Uganda’s immigrant workers have been sending less money to their families as COVID-19 continues to impact the global economy and the job market. Such remittances not only provide crucial support to individual families but the economy too.
The May 2021 Migration and Development Brief shows that remittance flows to Uganda declined by 26 per cent, from US$1.4 billion in 2019 to US$1.1 billion in 2020.
The publication by the International Fund for Agricultural Development (IFAD) says despite the decline, Uganda was ranked among the top ten recipient countries in sub-Saharan Africa.
According to the report, for millions of households that depend on remittances, the decline only underscores the role these private transfers of funds play in safeguarding their food security, health care, savings and investment opportunities.
Uganda’s mobile money service is one of the most integrated globally, especially for cross-border mobile money services. Existing services allow people to receive money from four countries in SSA and send it from wallet to wallet to six different countries in the region.
A recent study highlights the fact that innovative solutions have the potential to increase access to and use of remittances received by households for greater financial inclusion and investment opportunities.
Acting Head of the Financial Inclusion division of the Bank of Uganda, Tilda Nabbanja says there has been a great transition to digital financial services, the key concern for Uganda remains to make money transfer safer, more secure and cost-effective.
“Greater financial literacy, innovations in service delivery and synergies among the development institutions, private and public sectors have to be built, in order to promote financial inclusion in the country,” says Nababanja
The average cost of sending money to Uganda remains high at 8.7 per cent, double the Sustainable Development Goal’s (SDG) recommended target of 3 per cent. It is hoped that as Bank of Uganda implements the National Payment Systems law , Uganda will to achieve the set SDG target.
The Central Bank is expected under the new law to create an enabling environment for digital financial and payment service providers, and increase competition and consumer protection The study also recommends specific actions to safeguard and recover from the COVID-19 crisis.
According to IFAD, remittances sent by migrant workers to and within Africa were overUS$60 billion in 2016, of which 38 per cent (US$23 billion) were sent by migrants residing in Europe.
These flows were expected to reach US$80 billion in 2020, benefiting over 200 million family members of African migrant workers, the majority of whom live in rural areas In Africa, one out of five people send or receive international remittances, without considering domestic flows.
Most remittances received in Africa cover daily needs, with a significant amount (25 per cent) available for savings or investment. Bringing these funds into the formal financial system can dramatically increase their impact. When remittances are deposited into financial institutions, they can benefit both the individual and the community.
To help catalyse growth in the market, IFAD recently launched an over US$60 million fund which among others will boost both international and domestic remittances and migrant capital in rural areas of developing countries.
The aim is to identify and support initiatives that reduce transaction costs, accelerate digitalization, leverage remittances to deepen financial inclusion and expand formal channels.
“As all governments plan for recovery strategies, it is crucial to facilitate the contribution that 200 million migrants make to over 800 million family members around the world,” said Pedro De Vasconcelos, Manager of IFAD’s Financing Facility for Remittances.
“The opportunity for Uganda today is not only to make remittances cheaper as per the SDG target, but also to make them count for the millions of families that receive them. That will give families with greater financial options in their daily lives and ensure greater resilience, particularly in times of crisis,” he added.
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