May 3, 2023

Improving Financial Inclusion and Accessibility Through Inward Remittance in Africa

Sylvia Sinkari Sam and Pandella Duodu

Improving Financial Inclusion and Accessibility Through Inward Remittance in Africa

Financial inclusion plays a critical role in developing the economic growth and development of countries. Financial Inclusion makes financial services accessible and available to all members of society, especially those traditionally excluded from the formal financial sector. One way to improve financial inclusion is through inward remittances, which are the funds that migrants send back to their home countries.
 Globally, inward remittances have become an essential source of income for many developing countries, including African countries. According to the World Bank, global remittances reached $630 billion in 2022, with sub-Saharan Africa receiving $49 billion. 
The World Bank maintains inward remittances are an essential source of income for many households, especially those in rural areas. Inward remittances help to reduce poverty, increase access to education and healthcare, and promote entrepreneurship. However, the high cost of remittances remains a significant barrier to financial inclusion in many African countries. The average cost of sending remittances to sub-Saharan Africa is around 8.46%, which is much higher than the global average of 6.3%.

Remittances can also be a path to financial inclusion as they provide formal channels for sending and receiving money, particularly when they are made into transaction accounts. Remittance inflows enable families at the receiving end to save and invest through formal channels. 

A recent study by IFAD suggests that 75 percent of global remittances are used for immediate needs, such as food, shelter and bill payments. The remaining 25 percent, which accounts for approximately $100 billion, is used for education, health, savings, investments and income-generating activities. As both men and women are active senders and receivers of remittances, it is important that gender is taken into account in the remittance services themselves and in the regulation and supervision of those services. 

In Ghana, inward remittances play a vital role in the country's economy, accounting for over 8% of GDP. According to the Bank of Ghana, inward remittances reached $3.6 billion in 2020, despite the challenges posed by the COVID-19 pandemic. The government of Ghana has taken steps to promote financial inclusion and reduced the cost of remittances, including establishing a National Financial Inclusion and Development Strategy. The flow of inward remittances is a vital source of foreign exchange for Ghana and has significant implications for financial inclusion and accessibility in the country.

Improving financial inclusion in Ghana can be achieved through several initiatives, including promoting mobile banking, developing microfinance institutions, and expanding traditional banking services to rural areas. 
Furthermore, financial inclusion can be improved by strengthening financial infrastructure, increasing access to banking services, establishing more financial institutions in rural areas, and enhancing financial literacy.

Generally, inward remittance has the potential to play an important role in improving financial inclusion and accessibility to the largely unbanked population in Ghana. Remittances provide:

  • A source of funds for households.
  • Supporting the development of mobile banking and digital financial services.
  • Helping to finance the growth of microfinance institutions.

Similarly, Inward remittances support the development of mobile banking and digital financial services. The proliferation of digital technologies is rapidly transforming the remittance landscape. Innovative new technology-based remittance models are challenging incumbent, clunky and costly models. On the other hand, these new models help to reduce transfer costs, time and improve access at both the sending and receiving ends. However, these new, untested and fast-evolving business models could present challenges to customers and regulators alike and would require financial literacy and stringent regulation to mitigate the risks.

As a business, Remcash is contributing to and augmenting the financial inclusion landscape by providing an innovative platform that enables several services, including Remittances, Social Payments, Merchant Payments, Virtual cards etc. Remcash enables seamless, secure payments to businesses, merchants and partners across multiple African markets. Our intelligent platforms are developed to allow companies to connect, collect and collate payments from the widest pool possible in the most secure, seamless and accountable manner possible, irrespective of the business size.
 Remcash Remittance service offers payout options including instant cash pick-up from agents, bank deposits, transfers to mobile wallets and delivery within the remotest areas in the payout country.

Remcash was born out of the desire to inspire development and enhance financial inclusion by filling the gaps that traditional institutions could not close. We are creating a solution that will help anyone, anywhere, anytime, and are open to partnering with like-minded technology partners to cater for Africa's growing economy. Such partnerships will allow us to push the financial inclusion landscape further, meeting our customers' current and future needs.

Remcash is powered by Fortek Financial Hub Ltd. Fortek is a platform solutions company that leverages Codebase Technologies' SaaS platform to augment its existing services and empower new fintech, banks, and start-ups with a faster and more cost-effective speed to market for launching digital products and services.