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4 months ago

Crypto-Transfers may mean 90% reduction cost of remittance for Africa.

The financial institution provides indispensable services to people. From keeping funds and transferring them, to providing financial aids, etc. but it is unerring to say that charges on services rendered are high. Remittances are somewhat a lifeline for many in parts of Africa. Money sent home by migrants is almost as much a huge contributor like international aid is.  Although international aid has the largest financial inflows to developing countries. Even at that, money transfer costs via banks and money transfer operators are pensively high.



According to a new World Bank 2019 report, it costs 9.3% (of value transferred) to send the equivalent of $200 to the region, on the average. This remains the highest remittance rate worldwide. When money is sent through financial tech companies it is proven to be relatively lower. The fintech companies serve similar purposes as the traditional financial institutions but there is a drastic reduction of about 90% in the remittance cost of the former against the latter.

Bringing figures lower and back home to a transaction as simple as cash withdrawals from an ATM and sending money through a mobile device from a bank account; In Nigeria, a financial institution would no less than 50NGN for a 1000NGN cash transfer or withdrawal. Initially, there was a clause by Nigerian financial banks to limit withdrawal charges to once a month, then the clause reverted to a charge after every 3 withdrawals. Presently some banks now charge on every withdrawal from an ATM whether it is 3, 4 or 10 times a day. This has always been the case for online/mobile cash transfers.

In an instance, if a customer transfers 1000NGN to 10 different employees for feeding allowance, the customer consequently incurs a charge of 650Naira for 10000Naira transfer assuming a charge of 65Naira per transfer. This may not seem like much for one person, but it is accumulating too much when looking at the bigger picture, many other people and other countries. Millions of citizens getting Myriads of charges culminates in high remittance costs.


 Still, from the report, the World Bank noted that the bank is the most expensive agent for sending money back to Africa. It stands as 10.2 percent. Most transfer operators, 7.7 percent and 5.5 percent for post offices. In comparison to the Sustainable Development Goals (SDGs) target, we are far from reducing financial transfer costs to within 3% of the total transaction value by 2030.

The emerging fintech companies may have a fair share of risks in their pattern of services but they are in no doubt cutting remittance rates. It is a popularly known fact that Africans abroad are in high numbers working to support families or relations in Africa. This ends in these Africans trying to send money back home bearing the excessive burden of charges. Even in another light, Resident Africans send transfer funds Abroad to support their wards and the difference in currency values is just the start of the high cost.

Also from the world bank’s report is that an estimated $46 million is sent to Africa by Africans abroad to support families in their countries. Most of the money sent cater to food bills, Tuition fees, clothing among other things. Sadly, a significant sum of this estimate is being taken by the financial institutions as transfer fees.





In 2018 the overall global remittance grew 10% to US$689 billion which was inclusive of US$528 billion to developing countries by comments from the World Bank.  They also revealed that global remittance is expected to grow 3.7% to US$ 715 billion in 2019, including US$549 billion to developing nations.

As financial institutions have been charging Africans outrageous price for Remittance, crypto-based remittance is here and has become ease of pain. Not just for its low costs but also for efficiency and Speed. One of crypto-based Remittance platforms offering solace to Africans is Bitpesa. It was created by an American political science graduate Elizabeth Rossiello in 2013. Bitpesa was first focused on facilitating bitcoin-supported cash transfers between citizens of the U.K. and Kenya has now broadened operations to eight African countries: Ghana, Kenya, the Democratic Republic of the Congo, Morocco, Uganda, Nigeria, Senegal, and Tanzania. The first reportedly enables sending or receiving money from around the world at a mere fraction of what is charged by traditional agents.

In Nigeria, there is Sure Remit which charges between 0-2% for non-cash remittances. The company reportedly hosts a network of hundreds of merchants throughout the world and they use an in-house token, RMT. Wala in southern Africa utilizes its digital coin, 'Dala' to help users send money, pay bills and school fees buy airtime, etc.  in several countries at no cost.


Uganda’s Coinpesa is another crypto-based Remittances platform that is offering solace to Africans include which is primarily a crypto exchange and does not directly engage in the remittance business, but process trades that originated as Remittance.

These examples are proof of possibilities for more platforms to follow suit and even a benchmark urging the traditional remittance system to review their policies and charges to make them bearable. Although the traditional systems and old-time transfer operators have been there for long, they can be boycotted for the easier way out by citizens.

The world bank projects the African Remittance market to grow by 4.2% in 2019 and 5.6% in 2020. If the present moves Africa’s traditional Remittance System continues, crypto-based Remittance is going to claim a share of this growing market.

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Credits - Babatunde Modupe, Jeferry Gogo, Live Tech, Wikipedia.

Anita O.

Lover of tech and blockchain.

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