Remittances are worth $300bn a year, but more could easily reach the poor.

African workers send home more than $40bn to the continent each year, but restrictive laws and costly fees hamper the power of these remittances to lift people out of poverty. It means that the power of remittances to fight poverty remains largely untapped.

That’s the conclusion of a report by the UN’s rural poverty agency, the International Fund for Agricultural Development (IFAD). Globally, remittances now top $300bn a year, outstripping foreign direct investment and development assistance combined. But, while transfer costs have declined significantly in Latin America and in Asia, sending money home to Africa is still very expensive – as much as 25% of the sum being sent.

At the G8 Summit in Italy last July, world leaders set a goal of reducing the cost of remittance flows by 50% over five years – by promoting competition and removing barriers. At present, the number of payout locations across Africa is the same as Mexico – which has only one tenth of the population. Up to 40% of remittances sent to Africa are destined for rural areas, where many recipients have to travel great distances to collect their cash.

But the report finds that – just by expanding the kind of institutions able to conduct remittances services to include microfinance institutions and post offices – would double the number of payment points. And new technologies like cellphones, and existing infrastructure like post offices, could dramatically boost the reach of remittance services. It’s already happening in places like Algeria where 95% of remittances are paid through post offices.

“Supporting this people-topeople money flow to rural areas of Africa is especially vital now because of the recession,” explained IFAD assistant president Kevin Cleaver. “The power of remittances can be catalysed by easing restrictions and making it less costly for African families to collect this money.” Most money sent home by migrants is spent on daily consumption but research shows that linking remittances to financial services for people without bank accounts – or savings accounts, loans and insurance – allows even the very poor to save and potentially invest in the development of their community.

Find out more http://www.ifad.org