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Remittances – The Untapped Potential of the People

Considering the economic and livelihood resiliency and agency remittances provide to Sahelian populations, formal remittance paths and financial products need to be created to continue continued access to this critical financial modality


The net quantifiable result of the resilience and agency of the Sahelian population is that remittances generated on the back of their labour and agility have and continue to constitute the single largest sustainable financing flow into the region – even during the pandemic. ODA and FDI pale in comparison.


Between 2016 and 2020, the value of remittances sent to the Sahel region was US$130 billion, three times the value of FDI in the same year (US$37 billion) and 2.5 times the value of ODA and official aid received in the same period (US$52 billion). Each year, on average, the value of remittances is 2.5 times the value of ODA and official aid received. While three-quarters (75 percent) of remittance flows cover immediate needs, IFAD estimates that a quarter (25 percent) of remittances can be used to achieve other development outcomes.


Although the cost of sending remittances decreased from 17 to 10 per cent of the money sent between 2016 and 2020, the cost of sending US$500 to the Sahel region is still higher than the Sub-Saharan African average of 8 per cent. The cost of sending remittances to the region is also well above the G20 countries’ “5-by-5” target at 5 per cent of money sent, as well as the sustainable development goal (SDG) target 10.c of 3 per cent.

To protect the fruits of Sahelian labour and strengthen livelihoods, a multi-pronged approach is needed on remittances. While remittance flows of between US$ 200 and US$ 500 account for 60 percent of household income, leveraging remittances can have a significant impact on the livelihoods of migrants. Reduction in the cost of remittance transactions, switching migrants away from informal to formal remittance channels, and creating financial products such as loans and insurances are key.


Financial technology companies can play a key role in boosting financial inclusion, especially in areas not covered by existing financial services. These measures can directly impact households, especially those in rural and hard-to-reach areas. In addition, promoting financial inclusion and literacy for remittance recipient families can increase formal savings and investments which in turn can increase access to health, education, and better housing with a positive impact on the SDGs.


Drawing inspiration from IFAD’s multi-donor Financing Facility for Remittances, remittances could also be seen as an opportunity to improve entrepreneurship and strengthen the private business environment for micro-, small-, and medium-sized enterprises (MSMEs), generate investments in rural development as well as investing in climate-smart agriculture such as agro-forestry to increase long-term resilience to climate change.




Date - 12 May - 2023



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