Every day, people make the difficult decision to travel across the globe in search of better opportunities for their families and for themselves. They risk deportation, social stigma and alienation, and work in areas that native-born citizens would scorn.
More than 230 million people live outside of their country of birth, many of whom send part of their income to relatives and friends living in their home countries. Known as remittances, these cash flows accounted for an estimated $404 billion sent to developing countries in 2013, equivalent to more than three times the size of official development assistance.
This process is generally viewed as favorable to all parties involved, including the world economy which benefits from the exchange of ideas and optimization of worker productivity. However, a recent report by the Overseas Development Institute (ODI) reveals that not all overseas workers benefit equally from current remittance practices.
African immigrants living in the European Union and United States are typically charged 12 percent for each $200 money wire, nearly twice as much as the global average. Equivalent to $1.8 billion annually, ODI reports the elimination of this super tax could pay for the education of approximately 14 million sub-Saharan African primary school children, improved sanitation for 8 million, or clean water for 21 million.
Furthermore, these remittances account for 2 percent of the region’s GDP, or $32 billion. With international aid to the region expected to stagnate in the coming years, lowering the wire charges down to the G8 and G20’s pledge of 5 percent would increase the overall flow of transfers and a greater proportion of the transfer would reach the intended beneficiaries.
Factors such as Africa’s poor infrastructure are often blamed for the high cost of transfer rates. However, organizations such as the ODI argue that “in an age of mobile banking, internet transfers and rapid technological innovation, no region should be paying charges at the levels reported for Africa.’
In a realm of cryptocurrency, where Bitcoin may be a viable alternative to the vast surcharges accrued by African migrant money wires, having such a large discrepancy between overseas remittances seems more than archaic. Instead of blaming undeveloped aspects of Africa as the reason for these high percentage rates, companies should be investing in innovative techniques to bring African migrants’ remittance rates down to the rest of the global standard.
– Emily Bajet