It is now common practice for members of the African diaspora to send money back home. With mobile money technology, the process has never been faster and cheaper. In a matter of seconds, I can send money from the US to anyone in Rwanda, they would receive it in their mobile money account and they wouldn’t need to go to a bank or another financial institution for withdrawal.
Thus, it is not surprising that last year, remittances to Africa reached $200 Billion, surpassing the Official Development Assistance (ODA) and Foreign Direct Investments (FDI). The World Bank and the UN have hailed remittances as an alternative source of development finance for the continent, and rightly so.
However, the downside that is not discussed often is the opportunity cost of remittances–labor supply loss. This is particularly significant in Africa where migrants are more educated due to the arduous process of obtaining migration documents. This special feature of the migration and remittances dynamic in Africa adds an element of urgency to make remittances work for Africa.
It is prime time for remittances to be scaled up into high-impact investments. This necessitates moving from individual or family remittances and tapping into more collective, development-focused remittances. For instance, diaspora bonds have not yet taken hold on the continent. This is one avenue that governments need to explore to better pool resources from the diaspora and allocate them to long-term development projects.
Remittances are increasing; we need to make sure that this trend yields positive results.
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