The World Bank With about 30 million Africans living outside their home countries, migration is a vital lifeline for the continent. Yet African governments need to do more to realize the full economic benefits of the phenomenon, says a new report by the African Development Bank and the World Bank.
The report, Leveraging Migration for Africa: Remittances, Skills, and Investments, presents data from new surveys. The report finds evidence that suggest migration and remittances reduce poverty in the origin communities. Remittances lead to increased investments in health, education, and housing in Africa. Diasporas also provide capital, trade, knowledge, and technology transfers.
“Migration pressures will only rise in the future as a result of demographic changes of rising population in Africa and falling labor forces in Europe and many developed countries,” said Hans Timmer, director of development prospects at the World Bank. “Therefore, adapting policy responses to demographic forces and crafting multilateral arrangements for managing future migration is essential.”
Two-thirds of migrants from Sub-Saharan Africa, particularly poorer migrants, go to other countries in the region, while more than 90 percent of migrants from North Africa have moved outside the African continent. The top destinations for African migrants are France (9 percent of total emigrants), Cote d’Ivoire (8 percent), South Africa (6 percent), Saudi Arabia (5 percent), and the United States and the United Kingdom (4 percent each).
One innovation worth considering are diaspora bonds, which are sold by governments or private companies to nationals living abroad. These bonds have already been successful in tapping into assets of Israeli and Indian citizens living abroad.
Recorded remittances into Africa, which grew fourfold between 1990 and 2010 to reach nearly $40 billion in 2010, are the continent’s largest source of foreign capital after foreign direct investments. Recent surveys show that investments such as land purchases, building a home, and starting a business were the highest uses of remittances sent home by African diaspora. As a share of total investment, these represented 36 percent in Burkina Faso, 55 percent in Kenya, 57 percent in Nigeria, 15 percent in Senegal, and 20 percent in Uganda. Education was the second-highest use of remittances from outside Africa into Nigeria and Uganda, the third highest into Burkina Faso, and the fourth highest into Kenya.
However, official remittance flows to Africa are significantly underestimated, with only about half of the countries in Sub-Saharan Africa collecting and reporting remittance data with any regularity. The report finds it is still very expensive to send remittances to African countries, particularly within Africa.
The report recommends that post offices, savings and credit cooperatives, rural banks, and microfinance institutions that have large branch networks can play an important role to expand access to remittances and financial services among the poor and in rural areas. But they should avoid exclusive agreements with money transfer operators, which limits competition and tends to increase the cost of sending money. There is also a need to assess the implications of telecom companies in Africa offering mobile money transfers and other financial services for banking stability and systemic risk.
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