RemittancesGateway.org

Remittances to Africa to rise by 2 pc this year

Friday, 05 November 2010 09:57

Source: The East African

Remittances to sub-Saharan Africa are expected to rise despite the weak global economy currently affecting investment flow into the continent.

The share, however, will still trail the amount received by other developing regions mainly in Asia and Latin America.

According to a joint study by the World Bank and the Central Bank of Kenya, money sent to the region by those living abroad is estimated at $21 billion and is expected to grow by two percent this year.

Remittance flows represent a significant share of gross domestic product (GDP) for many African countries, but "in global terms it is not as high as other regions," Benjamin Musuku, head of the World Bank's Future of African Remittances programme, said at a news conference on Tuesday.

Musuku noted that remittances to some countries in Latin America, for example, Mexico and the Philippines, were roughly the same as those received by the whole of sub-Saharan Africa.

Funds received by friends and relatives back home are used for domestic consumption as well as investments in various sectors. Remittances also consist a key source of foreign exchange.

Musuku said sub-Saharan Africa needed a focused strategy on remittances, to boost economic growth and development in the region.

Kenya, according to the study, is one of top countries that have continued to benefit from a constant flow of funds from its citizens living abroad. The country received a total of $609 million in remittances last year, down from $611 million in 2008, a trend blamed on the global economic recession.

A chunk of the funds sent to the East African country, the study adds, goes to meeting domestic expenses such as food, housing and healthcare. Others are used as start-up capital for small businesses (35 per cent), paying for university education (33 per cent) and buying or building houses (8 per cent). However, only a tiny fraction, four per cent, is kept as savings

The study also found that Kenya, and many other African countries, lack adequate policies that could help direct the funds to key sectors critical for economic growth and development, instead of consumption.

Mr Michael Fuchs, an advisor to the World Bank’s Africa region, said governments must develop legal and regulatory frameworks that will help providers of remittances move beyond simple handouts.

“They need to design and deploy innovative and functional financial products and services that facilitate savings, loans, mortgages and insurance,” Fuchs said.

Musuku cited Kenya's mobile-phone money transfer services, M-Pesa, Zap and You Cash as examples of technological advancements that can be used to increase remittances.