Thread by @kcsalmon

"At one payments company, transfers from Britain to east Africa may have fallen by 80%. Another has seen flows from Italy to Africa drop by 90%."

My piece in @TheEconomist on how remittances to Africa are being hit by #Covid19 & what could help (Thread)
economist.com/middle-east-an…

Remittances tend to be underestimated. But they are massive. In sub Saharan #Africa:

➡️ At $46bn they are far larger than total FDI of $32bn
➡️ Worth more than the #aid from top 10 donors combined

Plus they go directly to families. And provide crucial forex to Central Banks

In Lesotho they equal 16% of GDP, in Senegal 10% and even in Nigeria, Africa's biggest economy, 6%. But huge chunks of remittances come from places now in severe #lockdowns

Worse, many migrants work in industries that have almost completely shut down, such as construction, restaurants and hotels. They are often ineligible for welfare or stimulus payments. Many are sent packing if they lose their jobs—or sometimes just because they are African.

Actually sending money is tougher too. Most payments still begin with cash being dropped off in person, often at a corner shop that doubles as a money agent. Many of these shops are now closed with much of world is in #lockdown

Extraordinarily, many money-transfer firms routinely fly stacks of banknotes via the Middle East to their African agents. They can't send money through banks since many Western banks refuse to deal with African remittance firms because of onerous anti-money-laundering regulations

That's partly why why remittances to Africa are more expensive than elsewhere.

- Fees to send to Africa = 9% of the transaction
- Fees to send globally on average = 5%

That adds up: getting the price of remittances to Africa down to the average might save $1.8bn a year.

Now with planes grounded, bundles of banknotes are piling up in remittance shops around the rich world.

Perhaps another $35bn in remittances goes to Africa informally each year, mostly in peoples hand luggage. But no one is flying.

In Somalia, banks are running out of notes

Sending cash home shouldn't be so difficult - especially amid #COVID19. What to do?

👉Relax money-laundering regulations to let operators wire money instead of flying it
👉Make it easier for people to open digital accounts
👉Allow money agents everywhere to stay open!
(END)