2021: World Bank forecasts 14% decline in remittance flows to low & middle-income countries

Remittances to low and middle-income countries are facing a projected decline of 14% to $470 billion in 2021, according to the World Bank. To delve further into this issue, CNBC Africa spoke with Iain Allison, Senior Director of Business Development (International) at Xoom, a company that has been providing remittance services in the African market for over five years. Xoom has traditionally offered deposit and cash pick-up services, and recently launched a deposit to wallet service in 12 African countries, with plans for further expansion. In 2020, the sector was heavily impacted by the COVID-19 pandemic, but Xoom saw significant growth in online services throughout the year. While the World Bank forecasts a 4% increase in remittances in 2021, Xoom experienced a 600% growth in new users between the first and second halves of 2020. This growth trend is expected to continue in the coming year. The increase in remittances and adoption of digital money transfer services are not only beneficial for individuals but also hold promise for small and medium enterprises (SMEs). As more transactions move online, SMEs are likely to receive funds faster and more efficiently, aiding in their recovery from the economic effects of the pandemic. However, there are still infrastructural challenges and policy limitations that need to be addressed to scale digital money transfer services on the continent. Mobile networks have played a crucial role in bridging some gaps, but governments need to foster innovation and update regulations to support the growth of financial technology. The digital economy is proving to be a significant driver of economic development across Africa, as faster money transfers spur economic activities from buying goods and services to investing in education and infrastructure. Looking ahead, increasing smartphone penetration and exploring emerging technologies like cryptocurrencies are expected to further advance the remittance landscape in Africa. Countries like Kenya, Ghana, and Zimbabwe have high smartphone adoption rates, paving the way for greater financial inclusion. Cryptocurrencies also offer new possibilities for moving funds quickly and securely, especially in underserved rural areas. These trends underscore the potential for remittances to reach more populations and drive continued economic growth across the continent.