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BusinessEthiopian diaspora remits USD 4 bln

Ethiopian diaspora remits USD 4 bln

– Most use informal channels

Dispersed far and wide, members of the Ethiopian diaspora have sent in USD four billion last year via formal channels, a report indicated. Overall, they are expected to send USD 4.6 billion to the country by the end of this year, according to the same study. 

The study shows that remittances to Ethiopia account for some five percent of the country’s GDP. “Scaling up Formal Remittances to Ethiopia,” was the title of the study financed by the European Union (EU), and it was discussed on Thursday.

According to Leon Isaacs, author of the report, the remittances Ethiopia is receiving represents one quarter of the foreign exchange earnings. In ten months of 2016, the remittances sent home exceeded overall export earnings. 

Total 2016 remittance is estimated to be between USD 3.7 and four billion. As Isaacs clarifies, these figures are solely based on the estimates of the National Bank of Ethiopia (NBE). But when it comes to the different methods and estimates of the World Bank Group, the stated value of remittances was USD 624 million in 2014. Furthermore, Isaacs mentioned that the official figures the International Monetary Fund (IMF) has for Ethiopia in 2015, sourcing NBE, stood at USD 3.7 billion. That disparity occurs mostly due to different approaches of data collection and reporting, Isaacs suggested.

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Demeke Atanfu, director general of the Diaspora Engagement Affairs Directorate General of the Ministry of Foreign Affairs (MoFA), lists the figures more confidently based on the records of NBE. He noted that USD 1.4 billion has been remitted in 2010/11, USD 2.4 billion in 2012/13, USD 2.9 billion in 2013/14, and USD 3 billion in 2014/15. In 2016/17, it is estimated to hit USD 4.6 billion.

Hence, the amount of money remitted to the country has been growing since 2009. Before 2009, according to Demeke, remittances stood at USD 400 million. Policy measures NBE undertook amending “Provisions for International Remittances Services,” enacted in 2006 had helped to transform remittance services.

According to Isaacs, the amended directive introduced essential principles including arranging non-exclusive conditions when Remittance Service Providers (RSPs) enter agency agreements between one another. Transparency in fees Money Transfer Operators (MTOs) charge and the zero commission in local banks for the payout of remittances are some of the undertakings NBE considered. Elias Loha, advisor to the governor of NBE, added that NBE has obligated MTOs to disclose publicly the rates or fees they charge in providing money transfer services. According to Demeke, there are some 40 MTOs operating in Ethiopia but the likes of Western Union, MoneyGram, Dahabshil, and Transatlantic are the bigwigs taking up the lion’s share of the remittance business.

Yet, due to barriers in the formal ways of sending money home, out of the estimated three million Ethiopian migrants living abroad, 78 percent use informal channels.

As Isaacs indicated, the Middle East and South Africa are two notable places where huge numbers of undocumented migrants are believed to be facing challenges of sending money formally. Out of the 1.2 million migrants in the Middle East and 200,000 in South Africa, 90 percent are likely to be remitting informally to Ethiopia. By the estimates of MoFA, from Saudi Arabia alone, where some 750,000 Ethiopians are believed to be living, USD 590 million is estimated to be remitted. A USD 158 million remittance could be sent from migrants in South Africa as well.

Though Ethiopia is estimated to be receiving a high volume of remittances in Africa next to Nigeria and one of the top 20 globally, there are grey areas, which Isaacs put in the study as barriers, have limited the potential of formal channels of remittance. Accordingly, high costs and prices of sending money, lack of services in rural and far-flung areas, speed of services and the like are some of the barriers, Isaacs pointed out. He recommended a range of measures that would create more access to formal remittance services both in the sending countries and in Ethiopia. For instance, improving irregular migrants’ access to formal remittance by addressing issues of identification, promoting formal routes of migration, supporting remittance payout locations in rural areas are some of the suggested undertakings Isaacs listed.

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