The quest to lower high remittance costs to Africa: a brief review of the use of mobile banking...

Christian K.M. KINGOMBE

The paper reviews the latest technological tools that arguably can contribute to reducing the excessively high costs of remittance transactions in Africa. Indeed, despite huge remittance inflows to and within the continent, Africa is the most expensive destination to send money to. As remittances have become more important than Overseas Development Assistance and Foreign Direct Investment inflows in some countries, it has become crucial to explore technological advances that can contribute to reducing their transaction costs. Such reduction would enable the end beneficiaries to capture a larger share of these external resources, which in turn could have an even bigger impact on development in Africa. In addition to revisiting the role of mobile banking in lowering remittance transaction prices, the paper takes a closer look at the newest available technology, the Bitcoin block chain technology that underpins digital currencies. Although, a few top schools, such as Cambridge University’s Judge School of Business, Georgetown’s McDonough School of Business, and UNSW Business School in Sydney, have conducted research into bitcoin and the blockchain, at this early stage, still very few social science researchers have addressed the role that such digital currency could play in the reduction of the remittance transaction prices, in addition to a few innovative Bitcoin operators. The paper proceeds as follows. It first looks at the causes of the high remittance transaction costs. Then, it reviews, presents and analyses the official remittances data downloaded from the World Bank's Remittances Prices Worldwide database. It also briefly reviews a few remittance transfer technological instruments. Given the novelty of the topic, the review of the most recent existing "literature" on Bitcoin is mainly retrieved from either online news sources or information from a few leading Bitcoin operators. In the light of the UN Global Working Group Post-2015 Development Agenda and Sustainable Development Goal proposal to reduce by 2030 the remittance transaction costs to even less than 3%, the effectiveness of these new technological instruments to reach such objective are discussed. Finally, a number of appropriate policy actions to foster the economic impact of remittances are proposed.