Africa’s Remittance Market Poised to Reach $500 Billion by 2025, Says DAI Magister
Africa’s remittance market is on a trajectory to achieve a staggering $500 billion valuation by 2025, according to recent predictions by investment bank DAI Magister.
Risana Zitha, Managing Director and Head of Africa at DAI Magister, highlights the pivotal role of increased competition, stakeholder collaboration, and robust investment in financial infrastructure in driving this growth.
Remittances are crucial to Africa’s economy, contributing significantly to the continent’s Gross Domestic Product (GDP). In 2022, the total value of remittances across Africa reached nearly $100 billion, with intra-African flows accounting for $20 billion of this amount. Despite their importance, sending money to Africa remains prohibitively expensive.
The United Nations Sustainable Development Goals aim for remittance fees to drop below 3% by 2030. However, the World Bank data reveals the current global average is about 6%, with some regions in Sub-Saharan Africa experiencing rates as high as 20%.
Mobile money is emerging as a key player in reducing these high costs. Zitha points out that increased mobile money interoperability, enhanced financial literacy, and streamlined legal frameworks are crucial for further reducing fees.
“Looking ahead, the growth of remittances in Africa is expected to continue. Based on the CAGR of 12.1% between 2019 and 2022, the formal African remittance market, valued at $100 billion in 2022, could potentially reach $283 billion by 2035,” Zitha stated.
The informal remittance market, estimated to be between 35% and 75% of the formal market’s value, is significantly higher in Sub-Saharan Africa compared to the global average. This indicates that the total remittance market in Africa could indeed reach the $500 billion mark by 2035.
To capitalize on these opportunities, Zitha emphasizes the need for stakeholders to address the existing challenges and barriers to growth. “Reducing remittance costs should be a primary focus, achievable through promoting competition, improving regulatory frameworks, and investing in financial infrastructure. This will enable remittance providers to offer more affordable services, benefiting both senders and recipients, and driving economic growth and development,” Zitha explained.
Improving access to digital remittance services is also crucial. While mobile money has made significant progress, there is still substantial room for expansion. Investment in digital infrastructure, such as mobile networks and internet connectivity, is essential to ensure broader access to digital remittance services.
Additionally, promoting financial literacy and education can help individuals understand and trust these digital channels, boosting adoption and usage.
As Sub-Saharan Africa faces acute hard currency shortages, leveraging remittance flows becomes increasingly vital. By addressing challenges and embracing technological innovations, Africa can harness the transformative power of remittances to drive sustainable development and economic growth.
In conclusion, Zitha reiterated the immense potential of Africa’s remittance sector: “By addressing the challenges and barriers, and leveraging the opportunities presented by technology and innovation, Africa can harness the transformative power of remittances for sustainable development and economic growth.”
Additional source: Africabusiness.com
