Remittances – Domestic as well as International or cross border are on rising since the early 1990s. If just for a minute we can assume:

  • Every person on this planet has a mobile phone
  • All mobile users have a bank account or a wallet.
  • Every bank account is created instantly.
  • Virally and at no cost, no bank charges exist, even for cross border transfers.
  • If customers money is always available from anywhere.
  • Every person can be a merchant at no take-on cost or POS device requirement.

One would say stop dreaming and go back to your work. This is my dream though and would like to see this world in near future.


Domestic or Cross Border Remittances

For instance, if we pick up one part “Domestic or Cross Border Remittances”. This piece has how much potential, how many challenges, what acceptability etc.

Would be interesting to know. I recently being interviewed by “George Chirwa”, who is PhD candidate studying “Remittances and their Economic Development impacts”. It was very exciting to answer his questions and listen to his side of the story. I am sharing some pieces here.


Cross Border remittances (CBR) expected to raise about $0.8 trillion USD. Numbers here are really big and yes this is a big deal. But since most of the world’s population now has access to the Internet or mobile phones, it is just a matter of time before the scales tip to primarily digital versus in-person remittances.

Remittances it is believed to increase the money supply and stimulate demand for consumption and investment. Innovative competitors are entering the market with alternative remittance models that send money via the Internet, mobile phones, mobile wallets, and social networks, sometimes in combination with mobile money or virtual currencies, or repurposing the remittance payment rails.

These new digital business models encompass the benefits of cost, customer experience, and convenience, and are poised to put consumers back in control of their money. Innovative ways of remittances shown the opportunity of remitting beyond money or cash. Remitting goods, services and professional services are now on mind and need of the time. Remittances play a very important role in eliminating poverty of a nation.

The high rate of economic growth leads to a sustained increase in the productive capacity of the economy through productive policies, which in turn leads to increasing employment opportunities in the country. This process allows a progressive absorption and integration of the unemployed and under-employed including skilled and un-skilled into expanding economic activities with high levels of productivity.

Domestic remittances also exist Recurrent – but typically made by individual transfers. For remittance service providers (RSPs), often indistinguishable from any other retail cross-border transfers. Low price may often be more important than a high level of service. The purpose is to tackle weaknesses in the market that inhibit competition (including poor regulation). Few questions are highlighted below


What is the impact of remittances on the receiving country?

  • Remittances play a critical role as much as they contribute to the export receipts for the country and are a major source of the countries revenue. In a few African countries its very significant, international remittance inflow play a very critical role where 29% of international remittances come in as foreign direct investment in the country
  • Typical African (Small country through) gets benefited immensely from International remittances in a country where over 80% unemployment is seen and you can found that the sponsors who happen to be a same country fellow in the diaspora have sustained their loved ones


What is the impact of remittances on the sending country?

  • So, first, I think there are about 2 million Zimbabweans living in South Africa; their ability to send International remittance result from the fact that they are employed and generating some form of income. In so doing they also contribute to the development of Macro Economic Business activities in South Africa.
  • The crux of the matter is that it is only a small portion that people take out of South Africa. So out of the tax that has been paid in South Africa, out of rental income, out of the amount that goes into the retail sector in South Africa where they buy food, goods clothing, whatever on a day to day basis.
  • And we hope that in the long run, we know the groups of people who then contribute to terrorism financing and money laundering; these are the things we typically watch for from the sending countries.


What are the other impacts of remittances?

  • It does impact greatly for example when Libya had its great political unrest. Companies like money gram had to shut down because it became too dangerous for the locations to stay open. Even it was too dangerous for customers to walk into these locations.
  • Where there is such political unrest and shut down becomes must it impacts GDP greatly for the year because money isn’t coming in. But it’s also a two-way pattern, for instance, Zimbabwe when they had some political unrest, remittances increased because people started sending their loved ones more money more often because they were realising that their loved ones either needed to leave the country or they needed to stock up on goods before things became worse.
  • It just depends on the country at hand if the political unrest becomes dangerous then remittances will decline because MMT service providers forced to close.


What is the general impact of remittances on an economy?

  • General Impact of Remittance on the receiving Country
    • Positive economic impact Remittances make up a significant proportion of the GDP of a country. in fact, countries like Kenya, Ghana, Ivory Coast and Uganda, Remittances can be the number 2 number 3 item on the GDP categories, so it’s a massive source of foreign exchange to those countries, and it also contributes to foreign exchange in those countries. So, it’s very clear that’s it’s a significant portion of GDP
  • General Impact of Remittance on the sending Country
    • Positive economic impact So, you can look at it from one side of productivity because of high volumes of migrant workers in sending countries they are high productivity in development and business activities
    • Negative economic impact So, you can also look at it as possibly a net outflow of cash situation in that country, it kind of change the balance of payment in that country to be negative.

Remittances are part of an individual’s access to financial services. A good remittance product improves value to the user in the short term and access to other financial products in the long term it also increases competition and could move transactions to the formal sector.


Books, Study Material and Interviews Referred.

  • Interview with George Chirwa – PhD student from South Africa in the area
  • On Ground hand on experience
  • Interviews with real customers in India, Zimbabwe, Kenya and Indonesia


fmConclusion – Issue of pricing, we need to work hard and try to figure out a way of ensuring or driving economies of scale by ensuring that remittance inflows are affordable, and if they become affordable across channels, perhaps people will shy away from using informal channels. The extraordinary thing about last week was what the second important piece of remittance-related news had to offer: Ant Financial Services Group of China will pay $880 million to buy MoneyGram, the second-largest global remittance firm, based in Dallas, Texas. As research has shown to be the case with cross-border remittances, even total amounts remitted are sensitive to price. An efficient domestic payment system infrastructure is key to reduce the costs of remittance services, especially in receiving countries.

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Posted by V Sharma

A Technology Specialist boasting 22+ years of exposure to Fintech, Insuretech, and Investtech with proficiency in Data Science, Advanced Analytics, AI (Machine Learning, Neural Networks, Deep Learning), and Blockchain (Trust Assessment, Tokenization, Digital Assets). Demonstrated effectiveness in Mobile Financial Services (Cross Border Remittances, Mobile Money, Mobile Banking, Payments), IT Service Management, Software Engineering, and Mobile Telecom (Mobile Data, Billing, Prepaid Charging Services). Proven success in launching start-ups and new business units - domestically and internationally - with hands-on exposure to engineering and business strategy. "A fervent Physics enthusiast with a self-proclaimed avocation for photography" in my spare time.

One Comment

  1. Excellent Article/Blog, Very informative post that resolved all me queries, keep updating, Thanks

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