Malawi expensive to send money to—World Bank

The latest World Bank report has revealed that Malawi is one of the few African countries which are most expensive to send money (remittances) to.

The report, titled the ‘Send Money Africa’ and has been prepared by the Financial Infrastructure and Remittances Service Line of the World Bank, analyses the cost of sending remittances from selected countries worldwide to a number of countries in Sub-Saharan, North Africa and within the African continent.

The World Bank report has since faulted banks as the most expensive remittance service providers which it says are often the only channel available to African migrants.

“The most expensive countries to send money to are those receiving mainly from other African countries namely Malawi, Botswana, and Mozambique,” reads the World Bank report in part.

Thus the findings of the report confirm the hassles that Malawians in diaspora are facing to remit funds to their relatives back home for survival.

A remittance is simply a transfer of money by a foreign worker to his or her home country.

International trade experts contend that remittances are playing an increasingly large role in the economies of many countries worldwide by contributing to economic growth and helping livelihoods of less prosperous people.

Local analysts told Business News last year that Malawi economy could beat many other top African countries that benefit significantly from service exports unless unfriendly foreign remittance instruments are removed.

According to the World Bank key findings in the report, the cheapest market to send money to is Egypt followed by Liberia and Somalia.

“The average cost of sending money to Africa is almost 12 percent higher than global average of 8.96 percent, and almost double the cost of sending money to South Asia, which has the world’s lowest prices (6.54 percent).”

The bank says remittances play a critical role in helping households address immediate needs and also invest in the future such that bringing down remittance prices will have a significant impact on poverty.

It also says lower cost remittances also help to advance financial inclusion, since they are often the first financial service used by recipients, who are then more likely to use other financial services including bank accounts.

“A regulatory environment that encourages competition among remittance service providers can help bring down remittance prices. Migrant workers can also benefit from more transparent information on remittance services,” adds the bank.

Money transfer operators (MTOs), which comprise 61 percent of the total sample of the World Bank report, are the majority of the service providers in the sample.

Some remittances service providers, according to the findings, fail to provide necessary saying quite often providers do not disclose the exchange rate applied to the transaction and, as such, do not disclose their full costs.

The majority of non-transparent banks are in European countries such as France, Germany, Italy and the Netherlands, where they were consistently unable to provide the ‘mystery shopper’ with an exchange rate for the currency of the African destination country, says World Bank.

Recently, Finance Minister Dr. Ken Lipenga pleaded with Malawians in diaspora to intensify remitting foreign currency back home as one way of beefing up depleted foreign exchange reserves.

Reserve Bank of Malawi (RBM) spokesperson, Ralph Tseka, was quoted recently acknowledging that forex remittances make a contribution to a nation’s economy.

Former president for the Economics Association of Malawi (Ecama) Dr. Naomi Ngwira said recently that it was imperative for Malawians in diaspora to get involved in financial markets’ instruments, foreign direct investment (FDI), public private partnerships and venture capital investments if the country is to benefit.

The National Statistical Office (NSO) figures show that remittances only contribute a fraction to the country’s Gross Domestic Product (GDP).