Helping out: how affordable is it?

“I AM getting married, you are invited and I need your contribution” – read a text message that I received from a friend of mine a while back. 

“I AM getting married, you are invited and I need your contribution” – read a text message that I received from a friend of mine a while back. 

This was exciting news in a sense that a friend I had known for a long time had finally decided to settle down and begin a journey that most of us look at with admiration and anxiety all wrapped in one. 

 

So without hesitation, I proceeded to reply back to my dear friend to offer my congratulations on the wonderful leap of faith he was about to undertake with his beloved wife-to-be.

 

Without delay and bearing in mind that I live all the way here in London, I wanted to establish when the wedding was due to take place so that if it were possible, I could arrange time off work to travel to Kigali and be present for my friend’s big day.

 

Disappointingly, my friend advised me that for reasons beyond his control, the wedding was due to take place in a month’s time, a fact that immediately ruled out my availability to attend the wedding.

Nevertheless, I was determined to contribute towards the costs much like it is customary in the Rwandan culture to help out each other.

Tentatively, I advanced to ask the all important question: How much would you like me to contribute? Now, I know that when contributing, it is almost unusual to ask such an open ended and difficult question, but I thought that time was not on our side and therefore I needed to establish my responsibilities quickly and fast.

“Most of my friends around here have contributed in the region of $100, so if you think that is an acceptable amount, please send that amount”, stated my friend. 

I thought that was reasonable, and in fact, I thought that since the timing of the wedding sounded like a matter of urgency, I felt I should send that figure in British pounds, which would have increased the final amount to at least $168.

With this intention, using Western Union’s online service, I proceeded to carry out the transaction in the knowledge that my contribution would reach safely and timely.

Before clicking the send button, I realised that in order for me to send £100, I needed to fork out another £4.90 in transfer fees. I was not entirely satisfied with this facility so I browsed for more alternatives until I found MoneyGram.

This option was slightly cheaper, at £4.70, but I was still not happy that I would have to pay an average of 4.8 per cent in charges as opposed to a scenario where if my friend was Indian living in India, the transfer charges would be reasonably priced at 2.9 per cent for £100 – even at £500.

After more research, I discovered that in fact, Africa’s Diaspora pays in excess of 12 per cent to send $200 to most African countries – which according to research carried out by the Overseas Development Institute (ODI) is almost double the global average.

In fact, in their 2014 report, the ODI states strongly that excess transfer fees continue to cost the African continent $1.8 billion a year; money that is capable of paying for 14 million children to complete their primary education in Africa.

In light of this, matters should not be taken lightly – mechanisms to limit the amount of transfer fees that Money Transfer Operators (MTO) can levy on money sent to Africa should be sought vigorously and also mechanisms to encourage more competition among operators.

At present, the 2014 ODI report insists that there are only two major MTOs operating in Africa; Western Union and MoneyGram – and that together they account for $586 million of the loss associated with the remittance ‘super tax’.

The report further suggests that some of the limitations to introduce competition are as a result of exclusive agreements entered between MTOs, local agents and banks to restrict any competition which results into higher prices.

Also, the report alleges that African financial regulations favour banks over other remittance payment options, seemingly encouraging an oligopoly type-market.

In essence, remittances are set to stay as a major source of development finance for many African families, businesses and the larger economic framework.

However, with all of the world’s top ten remittance-charging corridors found in Sub Saharan Africa, the future of sending money to friends and families remains uncertain.

A large number of African Diaspora continue to face excessive charges of over 12 per cent when it comes to transferring money back home. The structure is not any better when it comes to intra-Africa corridors; there are nine intra-Africa corridors with MTO fees in excess of 15 percent, up to 39 percent. This is the case for Ghana-based Nigerian workers who send money back home.

Both the G8 and the G20 group of countries should be constantly reminded by the African Union to honour the 2008 L’Aquila summit pledge to strengthen the development benefits of the remittance system whereby quantitative goals such as halving the average global cost of remittance transfers from 10 percent to 5 percent can be achieved.

Otherwise, most of us will continue to face excessive transfer charges, something that will inadvertently impact our friends, families and businesses.

And yes, my dear friend eventually received my contribution and the couple are now living happily ever after.

The writer is a UK Parliamentary Intern and holds a Master of Science in Public Service Policy.

Twitter: @Jsabex

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