Strengthening the developmental impact of remittances and diaspora finance in Africa
African countries have made efforts to mobilize the resources needed to support the developmental aspirations of African people, and remittances have become an important source of financing for Africa’s development -almost double the volume of FDI. However, they continue to be relatively untapped sources and are therefore unable to fulfill their potential in Africa’s development. Remittances to Africa rose from $67 billion in 2016 to $87 billion in 2019. In 2020, they decreased by 4% due to the COVID-19 pandemic and have recovered in 2021, to grow again by 9%, reaching $91 billion. Remittances have a strategic position in African countries, due to their nature and increased volumes during the last decades. They have proved to be countercyclical and more resilient compared to other sources of finance, especially during economic downturns and crises as was demonstrated during the COVID-19 pandemic.
The international community has recognized the importance of such sources and their potential to contribute to achieving the SDGs. In fact, SDG 10, on reducing inequality within and among countries, refers under goal 10.c to the need to reduce the transaction costs of migrant remittances to less than 3 per cent and eliminate remittance corridors with costs higher than 5 per cent, by 2030. Furthermore, Objective 20 of the Global Compact for Safe, Orderly, and Regular Migration, commits to promote faster, safer and cheaper transfer of remittances and fostering financial inclusion of migrants. However, the cost of sending money to Africa continues to be high— reaching 7.7 per cent in 2021, the highest rate among the rest of the regions, while at the same time the development impact of remittances is not fully exploited.
The policy paper entitled “Strengthening the developmental impact of remittances and diaspora finance in Africa: what is the role of international cooperation?” examines the opportunities offered to further attract remittances and diaspora finance for Africa’s development, by highlighting the critical role of international cooperation in supporting African countries’ efforts in this endeavor and facilitating putting in place the necessary conditions to further attract remittances and diaspora finance and harness their transformative financing capabilities.