Remittance flows defy slump

25/05/2010 | Pauline Bax

African migrant workers’ remittances have been surprisingly resilient in the face of the economic crisis, despite a small decline in growth figures, according to the African Development Bank

African migrant workers’ remittances have been surprisingly resilient in the face of the economic crisis, despite a small decline in growth figures, according to the African Development Bank.

Growth fell 6.8% last year, but Peter Walkenhorst, division manager in the AfDB Research Department, said today: “We saw a clear decline in North Africa, but Sub-Saharan Africa has been remarkably resilient.

“We expect remittances to bounce back during the global recovery – maybe not with the same high growth figures as before, but we are looking at 3% growth this year, and this is very encouraging.”

Remittances nearly quadrupled, to $41.1 billion, in the 13 years between 1995 and 2008, according to official statistics. And after nearly two decades of double-digit annual growth, remittances have become as important to Africa as development aid, which reached $39.4 billion in 2008.

Real worker remittances are significantly larger than the money flows currently recorded, Walkenhorst said, because considerable amounts of money are sent back home by informal methods.

The World Bank and AfDB are conducting a joint survey on volumes and types of remittances, to shed light on what Walkenhorst said is “a very important issue” that policymakers had so far ignored due to a lack of reliable information.

The survey includes statistics from so-called destination countries and information on African migrants, who are usually highly educated.

Previous studies have indicated that African migrants tend to be flexible workers who easily switch jobs in a tightening job market.

“Remittances are usually only a small share of people’s income, so they are more likely to resist income shocks”, Walkenhorst said. “The evidence so far shows that people send money back irrespective of whether they feel the squeeze.”

He said it was hard to predict whether the looming crisis in Europe will affect remittances in the near future. “If we are headed for a big crisis that results in stricter labour market requirements and drastic job losses, it’s possible,” he said. “But it could go either way.”

The survey also shows that the costs of remitting cash to Africa are up to 50% higher than in other developing regions, as official money transfer agencies often have near-monopolies through exclusive partnerships with post offices.

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