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Money transfers to EA hit $5.2b, account for 4pc of GDP

Discussion in 'Habari na Hoja mchanganyiko' started by BAK, Nov 12, 2007.

  1. BAK

    BAK JF-Expert Member

    Nov 12, 2007
    Joined: Feb 11, 2007
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    This is very encouraging, but I don't know how did they come up with $5.2 billion
    Money transfers to EA hit $5.2b, account for 4pc of GDP

    Special Correspondent

    The economies of East African nations are heavily dependent on money sent home by emigrant workers, a recent United Nations report says.

    Remittances from members of the diaspora account for an average 4 per cent of the gross domestic products of East African countries, according to the International Fund for Agricultural Development (Ifad). Money transfers to East Africa from individuals living abroad amounted to $5.2 billion last year, Ifad estimates.

    Kenya received the single largest share of remittances to the sub-region, with $796 million in transfers, representing 3.8 per cent of Kenya’s GDP.

    Ugandans in the United States, Europe and Asia sent home $642 million, which amounts to 6.9 per cent of Uganda’s GDP. For Tanzania, the respective figures were $313 million and 2.4 per cent.

    Somalia is said in the report to be “particularly remittance-dependent.” The $790 million in money transfers to Somalia last year was nearly equal to the sum for Kenya, but lack of reliable data prevented Ifad from indicating the share of Somalia’s GDP that these remittances represent.

    Eritrea led East Africa in the degree to which its national economy relies on money transferred from abroad. Remittances to Eritrea amounted to $411 million last year, a total representing 38 per cent of the country’s GDP, according to Ifad’s estimates.

    Kenya is leading the way in East Africa in “leveraging remittance transfers through the use of mobile telephony,” the Ifad report says.

    In much of black Africa, Ifad notes, money transfers are restricted to banking depository institutions — an arrangement that “foments monopolies” and limits financial access on the part of lower-income Africans. Lack of competition also results in high commissions being charged by transfer agencies, the report says.

    It estimates that an average 10 per cent fee is slapped on remittances to Africa — compared with only about 5 per cent in Latin America, where competition among agencies is described as “acute.”

    Safaricom’s M-Pesa serv-ice and a similar initiative by the Postal Corporation of Kenya allows subscribers to transfer money quickly and directly. Kenyans abroad who make remittances can thus receive greater value for their money by sidestepping the high fees charged by money-transfer companies.

    But most of the money still does not go to national development efforts, Ifad points out. It estimates that as much as 90 per cent of remittances are used by families to meet basic needs such as food, shelter and education. Most of the remainder goes toward “informal savings setups and investments, such as a stash in the closet or the purchase of a family cow,” the report says.