Diaspora remittances in 2018 rose to the equivalent of over 0.6 percent of Malawi’s Gross Domestic Product (GDP), according to a new report from the World Bank.
The 2019 Migration and Development report says remittances have risen from $41 million (about K30 billion) in 2017 to $45 million (K33.7 billion) last year, an increase of over $4 million or about K3.7 billion at current exchange rates.
The report released on Tuesday shows that across Sub-Saharan Africa remittances grew almost 10 percent to $46 billion in 2018.
In terms of remittances as a share of GDP, Comoros has the largest share, followed by the Gambia, Lesotho and Senegal.
Dilip Ratha, lead author of the new report said remittances were now “on track to become the largest source of external financing in developing countries.”
However, he added that the high costs of money transfers “reduce the benefits of migration.”
For example, the global average cost of sending $200 remained high, at around seven percent in the first quarter of 2019, despite the fact that reducing remittance costs to three percent by 2030 is a global target under the UN’s Sustainable Development Goals.
The cost of remittances was the lowest in South Asia, at five percent, while Sub-Saharan Africa continued to have the highest average cost, at 9.3 percent.
Remittance costs across many African corridors and small islands in the Pacific remain above 10 percent.
Banks were the most expensive remittance channels, charging an average fee of 11 percent in the first quarter of 2019. Post offices were the next most expensive, at over 7 percent.
Malawi has this year moved in to increase remittances with the launch of the Malawi Foreign Policy and Diaspora Engagement Policy that seeks to boost the relationship between the country and those in Diaspora.
The goal of the new policy is to ensure that Malawians living abroad make significant and effective contribution to the economic development of the country.
Reserve Bank of Malawi Spokesperson, Mbane Ngwira, an earlier interview said the central bank, in collaboration with the Ministry of Foreign Affairs, has been engaging the diaspora to boost remittances.
Among others, the central bank spokesperson said the move is also aimed at ensuring that barriers to entry into remittance business are reduced to encourage competition which would lead to reduction in transaction cost.
He said the engagement also seeks to ensure that foreign exchange regulations encourage innovative financial products to encourage the diaspora invest in cost effective money transfer business operations.
“We seek to create a conducive environment to encourage diaspora direct investment,” he said at the time.