Joel Otabong, a 42-year old technician in a railways firm in Sweden supports over a dozen dependants, many of whom have been orphaned by a vicious insurgency that has wrecked northern Uganda over the past 22 years.
“Every month I remit an average of $2,000 to my relatives for mainly education to my cousins and brothers through Western Union, Money Gram and at times Dahabshir – all with varying charges,” Otabong said. “The charges per transaction to send money keep fluctuating. At times I cut the amount I am supposed to send and thus leaving out some people till my next earnings.”
Otabong is one of an estimated 120 million remittance senders and receivers in Africa. Like most of them, he incurs high fees due to a lack of transparency in the booming industry.
A new online database, launched by the World Bank and the African Union, could prove a big benefit to remittance senders. The database will increase transparency by letting people know about fair prices and by stimulating greater competition among service providers.
The database, Send Money Africa, is a years-in-the-making partnership between the Bank, the African Union Commission, and donors. Through its interface, migrants can compare remittance costs: the price that service providers charge to send a particular amount to a given country.
“Remittance senders and recipients will benefit from transparent, efficient, less costly remittance services,” said Richard Cambridge, manager of the Africa Diaspora Program in the World Bank’s Africa Region.
The World Bank estimates that about 120 million people in Africa receive money from about 30 million relatives and friends who left their home country, for a total of US$40 billion a year.
However, when it comes to choosing which operator to use to send money to Africa, too often migrants do not have the necessary data to make an informed choice.
According to the World Bank “Remittance Prices Worldwide” database, Africa is the most expensive region of the world to send money to. The average cost of sending money to Africa is more than 12 percent of the amount sent, compared to a global average cost of nine percent.
“Remittances play a crucial role in poor households,” said Olawale Maiyegun, the director of Social Affairs of the African Union Commission. “For this reason, any reduction in the cost of the transfer would result in more money remaining in the pockets of the migrants and their families.”
At present, Send Money Africa provides data on the cost of sending and receiving relatively small amounts of money from 15 major sending countries worldwide to 27 receiving countries in Africa.
Research has shown that if the cost of sending money could be reduced by five percent relative to the total amount sent, remittance recipients in developing countries would receive over US$16 billion more each year than they do now.
In Africa, where remittances represent the second-largest source of foreign inflows – after foreign direct investment – this added income could provide recipients and their communities with more opportunities for consumption, savings and investment in local economies.
The database contains other information, as well: the methods that can be used to send money; the actual amount of money that is received in local currency by families and friends in the home country; the time needed before the remittance is available to the recipient; the places where the money can be collected; the exchange rates applied to the transaction; and more.