As the effects of COVID-19 continue to spread, the World Bank projects a sharp decline of 20% in global remittances, urging service providers and authorities to introduce measures to ease use of digital and mobile money platforms.
The bank says with the projected fall, remittance flows to the Sub-Saharan Africa region are expected to decline by 23.1% to reach $37 billion in 2020, while a recovery of 4% is expected in 2021.
The World Bank this week released a report detailing the expected impact of COVID-19 on remittances and the communities reliant on these funds.
According to the bank, remittances to low- and middle-income countries are projected to fall by 19.7% to $445 billion, representing a loss of a crucial financing lifeline for many vulnerable households.
The World Bank is urging easing of digital and money platforms due to the high costs associated with remitting money to the region from across the globe.
“Sending $200 remittances to the Sub-Saharan Africa region cost 8.9% on average in the first quarter of 2020, a modest decrease compared with the average cost of 9.25% a year before. The most expensive corridors are observed mainly in the Southern African region, with costs as high as 20%. At the other end of the spectrum, the less expensive corridors had average costs of less than 3.6%,” says the bank.
It says due to the COVID-19 outbreak in countries where African migrants reside, including in the EU area, the US, the Middle East and China, it has become difficult to send money back home as these large economies host a large share of Sub-Saharan African migrants and combined, are a source of close to a quarter of total remittances sent to the region.
Michal Rutkowski, global director of the social protection and jobs global practice at the World Bank, says: "Effective social protection systems are crucial to safeguarding the poor and vulnerable during this crisis in developing countries as well as advanced countries. In host countries, social protection interventions should also support migrant populations.”
KNOMAD, a brain trust for the global migration community, agrees with the bank on easing ways to remit funds to Sub-Saharan Africa.
“Quick actions that make it easier to send and receive remittances can provide much-needed support to the lives of migrants and their families. These include treating remittance services as essential and making them more accessible to migrants,” says Dilip Ratha, lead author of the Brief and head of KNOMAD.
The World Bank’s caveat to governments on digital platforms comes as mobile money services reached a milestone, surpassing one billion accounts globally.
Last month, GSMA unveiled the annual “State of the Industry Report on Mobile Money”, offering a view of the mobile money landscape and highlighting the impact greater financial inclusion has on lives, economies and innovation, especially in emerging markets.
The report highlights that 2019 marked a major milestone for the mobile money industry, with over one billion registered accounts and close to $2 billion in daily transactions.
With 290 live services in 95 countries and 372 million active accounts, mobile money is entering the mainstream and becoming the path to financial inclusion in most low-income countries, says GSMA.
For the first time, says GSMA, digital transactions represented the majority (57%) of mobile money interactions.
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