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FTInsight April/May 2016

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Insightful Remittances -

Insightful Remittances - the money migrants send to their countries of origin from their host countries, are increasingly significant for West Africa. In 2014, the amount sent home totaled US billion (of which US .9 billion was sent to Nigeria) and amounted to 3.2% of the region’s GDP. The magnitude of these transfers, which make West Africa the second recipient subregion on the continent, ref lects the size of the West African diaspora, estimated at 9.1 million people in 2011, or 2.6% of the population of the region. A remittance is a transfer of money by a foreign worker to an individual in his or her home country. Money sent home by migrants competes with international aid as one of the largest f inancial inf lows to developing countries. Workers’ remittances are a signif icant part of international capital f lows, especially with regard to labour-exporting countries. in Sierra Leone remittances increased by over 50% between 2013 and 2014 with the Ebola virus disease outbreak. Remittance f lows to and within Africa approach US billion. Countries in Northern Africa (for example, Morocco, Algeria and Egypt) are the major receivers in the continent. Eastern African countries depend heavily on these flows, with Somalia standing out as particularly remittance dependent. The 0bn global remittance market is becoming more fragmented, as regulators scramble to keep up with a surge in digital-only platforms and increased demand for money transfers from a growing number of international migrants. (Financial Times 29 December 2015) For the entire region, annual average remittances per migrant reach almost US,200 and on a country-by-country average represent 5 per cent of GDP and 27 per cent of exports. African and European leaders in November pledged to cut money transfer costs below 3 per cent by 2030 in an attempt to ease the burden on migrants who emigrate for work and send money home to their families. (Financial Times 29 December 2015) South-South migration is larger than South-North migration. Over 38 percent of the international migrants in 2013 migrated from developing countries to other developing countries, compared to 34 percent that moved from developing countries to advanced countries. Remittances are private flows of resources mostly intended for direct consumption and household support.

international migrants will send 1 billion to their families in their home countries this year, with developing countries receiving 1 billion, says the Migration and Remittances. Factbook 2016 Currently, no uniform and authoritative historical data on informal f lows exist. Given the widespread use of informal remittance channels, the data should be regarded as underestimates of total f lows. The United States was the largest remittance source country, with an estimated billion in outward flows in 2014, followed by Saudi Arabia ( billion), and Russia ( billion). India was the largest remittance receiving country, with an estimated billion in 2015, followed by China ( billion), and the Philippines ( billion). The top destination countries for Sierra Leonean emigrants are Guinea, the United States, the United Kingdom, Liberia, Senegal, Germany, the Netherlands, Australia, Nigeria, Canada. The African Institute for Remittances was launched on 28th November, 2014 to build the capacity of the Member States of the African Union, remittance senders and recipients and other stakeholders to develop and implement concrete strategies and operational instruments to use remittances as development tools for poverty reduction. Remittances to sub-Saharan Africa cost the most. Sub- Saharan Africa also has the least eff icient retail payment systems and regulation that creates high barriers to entry. Globally, sending remittances costs an average of 7.37 percent of the amount sent. This figure is used to monitor the progress of the global effort for reduction of remittance prices. South Africa remains the most costly G20 country to send remittances from, and this is despite a decline of about 5 percentage points in the last two years, when the cost of sending from South Africa was in excess of 20 percent. The cost of sending from the second most expensive G20 sending country – Japan – was recorded at 11.95 percent, falling below 12 percent for the first time in the history of RPW. Russia remains the least expensive G20 sending country, followed by Saudi Arabia (5.05 percent). Korea (5.54 percent) and the USA (5.93 percent). Location, Location, Location! Remittance costs vary widely between different service providers. Commercial banks, at 13 percent, remain the most expensive option for sending money unless they have dedicated remittance services. At 7 percent, specialised money transfer operators are the cheapest option. FT Insight 5 If the cost of sending remittances could be reduced by 5 percentage points, remittance recipients could receive over billion more each year. www.ftinsight.net

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Leone Sector Insight Economic Governance Freetown Countries Investors Herbert Opportunities www.ftinsight.net