Providing better remittance services to rural Africa
World Bank, June 17, 2016 Adjust font size:
On the occasion of the International Day of Family Remittances, June 16, the World Bank, IFAD, WSBI and UNCDF, in their joint efforts to support Postal Operators in Africa to offer remittances and financial services, issue a call for the "improvement of partnerships between Post and Money Transfer Operators for better remittance services to rural Africa."
Officially recorded remittances to developing countries amounted to US$431.6 billion in 2015, with the African continent alone receiving an impressive US$65 billion. The level of remittance dependency for many African states remains extremely high. In four African countries (Liberia, The Gambia, Comoros and Lesotho) remittances comprise around 20% of their GDP, and in another 10 countries remittances are higher than 5% of GDP.
According to the World Bank, the global average cost of sending a US$200 USD remittance was 7.4% in the last quarter of 2015, and is slightly declining. However, Sub-Saharan Africa remains the most costly region in the world to send remittances to, with an average cost of 9.5% in 2015 and with the presence of many of the most expensive remittance corridors. In Western Africa for instance, costs in many south-south remittance corridors remain above 10%. The G20 called for a reduction of the global average to 5% and, more recently, the UN Sustainable Development Goals set 3% as the goal to be reached by 2030, also adding that in no corridor the cost should be higher than 5%.
Post offices often offer remittance services close to this price and in some cases already below the 5%.
In many African countries, a large part of remittances are paid by bank branches which are mainly present in urban agglomerations. This has higher cost implications for rural people in terms of travel, work time lost, risks and time required to collect their remittances. There are nearly as many post offices as bank branches in Africa. Since 80% of post offices operate in rural Africa, these two existing physical channels complement each other.
For hundreds of millions of Africans post offices play a crucial role in their daily lives. Besides offering traditional postal services, post offices are used for receiving or sending postal payments, remittances, paying bills, savings and insurance, among others. Post offices often enjoy a high level of trust, especially by the un(der)banked who tend to eschew banks.
Post office network: a great potential to be fully leveraged
Post offices have a distinct comparative advantage in the remittance market in Africa. Holding a vast network of branches that reaches remote towns and villages, they provide postal payments and other remittance services – and in several jurisdictions, also banking services – for rural Africans. For this reason, post offices deserve a renewed approach which accounts for their comparative advantage. By investing in upgrading rural post offices, MTOs could expand their delivery network for remittances in rural Africa.
Change is mutually beneficial
A change towards a more inclusive business model based on sustainable partnerships between MTOs and post offices could widely increase and modernize the network of pay-out and pay-in locations for MTOs in complement to their postal payment services in rural Africa. Through a more balanced sharing of gains and pains with postal partners on the ground, the business could grow faster and to the mutual benefit of MTOs, postal operators, and especially remittance senders and their families. The partnerships between MTOs and posts could be optimized through the modernization of the networks, the sponsoring of vocational training of staff, and designing a specific set of fees and costs.
Making change happen
The African Postal Financial Services Initiative (APFSI), a programme implemented by a consortium comprising leading international development institutions, can greatly facilitate collaboration between MTOs and Posts making it stronger than ever. The initiative aims to improve the delivery of and remittances through post offices in Africa.
In 2007, the World Bank and Bank for International Settlements published the General principles for international remittance services. The General Principles guide the action of public authorities and remittance service providers aiming to improve the safety and efficiency of remittance services.
As providers of remittance services, the Post should also contribute to the implementation of the General Principles. The APFSI initiative has elaborated the following suggestions on how Posts could do that when partnering with a MTO.