By Ifelade Ayodele
In recent years, there has been a growing recognition of the significant role remittances play in driving economic growth and development across Africa.
While much attention has traditionally been focused on remittances from the African diaspora outside the continent, there is a compelling case to be made for fostering intra-African remittances as well.
However, numerous hurdles must be addressed to fully realize the potential of these transactions. In this piece, I’ll explore both the importance of intra-African remittances and the benefits of outside remittance, while delving into the challenges that hinder smooth transactions within Africa.
Remittances, either from outside Africa or within, are lifelines for millions of families across the continent, providing essential support for basic needs, education, healthcare, and entrepreneurship.
While external remittances have historically played a significant role, intra-African remittances also offer unique opportunities for economic empowerment, particularly given the scale of internal migration within the continent.
To put it into perspective, approximately 20 million people migrate within the continent, a figure that exceeds the combined total of over 15 million migrants across the US, UK, Canada, and Europe.
Remittances, both to and within Africa, offer several potential advantages. These funds can stimulate local consumption, spur investment, and fuel entrepreneurship, thereby contributing to the growth of economies at both the household and national levels.
In the case of intra-African remittance, there’s an added dimension: it enhances the financial stability and independence of African countries.
It’s worth noting the significant improvements in remittance flows from outside of Africa, facilitated by the emergence of various fintech solutions. The potential is endless. However, intra-Africa remittance encounters several challenges that need to be addressed.
The obstacles are multifaceted and deeply entrenched. Remittances are made less valuable by exorbitant transaction fees connected to cross-border money transfers inside Africa, which deters both senders and recipients.
Moreover, a considerable segment of the African populace continues to lack or have insufficient banking, which restricts their ability to utilize official channels for sending money abroad. These difficulties are exacerbated by the many regulatory frameworks that exist in African nations, which lead to complexity and impediments to the smooth transfer of funds.
Inadequate digital payment systems and banking services are just two examples of the inadequate financial infrastructure that further impairs the effectiveness and accessibility of intra-African remittance routes.
Governments, financial institutions, technology companies, and other stakeholders must work together to develop a holistic strategy to address these issues. The following are a few possible fixes:
- Expanding Financial Inclusion: By promoting the use of digital wallets and mobile money, as well as improving financial literacy, efforts can reach underserved communities with formal financial services, making remittance routes easier to use.
- Harmonizing Regulatory Frameworks: The Economic Community of West African States (ECOWAS) and the African Union are two examples of regional economic blocs that can significantly contribute to standardizing remittance practices and harmonizing regulatory frameworks across their member states.
- Fostering Innovation: Fostering innovation in financial technology (fintech) solutions can bring more affordable and user-friendly remittance options. Examples of such fintech solutions include AI driven emittance platforms and mobile banking apps.
As a young entrepreneur, I envision a future where innovative remittance solutions seamlessly connect African nations, facilitating efficient and affordable transactions. This future includes intra-Africa remittance channels that are as accessible as those from outside the continent.
Through the utilization of cutting-edge technologies and advocacy for regulatory harmonization, my goal is to contribute to building a resilient remittance ecosystem that empowers individuals, businesses, and economies throughout Africa.
Both intra-African and external remittance mechanisms play pivotal roles in fostering economic development across the continent. By tackling the obstacles impeding intra-African remittances while maximizing the benefits of external remittance, we can fully unleash the potential of these financial flows as catalysts for African growth and prosperity.
