RemittancesGateway.org

There is something dismally familiar about the tide of news concerning Africa's increased suffering in the face of the recent global financial crisis. But there is another side to the story. African countries locked out of international capital markets for most of the past five decades have largely been spared the financial turmoil and economic downturn. Their economies experienced a slowdown, not a recession.

Several African countries have now received ratings from credit agencies, which has opened up global financial centres to them. Stock exchanges are being established across the continent.

 
Countries such as China, India, and Brazil have provided a platform for increased exports, and a model of co-operation based on trade, investment and technology transfer, rather than "aid". China-Africa trade alone increased from $10 billion (about £6bn) in 2000 to $107bn (£54bn) in 2008, and billions of dollars are being invested in industry and infrastructure.

But transfers from the African Diaspora re the most significant factor in the continent's improved fortunes. A study commissioned by the Rome-based International Fund for Agricultural Development shows more than 30 million individuals living outside their countries of origin contribute more than $40bn (£25bn) annually in remittances to their families and communities back home.

Migrants' remittance behaviour is essentially dictated by the regulatory environment and the speed, cost, security, and accessibility of services offered by banks, transfer companies, micro-finance institutions, and informal operators. There are three different strategies in place in Africa.

The Anglophone strategy focuses on freeing up the remittance market by encouraging competition, relaxing regulatory constraints for non-bank operators, offering financial incentives, encouraging technical and financial innovation, and stimulating collaboration among market players. This approach contributes to reducing costs and increasing the overall volume of funds for beneficiaries.

The Hispanic approach emphasises migrants' involvement in banking by offering a range of banking services in both the country of origin and the host country, products of specific interest to migrants, and low commissions on foreign transfers.

Finally, the Francophone approach relies on two types of monopoly. The first is enjoyed by Western Union, which controls up to 90 per cent of the total formal transfer volume within Africa's 16-member Franc Zone. Western Union charges fees as high as 25 per cent on transfers to these countries, compared to an average global benchmark of 5 per cent, and has required that Franc-Zone countries sign exclusivity agreements.

The second monopoly is exercised in the banking sector. France has a veto within the boards of directors of the Franc Zone's two central banks, while two French commercial banks, BNP-Paribas and Société Générale, exercise a quasi-monopoly on lending programs, mainly centred on short-term trade financing and the needs of governments, public and private companies, and the elite.

Despite the increasing importance of remittances from Italy, Spain, and the US, the largest share still originates in France. There is thus a real need in the Franc Zone for a finance institution that would convert migrant remittances into productive investments, thereby generating jobs and wealth.

• Sanou Mbaye, a former member of the management team of the African Development Bank, is a Senegalese banker and the author of Africa to the Rescue of Africa.