A few weeks ago, I watched a Christmas party video in which the speaker talked about remittances by migrants living in the UK, and immediately I got an idea.
Why doesn’t the Malawi Postal Corporation (MPC) enter the business of International Money Transfers? Not only in Malawi, but across the region…
In that video, the London mayoral candidate George Galloway said that if he is elected mayor of London in 2016, he will move to make City Hall enter into the business of International Money Transfers, except it will be done on a non-profit basis. It made me think about how Malawians particularly in the UK and the US spend so much on charges and fees to send money to their loved ones.
The choice of the MPC may seem like a random or even odd one, but it is not. The Malawi Postal services has a wide network of 180 Post Offices across Malawi and 154 postal agencies in the country. Surely with such a wide network, they must have the capacity to add an additional service of money transfer ontop of the other services which MPC already offers? The only difference would be that this service will not depend on Money Transfer Operators (MTO’s) such as Western Union, Moneygram or other services, thereby more of the benefit of the transfers will remain on African soil.
In any case, remittances to East and Southern African countries have been steadily increasing. In 2013, US$28.7million was sent to Malawi from abroad (up from US$14.5million in 2006, see Index Mundi here) and US$72.8 million was sent to Zambia (Source: Examining the Relationship Between Received Remittances and Education in Malawi, Kasvi Malik, Claremont McKenna College, 2015). Zimbabwe received US$1.8 billion in 2013 (Source: Zimbabwe: Diaspora remittances in decline, The Africa Report), Tanzania received US$75.34million in 2012 and Mozambique received US$117million in 2010(data-World Bank)
In total the Overseas Development Institute estimates the total cost of fees charged by the Dallas based MoneyGram (whose 2014 revenues were US$1.45billion with $456.4million Gross Profit) and the Colorado based Western Union (whose 2014 revenue were US$5.6billion with $2.31billion Gross profit) to be US$1.8 billion (see Watkins, Kevin & Quattri, Maria. “Lost in intermediation: how excessive charges undermine the benefits of remittances for Africa.” Overseas Development Institute, April, 2014.Web. 20 March, 2015).
Surely this is money which should be utilised within Africa?
But why is this issue important?
Our Countries in Africa need money. Poverty lingers, our education systems are in tatters, we have high youth unemployment, healthcare crises, and in the face of illicit financial outflows, receding or suspended aid budgets, relatively small FDI’s and the corruption problem (which is far from going away), every penny counts.
Every penny must count.
The African Diaspora is a burdened community. The majority usually accept low-paying jobs, spend more money relatively than indigenous populations to establish themselves, are milked dry by extortionate immigration fees, have less social capital in the countries they dwell (therefore less access to informal or supplementary sources of funds), and fewer fallback protections than indigenous populations. In some countries, migrants have to pay more for healthcare, and for services which are free to the locals. They find it harder to access capital (with which to start businesses – which could help them financially), and on top of taxes, Social security / council tax, etc.. they have many mouths and responsibilities from family members back in their home countries, dependants who are often expecting dollars, pounds or Euros for their livelihood each month; to pay for rent, food, school fees, medical care and other expenses.
So how would the MPC Money Transfer scheme work?
On a very basic level, a non-profit organisation would be incorporated in the UK, the US, Malawi, Zambia, Zimbabwe, Tanzania, Kenya, South Africa and Mozambique, with bank accounts opened in all those branches.
The organisation would have one or two staff members based at the Malawian embassies in each of these countries. The Malawian government would deposit US$100,000 in each of the bank accounts, and when a remittance has been made, the organisation would level a 5-10% fee on the value of the remittance, as a cost for sending the money. A mobile app would be developed to make the job of transfering money easier, and contracts with banks and money gateways would be utilised to allow payments to other bank accounts or services in the participating countries on favourable terms. Any profits made at the end of the financial year after all the costs have been deducted would be donated to a fund to be used for job creation for youths, healthcare initiatives and other such purposes across Africa.
Obviously it’s not going to be as simple as that, and current market players are unlikely to want a new serious entrant with Social ambitions, but you get what I’m saying.
A few years ago, some people suggested that Diasporas Bonds (Read Economist article here) was the way for African migrants to help invests in their countries, but the scheme still depended on the likes of Western Union.
I acknowledge that the rise of mobile money has had a positive impact on empowering rural communities across Africa, but I’m not convinced that the benefit of such has been significant or evenly distributed among the people who use it. Indeed, it seems to me that a handful of entrepreneurs, and a few corporations (for example Orange SA who own Telkom Kenya, the part-owner of Safaricom, which owns Mpesa. Safaricom is also partly owned by Vodafone Group) have reaped the majority benefits of the mobile money revolution, meaning what mobile money has done, is made companies and corporations who are owners of the various platforms richer.
What I’m calling for is a scheme whereby our governments in Africa, as opposed to MTOs or private companies control a greater chunk of the pie, with a hope that such would lead to greater investment in services for the greater good of our people.