Explore Remittances For Ghana’s Development

The Author

Sub-Saharan Africa lags behind other developing nations in several human development indicators. These factors among others have resulted in consistent migration of both skilled and unskilled labour in search of better working conditions abroad. Migrants risk their lives by crossing rivers, oceans and mountains in order to realize their dreams. Remittance flows are one of the upshots of migration, which has emerged as a key link between human mobility and development.

According to the World Bank, officially recorded remittances to low- and middle-income countries reached $466 billion in 2017, an increase of 8.5 percent over $429 billion in 2016. In 2017, Sub Saharan Africa received $38.4 billion as migrant remittances. The largest remittances recipients were Nigeria ($21.9 billion), Senegal ($2.2 billion), and Ghana ($2.2 billion). These were followed by Kenya ($2.0 billion), Uganda ($1.4 billion), Mali ($1.0 billion) and South Africa ($900 million). These estimates mirror official migrant remittances receipts. However, much of what comes from migrants is received through the hands of travelers and goes unregistered. This implies that the estimate of the World Bank is possibly underestimated.

Sending money home from abroad has been proved to be a hidden force for breaking the cycle of poverty and inequality in Sub-Saharan Africa. Published in the Quarterly Review of Economics and Finance, Akobeng (2016) developed an economic model demonstrating that a 10 percent increase in remittances as share of national output will lead to a 1.2 percent decline in poverty rate and 1.5 percent decline in inequality in Sub-Saharan Africa.

Unlike foreign aid which mostly pay for the expensive lifestyles of non-governmental organizations and fills the pockets of corrupt politicians and administrators, migrant remittances go directly to household or family members. Unlike foreign direct investment, remittance flows tend to increase at difficult times when other private capital flows tend to decrease.

Remittances provide a bolster for income declines for receiving households in Ghana. Using the Ghana Living Standard Surveys and published in the International Journal of Social Economics, Akobeng (2017) found that a fall in income of agricultural households in Ghana by GH₵3.8 million due to illness attracts GH₵1 million increase in remittance receipts from both internal and international sources. By implication, a 26 percent fall in agricultural income in Ghana is replaced or socially insured by remittance payments.

Remittances are currencies wrapped with care for food, clothes, houses, education, health and investment. Micro-level research showed that in El Salvador, school drop-out is lower among remittances-receiving households. Also in Mexico and Sri Lanka, birthweight of children is higher among remittances-receiving households.

According to the World Bank, Sub-Saharan Africa remains the most expensive place to send money to, where the average cost is 9.4 percent. This is more than thrice as high as the Sustainable Development Goal target of 3 percent. Given the importance of remittances in the Ghanaian economy, policies aimed at reducing the transaction cost of remittances have to be pursued. As a country, we have to set a goal of reducing remittances cost and start thinking of creating a non-profit platform to send money to Ghana at low cost. Effective remittances need well-organized and cost-effective end-to-end systems from sender to receiver.

The banking system is an effective means for directing remittances into fruitful investments. Developing banking services by particularly targeting migrants can be successful in attracting remittances to the banking sector. Increasing the competiveness of the private sector through efficient management of the economy, structural reform at the institutional and policy levels, and vigorous infrastructural development to support remittance payments will improve the investment climate for remitting.

The mobilization of diaspora organizations and individuals to channel remittances towards community projects that benefit the poor must be considered. We must explore the benefits of both diaspora-given and diaspora-saving. Government of Ghana must endeavor to get data on diaspora population and encourage the formation of diaspora organizations. Skills, knowledge, entrepreneurial capabilities and other resources of migrants can be tapped to benefit Mother Ghana.

It will be economically beneficial and politically prudent for the Government of Ghana to concentrate efforts on interventions that will direct more remittances for development. Prioritization of remittances as a poverty-reducing and income-equalizing tool in preparing national budgets and poverty-reduction strategies can be one of the “Ghana beyond aid” pillars.