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The Quest to Lower High Remittance Costs to Africa: A Brief Review of the Use of Mobile Banking and Bitcoins

Ralph C. Maloumby-Baka () and Christian Kingombe ()
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Ralph C. Maloumby-Baka: University of Quebec in Montreal

No 10-2015, CFD Working Papers from Centre for Finance and Development, The Graduate Institute

Abstract: The paper reviews the last technological tools that arguably can contribute to reducing the excessively high costs of remittance transactions in Africa. Indeed, despite huge remittance inflows to and within the continent, Africa is the most expensive destination to send money to. As remittances have become more important than Overseas Development Assistance and Foreign Direct Investment inflows in some countries, it has become crucial to explore technological advances that can contribute to reducing their transaction costs. Such reduction would enable the end beneficiaries to capture a larger share of these external resources, which in turn could have an even bigger impact on development in Africa. In addition to revisiting the role of mobile banking in lowering remittance transaction prices, the paper takes a closer look at the newest available technology, the Bitcoin blockchain technology that underpins digital currencies. At this early stage, very few social science researchers have addressed the role that such digital currency could play in the reduction of the remittance transaction prices, except for a few innovative Bitcoin operators. The paper proceeds as follows. It first looks at the causes of the high remittance transaction costs. Then, it reviews, presents and analyses the official remittances data downloaded from the World Bank's Remittances Prices Worldwide database. It also briefly reviews a few remittance transfer technological instruments. Given the novelty of the topic, the review of the most recent existing "literature" on Bitcoin is mainly retrieved from either on - line news sources or information from a few leading Bitcoin operators. In the light of the UN Global Working Group Post-2015 Development Agenda and Sustainable Development Goals proposal to reduce by 2030 the remittance transaction costs to even less than 3%, the effectiveness of these new technological instruments to reach such objective are discussed. Finally, a number of appropriate policy actions to foster the economic impact of remittances are proposed.

Keywords: Remittances; Mobile Banking; Bitcoins; Africa (search for similar items in EconPapers)
JEL-codes: F20 F24 F30 G21 G28 O15 O33 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2015-10
New Economics Papers: this item is included in nep-dev
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