Why sending remittances to Africa is very expensive

Why sending remittances to Africa is very expensive

Remittance – sending of money back home – is one of the ways immigrants in developed countries make life better for their counterparts who live in emerging economies. It is a key financial lifeline for households and is one of the key income sources for less developed countries.

In 2019, remittance flows to low and middle-income countries reached a staggering $550 billion, surpassing foreign direct investment and official development aid. Out of this amount, the African continent recorded about $48 billion in remittance inflows, according to the World Bank. This figure represents only the established channels of sending money and does not take into cognizance other informal channels – which can be as analogue as passing money or valuables to someone who is making a trip from one country to another.

In Sub Saharan Africa, Nigeria accounts for about half of the total remittance inflows, representing 6.1% of its GDP. Other top recipients of remittance in Sub Saharan Africa include Ghana, Kenya and Ethiopia. For fragile states and smaller countries like South Sudan and Lesotho respectively, foreign remittances account for more than 20% of the GDP, being a key source of external financing.

This is higher than other sources of external financing such as foreign development assistance, long-term and short-term loans, foreign direct investment and portfolio investment. Taken together, foreign remittances to Africa represent 2.5% of Africa’s GDP, and it is a huge sector with abundant possibilities.

Despite the many benefits of remittance inflow to the continent, studies show that it costs more to send money to Africa compared to other regions in the world. The average cost of sending remittance to Africa is about 8.2%, while for South Asia, it’s 4.9%.

In 2020, Tanzania and Angola were the countries in Africa with the highest costs incurred on remittances sent. The charges for a money transfer of 200 U.S. dollars in each country amounted to 19.7 percent of the sum sent, on average. The implication of this is that families and individuals will have to give up a sizable chunk of the money sent to them as remittance fees. In most cases, there are also additional charges that the sender will have to bear to send money.

remittances to Africa


What’s driving the cost?

Bank regulations and exclusive agreements by African countries have been fingered as the two leading causes of high remittance charges in Africa.

Regulations instituted to checkmate money laundering and terrorist financing inadvertently inflates the administrative cost of sending money. Although, these checks go a long way in discouraging terrorist funded activities and money laundering, the increase in charges adversely affects innocent people who are receiving money legally.

In some African countries, citizens are not given the option to choose which remittance platform to use. This is because of the exclusive agreements signed by the government-owned post offices with payment companies to be the sole provider of remittance services in these countries.

People (especially in rural areas) are offered no choice but to use this postal service. This kind of scenario not only kills competition but puts people at the mercy of payment companies who can set charges arbitrarily.

Another cause of high remittance fees in the continent is bank charges by partner banks to send money from one country to another. In this situation, each bank claims a processing fee to send money.

This process adds to the overall cost of sending remittances to Africa and reduces the amount that will get to the receiver in the end. Aside from the high charges, receiving remittance can also be a daunting process, as money sent from abroad will typically take between one to five business days before it enters an African bank account.

From brick-and-mortar networks to digital

With the availability of cheap smartphones and deepening internet access in Africa, remittance transactions in the continent are increasingly shifting from brick-and-mortar networks to digital apps.

Fintech startups are springing up to lower the high cost of remittance to the continent. Some of these startups have raised mega-rounds to ensure they build a seamless process for sending and receiving money across borders.

Some of these startups include, Tanzania based NALA, a mobile money and wallet aggregator; Nigerian SureRemit; Uganda based EverSend; Send by Flutterwave, YC backed Flux and Ghana-based unicorn, ChipperCash.

The remittance market is still dominated by traditional offline players, but these startups are hoping to upend the system using technology. Mobile/digital remittance services are booming as they offer reduced fees mainly thanks to lower-fixed costs (maintaining a mobile app is much cheaper than operating a retail network).

Some of these platforms are utilizing blockchain technology to ease the remittance process and lower the cost of receiving money for Africans. This process also eliminates middlemen such as bank counter staff and agents that will ordinarily make the remittance process expensive and stressful.


  • Passionate about telling authentic African stories as it relates to tech. Yeboah covers tech startups, innovation, talent, and business in Africa and other emerging markets. Connect with him on Twitter @Yeboah_01.

Acquah Nana Yeboah

Passionate about telling authentic African stories as it relates to tech. Yeboah covers tech startups, innovation, talent, and business in Africa and other emerging markets. Connect with him on Twitter @Yeboah_01.

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The Ouut 2022
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