Market monopoly is believed to be one of the reasons leading to these astronomical charges.
“We estimate that the 1.8 billion US dollars lost in excess charges through transfers would be enough to send 14 million children to school. This is an uncompetitive remittance system that does not serve Africa well,” Kevin Watkins, director of the Overseas Development Institute told CNBC Africa.
“There are two major suppliers and the fee structure involves both flat rate charge that is applied across countries irrespective of underlying conditions in markets and foreign currency conversion charge which is often very high and sometimes not transparently reported to customers,” he noted.
African banks are also not helpful as they charges are often “notoriously high prices for what is often an ineffective service”.
The group of eight (G8) and group of 20 (G20) powerful countries made a commitment to reduce costs of remittances to not more than five per cent from 13 per cent by 2014.
“The reason for the inaction are manifold but one of them is because this is not an issue on the international development agenda. This issue should be treated just like the debt relief and aid to Africa. Financial regulators in Africa need to take a look at these exclusive arrangements that MoneyGram and Western Union have with individual banks which is restricting completion,” he added.
Currently the market has a high monopoly of chiefly two players, MoneyGram and Western Union money transfers.
The World Bank recently noted that remittances to the developing economies are estimated at 404 billion US dollars in 2013, up 3.5 per cent compared with 2012.
“Growth in remittance flows to developing countries is expected to accelerate to an annual average of 8.4 percent over the next three years, raising flows to 436 billion US dollars in 2014 and 516 billion US dollars in 2016,” the World Bank said.
Latest figures show that remittances from migrant workers are expected to be 436 billion US dollars this year.
BY TRUST MATSILELE