Financial Inclusion Back



Remittances are non-reciprocal transfers of money from an individual or household in one place to another individual or household in another place (Hougaard, 2008). They can take many forms but are typically associated with working migrants that send regular amounts of money to support their families and communities back home. The advantage of these payments is that they usually increase household income and can also lead to higher household savings and investments which has a positive effect on education, health care and human capital development (Gupta & Pattillo CA, 2009; Hassan, et al., 2017) (Cenfri, 2018). 

Remittances flow have become more important than foreign development assistance since the 1990s, and they tend to remain stable and less volatile than other financial flows into developing countries. Indeed, remittances flows to and within Africa were over US$ 60 billion in 2016, and are estimated to reach US$80 billion in 2020 (IFAD, 2018).

The remittance market in Africa is on average the most expensive in the world. Sending and receiving funds in the region is not only costly in terms of price for the consumer but also in terms of access to remittance service points. While the global average cost of sending US$ 200 remained to about 7.2 per cent in the first quarter of 2019, the cost of sending money to Sub-Saharan Africa was 9.4 per cent (World Bank, 2017), well above the target of 3 per cent under the Sustainable Development Goals.

Banks were the costliest channel for transferring remittances, at an average cost of 10.9 percent (World Bank, 2019). It is estimated that a reduction to at least 3 per cent by 2030 is expected to lead to an increase of at least US$5 billion per annum more in the hands of migrants’ families.


Although a rapidly growing portion of remittances is received cashless – e.g. on a mobile wallet or a card linked to an account – in 2016 more than 94 per cent of the remittances in Africa are still received in cash, and most senders still use cash to pay an agent. The prevailing reasons for the preference of cash are the perceived speed, reliability as well as proximity in pick-up. Transfers from bank accounts are often still considered too complex, taking more time and adding additional costs.

The emergence of digital financial services (DFS) also presents challenges in terms of compliance for new players involved in digital transfer value chains. For regulatory and supervisory institutions in the financial and telecommunications sectors, DFS raise the challenge of adapting laws and regulations to constant technological developments. They also raise concerns over international standards for the fight against ML / TF and addressing regulatory conditions for smaller financial transactions and users of cash transfers, mainly from populations generally excluded from formal financial systems. The decision-makers in the continent are therefore faced with this regulatory challenge, as do other countries in the continent where the penetration rate of digital financial services and mobile transfers is higher or lower. 

The lack of convenient access points for cashing in or cashing out remittances increases the opportunity costs to the consumer. In addition, remittance service providers (RSPs)  usually require official documentation, such as national identification documents (IDs) or proof of address when sending or receiving remittances. These add cost and are often hard to obtain, particularly for those consumers who live in rural areas or immigrants who do not have all the requisite documentation (Bester, et al., 2008). In South Africa, for example, many customers are explicitly excluded from sending formally even if they have a form of ID because the providers require proof of the residency/immigration status. (Market barriers to remittances in sub-Saharan Africa (SSA), Cenfri, 2018).


In the last decade, the emergence of digital financial services, especially mobile banking, has revolutionized the remittances industry in Africa. Indeed, service delivery models based on the use of the mobile phone, the distribution of electronic money and / or the use of non-bank agents, offer several advantages such as greater speed, improved security and relatively low transaction costs, as well as a reduction of cash and informal transfer channels. These benefits can therefore significantly increase the flow of formal remittances in and out of migrant countries.

The same trend is generally true for the countries of the CFA zone, which includes the 14 countries of West and Central Africa constituting respectively the UEMOA and CEMAC monetary zones where the CFA franc (XOF-XAF) is the common currency. This region is expected to see significant growth of cross-border mobile transfers due to the rapid adoption of mobile financial services by local populations.

The African Development Bank has engaged with its partners to explore ways to mobilize remittances resources. A Fund for Migration and Development (FMD) was created in 2009 at the initiative of the AfDB, the French Government (Ministry of Europe and Foreign Affairs and the General Directorate of the Treasury) and the International Fund for Migration. Agricultural Development (IFAD), with the primary goal of promoting and supporting local and African diaspora initiatives to reduce transfer costs and optimize the use of transferred financial resources.

Section 2: Highlights of our Activities

MFW4A supports the development of new tools and technologies to support productive diaspora investments in Africa as a contribution to long-term economic growth. 

Knowledge Management and Research

Webinars, Knowledge Briefs, Case Studies

Toolbox Date
Toolbox Description

Case study:A Systematic Approach to Supporting Diaspora Investment in Africa”, Ghana, Nigeria and Senegal

Toolbox Date
Toolbox Description

Case study : The Opportunities and Risks of Digitization on the Remittance Market in the West African Economic and Monetary Union (WAEMU) and the Economic and Monetary Community of Central African States (CEMAC)”

Networking and Advocacy Networks

High-Level Conferences and Roundtables

Project Support and Capacity Building

Trainings and Marketplaces


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