In today’s globalised world, migration has become a common phenomenon. Millions of people move to different countries in search of better opportunities and a better life. However, migration also leads to the separation of families, and many migrants often support their families back home through remittances.
The remittance flows to Africa have been steadily increasing over the past decade, from $34 billion in 2000 to $83.1 billion in 2020.
In this article, we will explore how remittances to Africa help the local economies and the effect they have on the local communities.
What Is a Foreign Remittance?
A foreign remittance is a transfer of money from a person who lives in a foreign country to someone in their home country. The transfer can be made through a variety of means, such as bank transfers, online money transfer services, or through money exchange services. Foreign remittances are often made by migrants who are working abroad and sending money back to their families or friends in their home country.
The Impact of Remittance in Africa
The African diaspora has become the largest financier of the continent. The fact that remittances are 100% gifts or grants means that they do not have to be paid back, unlike debt financing.
This makes them a valuable source of concessional financing, particularly for livelihood security for millions of Africans. The value of remittances lies not only in their financial contribution to recipient families but also in their potential to boost the economy by creating jobs and stimulating business growth.
Remittances act as a lifeline for many Africans and as a critical source of funding for the continent’s development.
Help for Individuals
Remittances have a significant positive impact on individuals and their immediate families in Africa. They are often used to cover basic needs such as food, housing, and education, which can help to improve the standard of living for recipient families. With the extra income, families can afford better quality food, live in better housing, and provide better education for their children.
In addition, remittances can also be used to improve healthcare and access to medical services, which is essential in many African countries where the healthcare infrastructure is inadequate. Remittances also provide a source of financial security for families, particularly during times of economic hardship or crisis. They can help to reduce poverty levels, improve the standard of living, and provide a safety net for families who may not have other sources of income.
Overall, remittances have a significant positive impact on the lives of individuals and their immediate families in Africa.
Help for the Economy
In addition to assistance at an individual level, remittances have a positive impact on the economy as a whole.
Increased Consumption and Investment
When families receive remittances, they often use the funds to cover basic needs such as food, housing, and education. This increased consumption can boost local businesses and stimulate economic growth. Additionally, remittances can be used to invest in property or start businesses, which can create jobs and further boost the economy.
Financial Sector Development
The increase in remittance flows to Africa has led to the development of financial institutions that offer services for sending and receiving money from abroad. The competition among these institutions has resulted in lower fees and improved services. This has led to the increased usage of these services, which has further boosted the financial sector.
Long-Term Poverty Reduction
Remittances have been shown to reduce poverty levels in recipient countries. This is because remittances provide a reliable source of income for families, which helps to meet their basic needs. When families have their basic needs met, they are more likely to invest in education and health, which can lead to long-term poverty reduction.
Which Country Receives the Most Remittances?
According to the World Bank, Nigeria receives the highest remittance flows in Africa. In 2020, the country received an estimated $24.4 billion in remittances, followed by Egypt with $24.3 billion and Morocco with $7.4 billion. Other countries such as Ghana, Kenya, and Senegal also receive significant amounts of remittances.
We’re Here to Help
As we move towards a more globalised world, it is important to continue to support the flow of remittances to Africa. This will help to improve the lives of millions of people and boost the economy of the continent.
Mukuru is a leading money transfer service provider that is helping to facilitate the flow of remittances to Africa.
Mukuru provides reliable and affordable money transfer services to many African countries, including Zimbabwe, Zambia, Malawi, and Kenya. With a focus on customer satisfaction and ease of use, Mukuru has become a trusted partner for many migrants and their families. By providing these services, Mukuru is helping to boost the local economies of these recipient countries by increasing the flow of funds and creating opportunities for investment and consumption.
Furthermore, the services provided by Mukuru have helped to improve financial inclusion and reduce the costs associated with sending and receiving money from abroad, thus further enhancing the positive impact of remittances on the local economy.
Signing up with Mukuru is simple. Download the app here.