Remittances from the East African diaspora soared to a record $9.3b in 2022 despite the high cost of funds transfer. This is according to the World Bank, which says remittances are one of the biggest sources of external financing for the region. Remittances to the East African Community partner states stood at $5.4b in 2017, jumping to the $9.3b figure in 2022.
Despite the rosy picture, the Bretton Woods institution wants the region to develop mechanisms which will reduce the cost of transfer of funds.
Reduction of the cost, it says, according to a dispatch from the East African secretariat, would boost the partner states’ economies.
Diaspora remittances is money sent by a person in a foreign land to his or her home country and has been increasing with citizens relocating abroad.
Owing to the huge sums involved, remittances are now being recognized as an important contributor to the country’s growth and development.
“The current information on remittances from the World Bank indicates that the partner states received a combined $9.3b in 2022,” the EAC statement said.
Kenya, the largest economy in the region, has been leading in diaspora remittances compared to other states in the union. In 2021, the Kenyan diaspora remittance stood at $3.718b, while remittance from Uganda stood at $599.3m. The inflow of funds from Tanzania diaspora in the same year was $569.5m, while Rwanda diaspora remitted $246m.
Given the above trend, US-based money transfer company, Banana Pay, says it is expanding its mobile app capabilities to enhance the remittance experience for East Africans living abroad. Licensed since 2003 and operating in over 22 US states, Banana Pay specializes in international money transfers.
“We are deeply committed to the security of funds for people who want to send money to East Africa. We operate in full compliance with financial regulations,” Banana Pay CEO, Garad Nor, says.
Nor says the says the service they offer is efficient and reliable for customers, adding that to use the service, one has to just download the Banana Pay app, create a free account, and initiate a transaction. They then select the destination country, amount, delivery method (bank transfer, cash pickup, or mobile wallet), and payment option. After providing identification and sending funds, Banana Pay handles the rest.
“Many East Africans are flocking to our platform and we are now processing nearly 30,000 transactions monthly,” says Nor.
Initially designed for existing offline customers, the app’s success is driven by demand from the African diaspora to send money back home.
Lower costs
The average cost of sending money back home for Uganda’s migrant workers is 11.3%, higher than the global average of 6.25% and African standards 8.35%, more than triple than the Sustainable Development Goal (SDG) target of 3%. Most remittances (75%) are used to fight poverty and improve access to nutrition, health, housing, and education. The remaining quarter are used to support entrepreneurial activities and facilitate access to financial products such as savings and credit, leading to financial inclusion.
Banana Pay aims to gain a competitive edge through lower transaction fees and versatile delivery options.
Uganda ranks in the top 10 sub-Saharan Africa remittance recipient countries. These flows represent around 3% of the country’s yearly gross domestic product (GDP) for the past decade.
Safeguards
Uganda was recently struck off the grey list of the Financial Action Task Force (FATF), a categorization that risked the Ugandan financial industry being blacklisted.
The grey list acts as a warning to a country that other countries, authorities and the international community will take caution while dealing with it in matters regarding financial transactions. Failure to take measures to improve this image may lead to blacklisting the country, which is equivalent to an advisory that the country is unsafe to do business with, as money to or from the country could be from, or destined for money laundering and terrorism financing activities.
The exit from the grey list is regarded as “a significant milestone in the country’s dedication to enhancing financial transparency and combating money laundering and terrorist financing” according to the Financial Intelligence Authority (FIA) of Uganda.
According to Nor, Banana Pay maintains strict adherence to Anti-Money Laundering (AML) and Counter-Terrorist Financing (CTF) regulations, ensuring the safety of customer funds.
While facing challenges like evolving financial laws and a crowded app market, Banana Pay’s goal for this year is to expand sending and receiving options for clients, including bank transfers, mobile money, cash collection, and other payment gateways
