More international companies are required to remit money to the country in order to lower the high costs currently incurred when sending money from abroad, a senior official at the Central Bank has said.
This follows a recent finding by the World Bank that the cost of sending money to Rwanda is among the highest in the region.
“The more companies (sending money) there are in these countries (Diaspora), the cheaper it is to send money. If the companies are fewer, the higher the costs,” Ambassador Claver Gatete, the Vice Governor told Business Times in a phone interview, on Monday, commenting on the reporting findings.
According to data compiled by the World Bank, published under the ‘Remittance Prices Worldwide’ database, sending US$200 from the UK to Rwanda can entail an average transaction cost of up to $30.72.
The data covers 200 “country corridors” worldwide, from 29 remittance sending countries to 86 receiving countries.
To encourage and ease repatriation of funds, Gatete said the Central Bank is willing to license more companies involved in money transfer business if they meet Central Bank requirements.
Currently, international money transfer window is dominated by Western Union and Moneygram, though commercial banks are also increasingly introducing direct transfers.
The World Bank estimates that international remittances totaled $414 billion in 2009, of which $316 billion went to developing countries, involving some 192 million migrants or 3 percent of world population and their families.
For Rwanda, remittances have been increasing since 2005 from $42.85million to $139.89 million in 2008, accelerating further to reach $172.40 million last year, statistics from the Diaspora General Directorate under the Ministry of Foreign Affairs indicate.
Last year, the Rwandan Diaspora, together with the National Bank of Rwanda, finalised plans to establish an investment fund, Rwandan Diaspora Mutual Fund (RDMF), which was adopted during the 2008 Diaspora retreat.
After its establishment, the Mutual Fund will invest in treasury bonds, guaranteed by BNR, and at a later stage, the interest gained from the bonds will be invested in higher risk products such as corporate bonds and stocks.
However, it is also expected that, in the long-run, the fund will invest abroad to earn more interest which will then be repatriated back to Rwanda.
Data also shows that diaspora remittances have become a key foreign exchange earner for Africa, with about $5 billion released annually.
The World Bank estimates that, after ecovering by the end of this year, recorded remittances to developing countries will rise further in 2011 and 2012, possibly exceeding $370 billion in two years’ time.