Beyond the Band-Aid: The Positive Impact of Remittances on African Households and Communities

Remittances are financial transfers from people living and working abroad to their families and communities in their home countries. In Africa, remittances are a significant source of income for many households and communities, and play a vital role in supporting economic activity and development in low and middle income countries.

However, the predominant narrative around remittances in Africa often times portrays them as a temporary "band-aid" rather than a solution. This narrative centers on the high fees charged by some money transfer companies, which eats into the value of remittances making them less effective in supporting households and communities.

In this article, we are poised to question this narrative and offer alternatives (including how to choose the best remittance service) on the role of remittances in Africa.

Contradictions to the “band aid” narrative

Remittances are vital sources of income, rather than a "band-aid".

While it is true that high fees charged by some money transfer companies can be a burden for senders and recipients of remittances, it is important to explore cheaper ways to send money as well as recognize the vital role that these financial transfers play in supporting household income and economic development in Africa.

Remittances are a key source of income for many households on the continent, and contribute significantly to meeting the basic needs and interests of families. According to the World Bank, remittances to Sub-Saharan Africa reached a record high of $48 billion in 2019, and are expected to continue growing in the coming years.

The availability of low-cost options for sending money home.

While the high fees charged by some money transfer companies can be a barrier to the effective use of remittances, it is important to recognize that there are also many low-cost options available for people to send money home at more affordable rates.

For example, platforms like Africhange offer low or no fees for sending money internationally, and there are also options such as community-based money transfer organizations that provide affordable rates for sending money home.

The positive impact of remittances on household income and economic activity.

Contrary to the narrative that remittances are a "band-aid" solution that does little to address the root causes of poverty, research shows that they have a positive impact on household income and well-being, as well as stimulate economic activity and development at the local level.

For example, a study by the International Fund for Agricultural Development (IFAD) found that remittances can contribute to increased household income, improved living conditions, and increased investment in education and health. Additionally, remittances can stimulate economic activity at the local level by providing a source of capital for entrepreneurship and small businesses.

Remittances are not just a "safety net" for people in crisis, but also a way to support families and communities on an ongoing basis.

While it is important to recognize the role of remittances in providing a safety net for people in crisis, it is also important to recognize that they are often used to support families and communities on an ongoing basis.

For example, remittances can be used for education, healthcare, and other essential expenses, remittances can also be invested in developing assets such as land and housing that can contribute to long-term development.

The agency of people in recipient communities in addressing challenges and identifying solutions.

While it is important to address issues of corruption and mismanagement that may impact the effective use of remittances, it is also important to recognize the agency of people in recipient communities.

Rather than viewing them as passive recipients of aid, it is important to work with them to identify and implement solutions that meet their needs and priorities. This may involve supporting community-led initiatives and organizations that advocates and facilitates the effective use of remittances, including engaging with local government and other stakeholders in ensuring that policies and practices are conducive to the effective use of these financial transfers.

By recognizing and supporting the agency of people in recipient communities, it is possible to create more sustainable and impactful solutions to the challenges surrounding remittances in Africa.

Alternative perspectives on the role of remittances in Africa

The potential for remittances to contribute to sustainable development and poverty reduction.

The dominant narrative sometimes portrays remittances as temporary or unsustainable solutions to poverty, meanwhile remittances carry the potential to contribute more effectively to sustainable forms of development and poverty eradication.

For example, investing in education, health, and other areas through remittances can contribute to long-term development, and help create positive and equitable outcomes for recipient communities. Additionally, by supporting entrepreneurship and small businesses, remittances can stimulate economic activity and create employment opportunities, which contributes to more sustainable forms of development.

The importance of supporting and empowering recipient communities, rather than viewing them as passive recipients of aid.

Remittances can provide a source of income and support for families, as well as contribute to the local economy. However, if recipient communities are viewed as passive recipients of aid, they may not be able to fully leverage the potential benefits of remittances.

Empowering remittance recipient communities can involve a variety of strategies, such as providing financial education and training to help individuals and families make the most of their remittance income. It can also involve supporting small businesses and entrepreneurship, as remittances can provide capital for investment. By supporting the development of local economic systems, recipient communities can create a more sustainable source of income and increase their resilience to external shocks.

By supporting and empowering recipient communities, it is possible to create more sustainable and impactful solutions to the challenges surrounding remittances in Africa.

The role of governments, international organizations, and other actors in facilitating the effective use of remittances.

While it is important to recognize the agency of recipient communities in addressing the challenges surrounding remittances, it is also important to acknowledge the role of governments, international organizations, and other actors in facilitating the effective use of these financial transfers.

For example, governments can play a role in regulating money transfer companies to ensure that fees are reasonable and transparent, and can also work to create an enabling environment for the use of digital financial services, which can make it easier and more affordable to send and receive remittances. International organizations and development partners can also support efforts to increase the effectiveness and sustainability of remittances, through initiatives such as technical assistance and capacity building.

Conclusion

In conclusion, the dominant narrative around the "problem" of remittances in Africa often obscures the vital role that these financial transfers play in supporting household income and economic activity on the continent. While it is important to address issues such as high fees and corruption that may impact the effective use of remittances, it is also important to recognize the agency of recipient communities and work with them to identify and implement solutions that meet their needs and priorities. By considering alternative perspectives on the role of remittances in Africa, it is possible to create more sustainable and impactful solutions to the challenges surrounding these financial transfers.