One of the cornerstones of our mission here at PD is to encourage the African Diaspora to do more with their remittances. Annually, it is estimated that Diaspora remittances to Africa are inching north of $40 billion. That’s money put directly in the hands of those who need it. Increasingly, remittance investments are becoming the economic driver for development projects across Africa, but the process of remitting money is so far a bit cumbersome, expensive and in some instances, laborious. The whole institution of sending money overseas is in need of an overhaul.
My remittance scenario usually looks like this: I have sibling in Kampala, the capital of Uganda. The rest of the family is split between Masindi town (a 4-hour ride from Kampala) and surrounding villages. My sibling in Kampala uses one of my Visa® ATM cards I supplied to withdrawal money directly from my account for her school fees. This has proven to be cheaper than, say, Western Union or Money Gram.
But if money needs to go all the way to the village, where my parents are, then the whole process starts to look like a financial relay race. Money is withdrawn from my account in Kampala, deposited into a bank account that has a branch in Masindi. Someone in Masindi withdraws from that account, puts it on a local matatu traveling to the village where my mom lives and delivers the money. That whole process can take up to 24 hours. At a total cost of about $6-10 US. While laborious, it’s a lot cheaper than a direct bank wire transfer ($40 US + fees) or Western Union (based on percentage of transfer, plus manipulated exchange rate). Now, why an automated bank transfer costs $40 is beyond me.
What is needed is an innovative way to get money directly into the hands of the recipients faster and cheaper. There are handful mobile wallet & mobile payments initiatives in Africa by the likes of MTN, Vodafone, and others in the mobile phone space, but they primarily concern with moving money within Africa. None of them currently connect to the Diaspora. It’s astounding that in the era of mobile everything, not a single African banking institution has taken the reigns of the mobile wallet. In fact, Africa is leading the global rollout of mobile banking! It’s been entrepreneurs and cellular communications giants that are pushing the envelope in this space. Banks meanwhile are pulling out the stops by fighting to protect their tuff instead of seizing this as an opportunity to capture market share and innovate in this space. If anyone should be looking to capitalize on $40 billion dollars-worth of annual Diaspora dollars, you’d think it would be banking institutions, instead they are thumbing their noses at the Diaspora and sitting on their hands.
IFAD: CALL FOR PROPOSALS (Financing Facility for Remittances)
This week, The International Fund for Agricultural Development (IFAD) is looking to simplify the Diaspora remittances process by announcing the availability of funds for any organization working on remittance technologies and solutions:
The objectives of the 2009 call for proposals are to:
1. Improve remittance transmission and access to remittance services in rural areas
2. Link remittances to financial services and products in rural areas
3. Develop innovative and productive rural investment channels and opportunities for
migrants and community-based organizations
Here’s some information about what will be funded and how much:
Through a four-phase competitive process, the FFR will award grant financing of up to
US$250,000 per project to eligible institutions, to be implemented within a two-year period.
Applicants must provide a minimum counterpart contribution of 20 per cent of the amount
requested (or 30 per cent for projects in the Latin America and the Caribbean region), of
which at least half should be in cash.
Here the dates and deadlines for the 2009 proposals:
Deadline for online application of Concept proposals 29 May 2009
Finalist pre-selection and request for Full proposals 17 Jul 2009
Deadline for submission of Full proposals 14 Aug 2009
Selection of finalists 24 Sep 2009
You can download the full Executive summary and general conditions document (PDF).
It is important to note that Africa’s true middle class is it’s Diaspora. So any technologies or aggressively proactive policies that make it easier for investment remittances to reach their destination, cheaper and faster will be a boon to development. I will certainly be cheering for any Diaspora or indigenous institutions that receive funding to tackle this issue. African-crafted innovations for African problems indeed.