Crackdown on money laundering raises remittance costs

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Crackdown on money laundering raises remittance costs

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The cost of sending money back home to Africa is 25 per cent higher than anywhere else in the world according to a new World Bank report.

According to the Migration and Remittances Factbook for 2016 the global average cost of sending $200 home was about 7.4 per cent in the fourth quarter of 2015, down slightly from the previous quarter and 0.6 percentage points below the end of 2014.

However, sub-Saharan Africa, with an average cost of 9.5 per cent, remains the highest-cost region and over 25 per cent more than other developing countries.

Overall remittances to developing countries amounted to Sh4.3 trillion ($431.6 billion) in 2015, an increase of 0.4 percent over $430 billion in 2014.

If the seven per cent charge is used, then Sh300 billion is the cost of sending Sh4.3 trillion.

In an additional area of concern the report says that major international banks continue to close correspondent banking accounts of money transfer operators (MTO) to limit exposure to money laundering and other financial crimes.

A World Bank survey confirms that account closures are widespread, with adverse impacts on remittance costs and flows in rural and remote regions across the African continent.

Kenya and Uganda have both recorded a substantial increase in remittance flows from the Diaspora in 2015, bucking the trend for sub Saharan Africa and developing countries as a whole.

Kenya saw an increase of over Sh1.2bn (US $ 120m|) to US $1.56 billion in 2015.

The figure for Uganda was $1.075 billion (3.3percent of GDP) while for Tanzania, it remained the same at US $389m which is 0.8percent of GDP.

Overall sub-Saharan Africa saw a modest growth of 1 per cent in remittances in 2015, compared to 0.2 per cent in 2014. Remittances to the region are expected to increase further this year, by 3.4 percent, to $36 billion, from $35.2 billion in 2015.

The report also revealed some interesting statistics on migration flows to and from sub Saharan Africa. It showed that migrants from Africa totalled 23.2 million, of whom 26 percent were living in OECD countries and 65.6 percent were living within the region.

The largest source countries of emigrants were Somalia, Burkina Faso, Sudan, Democratic Republic of Congo, Nigeria and Côte d’Ivoire. The region hosted 18 million migrants in 2015.

The majority of migrants from Africa (particularly from the poorer countries) go to other African countries, mainly to South Africa, Côte d’Ivoire, Nigeria, Kenya and Ethiopia. The growth pace in 2015 was the slowest since the global financial crisis. The slowing in remittances growth, which began in 2012, was exacerbated last year by low oil prices, which are taking a toll on many oil-exporting remittance-source countries.

Remittance flows are expected to recover this year, after a bottoming out in 2015, with growth driven by continued economic recovery in the United States and the Euro Area.

Source: Daily Nation

Crackdown on money laundering raises remittance costs Reviewed by on April 19, 2016 .

Share thisFacebookTwitterPinterestEmailWhatsAppThe cost of sending money back home to Africa is 25 per cent higher than anywhere else in the world according to a new World Bank report. According to the Migration and Remittances Factbook for 2016 the global average cost of sending $200 home was about 7.4 per cent in the fourth quarter of

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