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AU commissioner rallies support for remittance project

The Commissioner for Social Affairs Department at the African Union (AU) Commission, Ms. Bience Gawanas, has expressed concern at the lack of cooperation from central bank officials in Africa for the technical team on the establishment of an African Institute for Remittances (AIR).

The commissioner, who spoke Sunday in Addis Ababa, Ethiopia, during a high-level ministerial discussion on “Leveraging remittances for social development in Africa,” said it had been difficult for the technical team to obtain timely responses from central banks regarding their acceptance of the assessment visits.

“I urge our member states to galvanize your commitments to this course and also to join us in implementing this project for the benefit of our continent,” Gawanas said.

The panel discussion was held on the sidelines of the meeting of the committee of experts of finance and economy, which started Thursday to prepare for the Conference of African Ministers of Finance, Planning and Economic Development beginning Monday.

The panel discussion was intended to sensitize AU member states on the implementation of the preparatory phase of AIR and inform on the road map towards its creation.

The preparatory phase towards the establishment of AIR was launched in June 2010 and focuses on consultations, research, capacity building and networking.

The finance ministers will make appropriate recommendations to the AU executive council and the assembly on the establishment and structure of AIR.

According to the AU, there are some 30 million Africans living outside their countries of origin, some 3 percent of the continent’s population, who contribute about US$40 billion in remittances to their families and communities back home every year, affecting as many as 25 million recipient households.

It is believed that the remittances, when properly harnessed, will have significant effect in accelerating socio-economic development of the continent.

Unlike development aid, remittances are spent directly by the families of migrants, making it an efficient way to raise the overall income and well-being of the poor.

The establishment of an African Institute for Remittances is expected to facilitate remittances leverages for economic and social development.

Gawanas, however, noted that in spite of the size, stability and development implications of these flows, remittance markets in Africa remain relatively underdeveloped.

She cited high cost of remittance, legal and regulatory frameworks that inhibit competition, low level of financial access and inadequate data that could facilitate introduction of new technologies by the private sector as some of the challenges being faced.

“Sound and coherent policy interventions and other enabling environments are required to unleash the full potential of remittances to leverage development,” she said.

Donald Terry, a consultant to the World Bank and one of the panelists, said the cost of sending remittances back home to Africa is by far the highest of any developing region of the world.

He noted that the cost of sending money to North Africa was far lower than the cost of sending money to sub-Saharan African countries, because the remittance markets in the five countries in North Africa are much more developed and there is much more competition and also much more involvement of the private sector and banks.

“Only about five percent of families in sub-Saharan Africa have direct access to formal financial inter-mediation, so we are dealing with a difficult circumstance.”

“The first thing that can be done to help cut down the costs of remittances is to improve the legal frameworks that allows more organizations to get involved in the sending and receiving remittances to Africa,” Mr. Terry said.

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