08/ 04/ 21
A year like no other- The effect of COVID 19 on the remittance industry
2020 has been begrudgingly described as ‘the year that ended in March’
Exactly 12 months later, the continent is still picking up the pieces of the devastating 2020 global pandemic. It completely altered the world and affected everyone, challenging global health systems, politics and economic stability – but not equally.
As African economies put several restrictions and measures in place in order to curb the spread of the virus, industries and businesses alike experienced different fortunes. E-commerce and pay-on-demand entertainment recorded unprecedented growth, while Retail Trade, Airline and Hospitality industries were among the hardest hit.
The remittance industry was predictably not to be spared the brunt of border lockdown, with the World Bank estimating a historical decline in global remittances of US$110 billion, with sub-Saharan Africa (SSA) expected to experience a decline of about 23.1%.
This, however, was not the case for the Kenyan remittance industry, for example. According to the Kenya Central Bank, remittance inflows into Kenya jumped by nearly 11% in 2020 to $3.09 billion. It took speedy action from policymakers in remittance-sending countries to either make available or relax stringent identification requirements demanded of migrants for them to remit, incentivize the use of digital platforms, and protect migrants from job losses. This increase was also attributed to technological innovations that helped people overcome the economic struggles brought on by the COVID 19 crisis to send more money home.
Nevertheless, it is undeniable that the continent as a whole saw reversed years of progress in reducing extreme poverty, and its impact on migrants has been particularly severe given that they were already marginalized and suffering hardships before COVID-19 struck. Many migrants lost their jobs and consequently their ability to send any money back home. While the whole world is being affected by the pandemic, it is the poorest countries that will pay the highest price unless they receive more help.
But there is hope on the horizon. Many countries across the globe are undertaking vigorous vaccination exercises, the success of which we won’t be able to tell for another six months. The growth of remittances has also been supported by financial innovations that provided Africans in the diaspora more convenient channels for their transactions.
With the changing dynamics in the way we operate in our day-to-day activities, the need for modernized and new technological innovations are necessary to provide consumers with services that enable them to provide for their families regardless still effectively and efficiently of their location.
We at UPESI pledge to continue playing our part in the ongoing acceleration of digitalization of cross border payments to push towards better digital financial inclusion in our areas of operation, and to eliminate or reduce transaction fees on remittances. It’s the responsibility of all stakeholders to embrace the digital revolution in Africa to make remitting easier and more convenient.