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The cost of sending money home from the diaspora is set to reduce thanks to behind-the-scenes discussions taking place at the EU African leaders’ summit in Malta.
According to the UK’s Financial Times an agreement is set to be reached to reduce transaction costs to “less than three per cent” of the total sent by 2030.
That would be a significant reduction on the current average of eight per cent to send $200, according to the World Bank.
It would also prove hugely beneficial to the tens of thousands of Kenyans living abroad who sent $1.14 billion (Sh114.6 billion) back home from the beginning of the year to September.
The proposal is part of a package of aid pledges and reforms aimed at reducing the increasing flow of migrants from Africa to the EU.
It goes further than previous demands, such as a call in 2011 by Bill Gates, Microsoft co-founder, for the Group of 20 leading economies to slash remittance charges to five per cent.
The remittance market is dominated by large groups such as Western Union, but has been opened up in recent years by a number of smaller companies.
The remittance companies have argued that the fees represent a fair cost of business for companies operating in a risky market.
But many people send small amounts, often less than $500 (Sh51,000), meaning that they are losing a substantial figure in costs.
This has led some to consider using backstreet operators as an alternative.
Lower fees from established transfer groups would discourage people from the risk of sending their money via unofficial channels, according to Caroline Njuki, the regional migration co-coordinator for the Intergovernmental Authority on Development.
“At the moment many people send remittances through unregulated ways to save on the fees, and the money sometimes just doesn’t arrive,” Ms Njuki told the Financial Times.
– Business Daily