Lost in Intermediation: How Excessive Charges Undermine the Benefits of Remittances for Africa

Categories : Customer and Users of Digital Payments, International Remittances


Author: Sarah Corley

This paper by the Overseas Development Institution makes the case for putting remittances at the centre of international cooperation on development. It is divided into four parts. The first looks at the level of remittances to Africa and at the drivers of migration. Part 2 provides a summary overview of evidence on the benefits of migration. Part 3 looks at the high costs of remittances to Africa, examining underlying global and regional remittance-market structures and highlighting the domination of two global money transfer operators (MTOs). While there is no evidence of collusive pricing or other cartel-type behaviours, the remittance market is characterised by limited competition, restrictive business practices and extensive rentseeking. Part 4 looks at strategies to increase the development impact of remittances. While highlighting a wide range of potentially innovative options – including diaspora bond issues and partnerships between diaspora and local governments – it offers a simple message: namely, no measure would have a greater impact than deep cuts in the costs of intermediation.