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Project reduces high costs of money transfers to developing countries

Project reduces high costs of money transfers to developing countries

Deputy Prime Minister and Minister of Development Cooperation Alexander De Croo joins forces with IOM, the UN Migration Agency, to build a comprehensive price comparison app for international money transfers (remittances). The collaboration between Belgium and IOM must provide users with objective information about the transfer rates. Today, many providers offer remittances services at very high rates.

Belgium will support the development of MigApp, an app that provides objective information to migrants about migration and that includes a price comparison tool for international money transfers. Remittances are the private funds that migrants send to their home countries. At the request of Minister De Croo, IOM is expanding the app so that all 14 partner countries of the Belgian Development Cooperation can be integrated in the price comparison tool. This extension has been made possible thanks to a new partnership between IOM and RemitRadar, an online FinTech provider active in the field of remittances. With the app, users will be able to assess the cheapest service provider options for sending money home. Belgium is one of the four pilot countries where the app has been launched. Other EU pilot countries are Greece, Ireland and the Netherlands.

Alexander De Croo commented: “The new price comparison tool should contribute to a decrease in the rates, which are much too high at the moment. In some cases, one can even speak about extortionate prices. By giving an easy access for the users to information about the cheapest and fastest option, we aim at stimulating the competition. More and more FinTech enterprises are investing in mobile money, which rates are, on average, half of the classic money transfers via the main popular players.”

Costs need to decrease

According to World Bank figures, migrants sent US$466 billion to developing countries in 2017, an amount that exceeds the amount of official development three times over. As such, migrants contribute greatly to the economy of developing countries. However, the problem with remittances resides in their high transfer costs. On average, the cost of sending the money is equal to 7.1% of the amount being sent; for remittances to Sub-Saharan Africa, these transfer costs are 9.4% on average and even higher in some cases. The UN has, in the framework of the Sustainable Development Goals, agreed to lower the costs of remittances to an average of 3% by 2030.

More and more ‘mobile money’

William Lacy Swing, IOM Director General, has recognised remittance flows as ‘economic lifelines’ for migrant families. Remittances reduce poverty, provide better healthcare and access to nutrition and increase education opportunities for children. In an op-ed published ahead of the International Day of Family Remittances (celebrated on 16 June), Ambassador Swing wrote: “let us pause to recognise the tremendous contribution of migrants, both in their financial and social remittances to economies, but most importantly to individual families.”