WorldRemit wants radical remittances shift in Africa
Online money transfer service WorldRemit is calling for a huge shift from informal to formal remittances through faster adoption of digital financial services.
Pardon Mujakachi, WorldRemit head of Sub-Saharan Africa, tells ITWeb the majority of high-value remittances from South Africa are currently sent through informal channels.
These, he says, include high-value transactions and “digital remittance platforms like ours are helping to formalise the largely informal remittance industry in South Africa”.
Mujakachi believes improved technology is important and is reinventing the financial services sector.
He explains: “Technology is critical; it is promoting faster adoption of digital financial services, which make remittances cheaper and more accessible. We have seen governments in most countries we operate in have embraced our model – including South Africa.
“We believe small changes in remittance policy can have a big effect on financial systems in developing countries over time. Given the scale and importance of remittances for people surviving on just a few dollars per day, actions to reduce the cost of transactions and make it easier to send and receive them can immediately improve the lives of migrants and their families.”
He says given the significance of remittances to financial stability in many countries, such policies can promote recovery down the road.
Going forward, Mujakachi says, faster adoption of digital financial services will make remittances cheaper and more convenient.
“For example, currently, 68% of high value remittances from South Africa are sent through informal channels such as unregistered courier services and buses crossing the border.
“These include high-value transactions. Digital remittance platforms like WorldRemit are helping to formalise the largely informal remittance industry in South Africa and across the world.”
Moreover, Mujakachi believes there will be a decline in the cost of remittances as the industry goes digital.
The World Bank estimates the total value of international remittances was $689 billion 2018. The average cost of digital remittances across the industry is 27% cheaper than offline remittances, according to World Bank data.
“The traditional formal players such as banks and traditional money transfer operators are also relatively expensive in South Africa, typically costing between 15% and 20% of the value sent, and often involving onerous procedures, making them difficult to access,” he notes.
As the effects of COVID-19 continue to spread, the World Bank is projecting a sharp decline in global remittances and is urging authorities to introduce measures to ease the use of digital and mobile money platforms.
The bank says with the projected fall, remittance flows to the Sub-Saharan Africa region are expected to decline by 23.1% to reach $37 billion in 2020, while a recovery of 4% is expected in 2021.
Mujakachi says the money transfer company continues to see an uptake of its services due to several reasons.
“The platform accepts debit/credit cards or bank transfers when funding your transfer on the send side. Customers do not need to visit brick-and-mortar agents when sending money home. Secondly, most WorldRemit transactions terminate into mobile wallets across the Africa.
“In Africa, WorldRemit has integrated with major mobile wallets such MTN, Airtel, Tigo, EcoCash and Orange to ensure everyone, everywhere has access to financial services.”
Mujakachi says WorldRemit has been sending money to over 150 countries from 50 countries.
“This has allowed the company’s digital platform to be accessible and available to migrants across the globe.”
Further, he says the company’s low-cost model has worked in its favour.
“WorldRemit operates a low-cost platform which allows people to send low-value transactions more frequently. The platform is generally 25% cheaper than banks and traditional money transfer operators.”