CAN BANKS SOLVE THE REMITTANCE PROBLEMS IN AFRICA?
Did you know that Africa is one of the only continents in the world where people have to pay more to send money back home compared to anywhere else? In fact, it costs roughly 7% for each transaction. This means that Africans are spending a lot of money when transferring funds from overseas and this is becoming an issue because it’s affecting their economy.
The remittance industry is one of the most profitable industries in Africa. The
World Bank estimates that Africans living abroad sent $32 billion back to their home countries last year. Unfortunately, many African banks are not able to keep up with this growing market due to high fees and poor technology.
Traditional banks face lots of challenges in remittance that doesn’t look like they have the capacity and technical accessibility to solve it which includes:
1. Excluding the Unbanked Population: It will interest you to know that about 50%
of the African populace is still unbanked. The implication of this is that there is a huge exclusion of people that have access to financial services including
2. High-Entry level for remittance services: International remittance in Africa is plagued by regulatory factors such as; Requirements for money transfers.
Ownership of foreign currency accounts, and Anti-money laundering. These
factors limit banks from properly handling and solving the remittance needs and issues in Africa.
3. Poor Transfer Speed: Local remittances between banks sometimes are slow and can be frustrating. How about international remittance? Well, in some cases international remittances could take up to 48–72 hours or even more due to the bank delaying such transactions just to verify that such transaction is void of fraud.
4. Exorbitant rates: While it may be great to see banks trying their best in reducing
the cost of remittances; however, we must acknowledge that traditional African banks don’t have enough robust and reliable technology infrastructure to transfer money at a lower rate.
All of these and more are the challenges encountered while using banks for
remittance transactions. As opposed to the traditional banking system there is a new solution on the rise and it may be able to change how Africans send money across borders. This revolutionary form of digital currency, known as
cryptocurrency, can help end poverty in Africa by changing how we transact
with each other. It will allow African people living abroad who have been using cryptocurrency for years already to finally enjoy these benefits when they want to transfer funds back home! As more cryptocurrencies become accepted around the world, especially in African countries where their own currency isn’t so strong against major currencies such as USD/GBP.
The advent of blockchain technology brings a lot of possibilities and use of
the cryptocurrency which includes reducing remittance costs drastically. This would help the economy of Africa grow at an exponential rate because people are able to save more or send more money back home instead of giving it all away as remittance costs eat up too much. Blockchain will change everything about how we transfer value between borders and what used to cost Africans roughly $32 billion per year might now only be costing them pennies! Imagine that?