Mobile Phone Remittances Increasing in Africa with Questions Unresolved

mobile-money1New Orleans   The constant risk in reading the business press, and, yes, I’m talking about Rupert Murdock’s Wall Street Journal, is picking a path between the facts, the news, and blatant sales and promotion. That’s especially dangerous because at ACORN we eat up almost any article that pretends to talk about lowering the costs of money transfer remittances for migrant workers and immigrants as if it were an ice cream sundae. Needless to say, I scooped up an article with the headline, “Turning African Phones Into Wallets,” particularly because days ago in a Canada to France to the USA skype conference we had been all over this topic!

First the news. The World Bank, years away from the G-8 commitment to lower all costs of remittances to 5%, is now saying that they believe the cost globally is 8% and in Africa 12%. The facts continue to be that they are hedging their bets on the figures by not including all of the charges, but I’ll get to that. They do offer that remittances to sub-Saharan Africa rose by 2.2% to $32.9 billion in 2014 compared to 2013, doubling the average growth rate globally and projected to hit even higher between 2015 and 2017.

Interestingly, a lot of the transfers are now cross-border transactions between migrant workers in other African countries led by Nigeria, Senegal, and Kenya. Seeing that development elsewhere ACORN has been trying to change our strategy in Honduras and Ecuador. In Africa many of the transfers are being enabled by mobile phones, led by MFS Africa a 6 year old South Africa based company. Importantly, a smartphone is not required. 500 million users of cooperating communications companies allow access through a mobile payment account on the cell enabling transfers to the mobile phones of other enrolled customers who can essentially text something like a money order to the receiver’s phone and confirm completion with a PIN number. Pretty straightforward. MFS Africa makes its money, according to the Journal on a 30 cents per transaction charge with the average transfer being $80, which also resonates with ACORN International’s research.

There’s still a devil in Paradise though, which is where the story takes a bad turn into sales and promotion for the businesses and against the workers who are moving money home. There’s no discussion of the charges applied for currency exchange and pickup. The Journal obliquely mentions that MFS Africa gets a taste of the exchange from some communications companies, but it’s silent on how much rip-and-run is there. Same problem with the World Bank figuring.

In a conversation with an interesting startup called Wave.com that thus far was only transferring money from Kenya and trying to open soon in Ethiopia to channels in the USA and Canada, their representative told me they take no front end charge but make all of their money on the exchange rate, though assuring me they took less than the 5% cap ACORN has been fighting for globally. There are huge, deep-pocketed companies trying to get a slice of migrants’ hard earned wages going home, including MasterCard and other joint ventures, so having no money for marketing makes such small efforts like Wave imperiled, but it also signals that without strong rules and regulations the exchange and after-transfer charges will likely continue to be predatory.

For a change it would be nice if the G-8, the World Bank, and countries around the world, desperate to maximize the money for development and personal investment in communities represented by remittance receivers, actually got ahead of the dark-side of this market, rather than just sitting in the stands and waiting for businesses to flash an applause sign. ACORN Canada is hopeful that it can convert a platform commitment from the Liberals to remittance reforms and caps into reality, given their recent election success, which would break new ground.

In the meantime the best we can hope is that we’re at two steps forward and only one step back, but it’s hard to be certain.

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Demanding a Suspension of Remittance Fees During Disasters

_85611725_e26ea287-55ce-49b3-8ea6-b02ceba61ef7Newark   An 8.3 level earthquake hit Chile in recent days. The quake lasted three minutes. The tsunami carried boats from the port onto city streets along the coast. One million people were evacuated. Over 100,000 continue not to have electricity. Many are displaced. Amazingly, the death count has been relatively minor for such a tragedy with only eleven reported at this point. Many believe this may be due to progress in governmental response and the institution of tougher building codes since a 2010 earthquake killed over 500.

Several years ago when the tsunami hit Japan the focus was huge, damage immense, and attention riveting. Many are just coming back to their homes three years later in the worst impacted areas. Nuclear plants are still under observation and the existence of the plants themselves and the threats of climate change are heated debates.

In a global community what is the best response? Many will be moved to help, but families will feel special obligations whether it is Chile now, Japan then, Katrina ten years ago, or Aceh in Indonesia.

Sending money costs money. Big money. Even the Economist in a recent editorial and article chided the lack of progress by the G-8 and World Bank on reducing the fees to the 5% cap that was supposed to have been achieved years ago. They claim the average is 7.5% but that figure has little credibility given how much it leaves out of the calculations. There are regular reports of technological breakthroughs and new competitors, but many institutions have raised their rates claiming the costs of money laundering and terrorism legislation requires more scrutiny. The Economist called for reductions across the board, and ACORN’s Remittance Justice Campaign has long made that demand.

Can there be any better argument for reductions than disasters like Chile? A number of banks in Canada and the United States lowered or waived fees for transfers after the Japanese tsunami. Western Union and MoneyGram even said the right things for a bit. Where are they now?

Many are joining in a call for Western Union particularly to lead the way by reducing the cost of transfers to Chile during this crisis and time of displacement. Any of us that can need to raise our voices now.

ACORN and many other organizations have begun online petition drives among other tactics to get the message to the CEO of Western Union in Colorado to act now. Do whatever you can and sign the petition with us.

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