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The Quest to Lower High Remittance Costs to Africa: A Brief Review of the Use of Mobile Banking and Bitcoins

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Abstract

The paper reviews the last technological tools that arguably can contribute to reducing the excessively high costs of remittance transactions in Africa. Indeed, despite huge remittance inflows to and within the continent, Africa is the most expensive destination to send money to. As remittances have become more important than Overseas Development Assistance and Foreign Direct Investment inflows in some countries, it has become crucial to explore technological advances that can contribute to reducing their transaction costs. Such reduction would enable the end beneficiaries to capture a larger share of these external resources, which in turn could have an even bigger impact on development in Africa. In addition to revisiting the role of mobile banking in lowering remittance transaction prices, the paper takes a closer look at the newest available technology, the Bitcoin blockchain technology that underpins digital currencies. At this early stage, very few social science researchers have addressed the role that such digital currency could play in the reduction of the remittance transaction prices, except for a few innovative Bitcoin operators. The paper proceeds as follows. It first looks at the causes of the high remittance transaction costs. Then, it reviews, presents and analyses the official remittances data downloaded from the World Bank's Remittances Prices Worldwide database. It also briefly reviews a few remittance transfer technological instruments. Given the novelty of the topic, the review of the most recent existing "literature" on Bitcoin is mainly retrieved from either on - line news sources or information from a few leading Bitcoin operators. In the light of the UN Global Working Group Post-2015 Development Agenda and Sustainable Development Goals proposal to reduce by 2030 the remittance transaction costs to even less than 3%, the effectiveness of these new technological instruments to reach such objective are discussed. Finally, a number of appropriate policy actions to foster the economic impact of remittances are proposed.

Suggested Citation

  • Ralph C. Maloumby-Baka & Christian Kingombe, 2015. "The Quest to Lower High Remittance Costs to Africa: A Brief Review of the Use of Mobile Banking and Bitcoins," CFD Working Papers 10-2015, Centre for Finance and Development, The Graduate Institute.
    • Handle: RePEc:gii:cfdwpa:cfdwp10-2015
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    References listed on IDEAS

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    1. Freund, Caroline & Spatafora, Nikola, 2005. "Remittances : transaction costs, determinants, and informal flows," Policy Research Working Paper Series 3704, The World Bank.
    2. repec:wbk:wbpubs:2300 is not listed on IDEAS
    3. Adrian Blundell-Wignall, 2014. "The Bitcoin Question: Currency versus Trust-less Transfer Technology," OECD Working Papers on Finance, Insurance and Private Pensions 37, OECD Publishing.
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    Cited by:

    1. Saralees Nadarajah & Emmanuel Afuecheta & Stephen Chan, 2021. "Dependence between bitcoin and African currencies," Quality & Quantity: International Journal of Methodology, Springer, vol. 55(4), pages 1203-1218, August.
    2. Heping Ge & Lianzhen Tang & Xiaojun Zhou & Decai Tang & Valentina Boamah, 2022. "Research on the Effect of Rural Inclusive Financial Ecological Environment on Rural Household Income in China," IJERPH, MDPI, vol. 19(4), pages 1-16, February.

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    Keywords

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    JEL classification:

    • F20 - International Economics - - International Factor Movements and International Business - - - General
    • F24 - International Economics - - International Factor Movements and International Business - - - Remittances
    • F30 - International Economics - - International Finance - - - General
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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