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WOCCU CU support would increase remittances in Africa
TUNIS, Tunisia (11/4/09)--More remittance funds would reach more people, especially those in poor rural areas, if Africa's savings and credit cooperatives (SACCOs), or credit unions, were able to better support cost-effective remittance programs, according to the World Council of Credit Unions (WOCCU). People in developing countries worldwide depend on remittance income--money transfers sent by family members working abroad--to sustain their households, but some countries’ financial systems are better able to support such programs than others. African nations have been particularly hard hit because their capabilities are hamstrung by restrictive regulations and dominated by only a few providers, WOCCU said. “Remittances have become a critical income source for many poor families in developing countries,” said Saul Wolf, remittances manager for IRnet, the international remittance program supported by WOCCU Services Group, the association's for-profit arm. Speaking to attendees at the recent International Fund for Agricultural Development's (IFAD) Global Forum on Remittances in Tunisia, Wolf echoed the findings of a recent IFAD study, noting that lower transfer costs and greater access through microfinance institutions (MFIs) like SACCOs will improve Africa's remittance opportunities. “High remittance fees take money away from poor recipients who depend on the funds to meet basic needs and improve the quality of their lives,” Wolf said. “IRnet’s goal is to help African SACCOs gain the capabilities necessary to grow their remittance programs where local laws permit.” Roughly 30 million Africans live outside their country of origin, and many leave to find work, according to the IFAD study. African migrants send about $40 billion in remittances to their families each year. An estimated 30% to 40% of remittances are for recipients in underserved rural areas, many of whom face high transfer fees and the need to travel long distances to receive their funds. Both hurdles diminish the funds, leaving less for recipients to meet their personal needs. Regulatory restrictions in some African countries also prohibit MFIs, including SACCOs, from participating in electronic funds transfer activities, which support remittance traffic. Market dominance by Western Union and MoneyGram, which the IFAD study estimates control 65% of Africa’s remittance market, leave little room for fledgling service providers to grow. Greater involvement by SACCOs and other MFIs would not only help make remittances more affordable, but foster greater economic stability among Africa’s working poor, the study said the study. IRnet’s program in Kenya has demonstrated that SACCOs can be effective conduits for remittance funds. Currently, 11 SACCOs throughout Kenya distribute remittance funds sent via credit unions in other countries to family members back home. Kenya's SACCOs processed 1,432 transactions, or about $670,000 in the first nine months of 2009, indicating that the number of transactions and the amounts transferred are increasing. Kenya is IRnet's first foothold in Africa. The program, which supports credit union-to-credit union funds transfers in seven Latin American countries, accounted for more than 1.2 million transactions totaling roughly $491 million worldwide in 2008. WOCCU would like see both amounts increase, and hopes to bring IRnet services to other African nations through their SACCOs pending increased technological capabilities and favorable regulations in support of such programs, Wolf said. “IRnet can be a critical link in the chain because it can help facilitate viable low-cost money transfer opportunities for people worldwide,” Wolf said. “We want to follow the model we’ve established in Kenya and expand IRnet to other parts of the world, where high remittance fees remain the norm rather than the exception.”
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