UK Working to Reduce the Cost OF REMITTANCES IN THE PACIfiC
In 2019 the Pacific received US $675 million (FJ$1.3 billion) in remittances from Pacifica diaspora living and working overseas. Many living in Australia, New Zealand, the UK, and USA. Remittances are a vital source of foreign exchange for countries in the Pacific.
However, the cost of sending funds to the region is amongst the highest in the world, typically over 10 per cent compared to a global average of about 6.5 per cent.
The UK Foreign Commonwealth and Development Office and GSMA (the mobile phone operators association) yesterday convened experts from across the region, the UK and France to explore how mobile phone technology can help to maximise access to and reduce costs of remittances in the Pacific.
The workshop heard from the Reserve Bank of Fiji that remittances have proved a lifeline for Fiji during the Covid-19 pandemic.
Deputy Governor of the Reserve Bank of Fiji, Esala Masitabua said: “During 2020 remittances rose to occupy first place as Fiji’s largest foreign exchange earner with a value of US$356.9 million (FJ$734.9m).”
He predicted that this trend would continue through 2021. Aside from providing macro-economic stability, remittances are vital to maintaining household incomes and livelihoods.
Jean-Paul Penrose, Pacific Development Director at the British High Commission noted that remittances have proved invaluable during the COVID-19 crisis.
They directly benefit households and livelihoods in ways which other financial support struggles to achieve.
“Remittances sent by mobile phone can help deliver vital funds rapidly and cheaply to vulnerable households at times when they are most needed”. Deputy Governor Masitabua highlighted the rapid growth in mobile remittances during the COVID-19 crisis: “The total value of personal remittances through mobile money in Fiji recorded an unprecedented and remarkable annual increase of 338.9 per cent to US$39.6 million (FJ$81.4m) in 2020.
This value accounted for over 218,000 unique transactions during the year: or an average of US$140 (FJ$289.2) per transaction”.
The workshop heard that mobile money transfers are often significantly cheaper than more traditional remittances routes.
Max Cuvellier, Director of GSMA Mobiles for Development advised participants that: “The average price of sending US$200 remittances via mobile money remained the cheapest at 3.53 per cent. Mobile money has great potential to strengthen the Pacific remittance sector”.
However, despite the lower cost of mobile money remittances, uptake is still not as high in the Pacific as in other regions in the world.
Increasing financial literacy and trust in digital money services will be key to increased usage of this cheaper form of remittance service.
Participants comprised leading experts in the field of remittances and mobile technology including Vodafone, Digicel, KlikEx, MoneyGram, Western Union, and Reserve Banks across the Pacific, Governments and development partners including the UK, Australia, UN, and World Bank.
These experts explored how to increase access to mobile remittances in the region and how to bring down the costs.
Key recommendations include reform of regulatory frameworks, building trust in mobile remittances and increasing awareness and financial literacy.
Key to growing the mobile remittances market they agreed is the ability for recipients to use these funds for other digital services such as making bill payments or for savings.
In closing the workshop Jean-Paul Penrose noted that: “Shifts in behaviour forced on us by COVID-19 might just be the trigger we need to strengthen the mobile remittances sector in the Pacific and in so doing increase accessibility and bring down the costs of transfers.
The UK and GSMA stand ready to work with other partners to support this”.
The UK funded GSMA report on Harnessing Mobile Technology to Strengthen Remittances in the Pacific will be available early June 2021 on the GSMA website.