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

This report studies the high costs of remittances for Africa. It argues that market concentration in the global money transfer industry, financial regulation in Africa, and high levels of financial exclusion are driving up costs. It also estimates the additional finance that would be generated under a range of charge-reduction scenarios. Key points include:

• Remittances from African migrants play a vital role in supporting health, education, food security, and productive investment in agriculture. Africa's diaspora pays 12% to send USD 200, almost double the global average;
• In effect, Africans are paying a remittance 'super tax.' Reducing charges to world average levels and the 5% G8 target would increase transfers by USD 1.8 billion annually;
• Weak competition, concentration of market power, and flawed financial regulation, all contribute to high remittance charges;
• 'Exclusivity agreements' between MTOs, their agents, and banks restrict competition and drive up prices, as do African financial regulations favoring banks over other remittance payment options;
• African governments should do more to secure a better remittance deal for their citizens. Prohibiting exclusivity agreements is one immediate priority, along with ending the stranglehold of banks on remittance payments.