A handful of firms are exerting a stranglehold over the global
remittance industry by charging huge fees on money sent from friends and
family abroad, choking an annual half a trillion dollar lifeline for
countries that face sweeping economic challenges.
Remittances generate three times more money every year than the total global aid budget, according to the World Bank, which projects that $436bn (£261bn) will be sent overseas this year.
The value of transfers often overshadows huge sectors of a country’s economy: Filipinos, for example, received $25bn in remittances last year, eclipsing the total value of the country’s $22bn electronics industry. In Vietnam, cash transfers worth $11bn nearly equalled all petroleum exports, which were valued at $12bn, according to World Bank data.
But fees of up to 29% are still being charged on money transfers between some countries, despite a pledge by the G8 at the L’Aquila summit in 2009 to halve the world’s mean remittance fee to 5% (pdf). Such a reduction would save poorer countries as much as $16bn a year, the World Bank says.
The average transfer fee is more than 8% (pdf). The average surcharge from the G8 group of rich countries is just 0.5% lower, with Japan the most expensive country to send money from, and Russia the cheapest.
There are five “corridors” – a country to country transfer – with an average fee higher than 20%, all of them in Africa. Migrant workers in South Africa, for example, paid an average of just over 23% in fees on the money they sent to Botswana in 2012, making it the most expensive remittance channel in the world.Sending money from South Africa to Mozambique was the second most costly channel, with an average 22% fee imposed on transfers.
“Forcing migrant workers to pay as much as $50 to send $200 is wrong, especially when they are sending salaries they have earned in the hope of supporting their families back home,” the World Bank said in a report. “Two-hundred dollars often is a very significant sum for migrants’ family income.”
The World Bank said: “These funds would simply remain available to migrants and their families and could contribute significantly to improving the living conditions of the migrants themselves as well as reducing poverty in their countries of origin.”
Remittances generate three times more money every year than the total global aid budget, according to the World Bank, which projects that $436bn (£261bn) will be sent overseas this year.
The value of transfers often overshadows huge sectors of a country’s economy: Filipinos, for example, received $25bn in remittances last year, eclipsing the total value of the country’s $22bn electronics industry. In Vietnam, cash transfers worth $11bn nearly equalled all petroleum exports, which were valued at $12bn, according to World Bank data.
But fees of up to 29% are still being charged on money transfers between some countries, despite a pledge by the G8 at the L’Aquila summit in 2009 to halve the world’s mean remittance fee to 5% (pdf). Such a reduction would save poorer countries as much as $16bn a year, the World Bank says.
The average transfer fee is more than 8% (pdf). The average surcharge from the G8 group of rich countries is just 0.5% lower, with Japan the most expensive country to send money from, and Russia the cheapest.
There are five “corridors” – a country to country transfer – with an average fee higher than 20%, all of them in Africa. Migrant workers in South Africa, for example, paid an average of just over 23% in fees on the money they sent to Botswana in 2012, making it the most expensive remittance channel in the world.Sending money from South Africa to Mozambique was the second most costly channel, with an average 22% fee imposed on transfers.
“Forcing migrant workers to pay as much as $50 to send $200 is wrong, especially when they are sending salaries they have earned in the hope of supporting their families back home,” the World Bank said in a report. “Two-hundred dollars often is a very significant sum for migrants’ family income.”
The World Bank said: “These funds would simply remain available to migrants and their families and could contribute significantly to improving the living conditions of the migrants themselves as well as reducing poverty in their countries of origin.”
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