcement and investigative authorities

32 - Cash couriers

General Requirements

33 - Statistics

34 - Guidance and feedback

Sanctions

35 - Sanctions

G – INTERNATIONAL COOPERATION

36 - International instruments

37 - Mutual legal assistance

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38 - Mutual legal assistance: freezing and confiscation

39 - Extradition

40 - Other forms of international cooperation

Source: FATF-GAFI -http://www.fatf-gafi.org/recommendations

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END

Remittances

in Africa

The World Bank GroupThe European Commission

A Catalogue of Studies and Technical Assistance by the

World Bank, Development Agencies and Government in Africa

November 2013

Documents

Remittances in Africa: A Catalogue of Studies and …...Foreword Remittance inflows to Sub-Saharan Africa continue to rise and recover from the global financial crisis. In 2012 the