“Central Banks of Igad Reignite Drive to Reduce Transmittal Costs – But Why?”

The secretariat of the African bloc, Inter-Governmental Authority for Development (Igad), has conducted a meeting with the central bank governors of the Igad member countries to address the issue of diaspora transaction fees.

The members of the Igad consist of Djibouti, Eritrea, Ethiopia, Kenya, Somalia, South Sudan, Sudan and Uganda.

Igad Executive Secretary Workneh Gebeyehu has urged the member states to harmonise diaspora transaction fees so as to increase inflows. It has been noted that despite the region having high volumes of remittances from abroad, transaction rates are way above the global average.

According to Mr Gebeyehu, the average cost of sending remittances to the Igad region is 8.9 percent compared to the global average of 6.5 percent, which is nearly three times the Sustainable Development Goals target rate of below three percent.

Furthermore, the cost of intra-regional remittances transfer among the Igadd member states is at 10.6 percent, which is higher than the rate of sending money to the region, making it more expensive to send money among members.

“Many remittances to the Igad region are still being sent through informal channels, such as friends and family members carrying cash across borders or using unlicensed money transfer operators,” said Mr Gebeyehu who also noted that these informal channels are often unregulated, expensive and risky, exposing both senders and recipients to fraud and exploitation.

The World Bank has reported that despite the disruption of Covid-19 on the global economy, remittances to low and middle-income countries reached a record high of $540 billion. Global studies have also indicated that about 281 million people, which is equivalent to four percent of the world’s population, live outside their country of origin and sent $781 billion in remittances in 2021 alone.

During the meeting, Host governor, Dr Patrick Njoroge, has noted the seclusion of other diaspora dwellers in the transaction bands, urging the need to revise the already set transaction thresholds. He has emphasized that the possibility of having small ticket sizes should be considered, assuring that the remittance does not necessarily have to be large, but it could be as small as $20 or $10.