Recently there was a meeting of minds in our region to counter the scourge of money laundering and illegal movement of capital. While we must cooperate to counter this menace, we must also ruthlessly compete for capital.
Our systems are not set up to adequately ensure free movement of capital. Before we look at the reasons for this, let us look at the legal avenues available.
An African in Europe trying to send money for school fee’s back home has few viable options. The first is a swift money transfer to your Rwandan bank account, I have used this and found I am charged in Europe, then 2.5-3.5 percent here.
Very often the transaction takes days and often the transaction slip gets lost and it can take weeks to get your money.
Then there is Western Union and MoneyGram and the like, these charge between 7-14 percent of the money to transfer it. At least it is efficient even though you lose so much.
These franchises are well supported and often dictate money-transfer policy. Western Union was first to lobby that small-scale money transfer agent were potential terrorist fund-raisers and got the law changed which has helped them no end.
Many Rwandans have relatives abroad, those in Europe have suffered as the Euro and Pound have fallen against the Dollar, and they have turned to illegal money agents.
With a simple phone call, a relative in Kigali can go a forex and receive whatever amount they are sent. The transfer cost is only $3 whether you receive $10 or $10,000. The agent in Europe receives the money in his account, he buys goods which he ships to Africa, he texts the local vendor to give put the equivalent in local currency.
In that instance you have, money-laundering, fraud, capital flight, tax evasion, racketeering, conspiracy and so many other felonies.
All these were committed because there was a lack of attractive legal methods. The best way to reduce money laundering is to remove the need to do so, clean money has to be laundered just to enter our economies.
Do we charge aid donors 3-7 percent of their total capital to invest in Rwanda? Then why charge ordinary Rwandans to help their families? We need capital to enter our economy, especially remittances, Kenya receives more than $1 billion from Kenyans abroad.
If 20,000 Rwandans sent $5,000 a year it would be $100m and could reduce our dependence on aid by 30 percent.
There are ways to reduce laundering, such as cooperation, creating a regional task force, creating multinational crime fighting organs, tightening loopholes and tougher sentencing, deploying software that detects fraudulent transactions.
However, none will be as effective as removing obstacles to legal transactions, setting maximum rates that agents can charge, and streamlining the paperwork required for transactions.
Above all we need more open competition to break the duopoly.