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Thursday, 17 May 2007

Zambian Remittances


Thanks to Yakima for pointing out this interesting table from the World Bank paper we have been discussing on "World Bank on Zambia's brain drain". It appears to show that Zambians abroad send less money compared to others. While statistics can always be debated, it does raising an interesting "why?" question.

17 comments:

  1. I read the statistics differently - per capita remittance of 2.13 places Zambia in the middle rather than at the bottom of the list. Percentage of GDP is meaningless because a country can have fewer emigrants and thus lower total remittances compared to other countries. Also higher per capita remittances for other countries can be due to factors such as more war refugees from countries like Sudan sending money back. It would be interesting to see what Zimbabwe's per capita remmitance is now.

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  2. "I read the statistics differently - per capita remittance of 2.13 places Zambia in the middle rather than at the bottom of the list."

    You need to look at the sub-saharan average which is 4.6. That is your "middle".

    Zambia is significantly below the 4.6. So we are certainly not in the middle.

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  3. doesn't mean we're stingy, it could be due to a host of factors

    those that are outside could be from well to do families (relatives speaking) so once out here their families back home don't depend on them to send money to survive. there are people from other countries that risk everything to cross over because that's the only way that their families back home can survive.

    i am going to give you my personal example, and this' not to brag or nothing like that. my family back home doesn't depend on me to survive, they don't depend on me sending money home for their survival. i send money when i feel like, when i can or if there are some projects that we're undertaking. i had a nice little send off party of ifyumbu, imbalala, tute umunkoyo na mahewu. i didn't have to pay someone to ship me across....

    like kafue said, there are some nationalities who are out of their contries and the people back home depend on them for pretty much anything.

    it depends on the push factors (what factors forced these people to leave their coutries) those that HAD to leave their counties will have a bigger obligation to send money back home than those that left on their own, bought their own tickets, had applied for school and knew exactly what they were going outside to do as opposed to JUST leaving and not even knowing what they'll be doing once they cross over.

    i'm going to have to do a browser clean up on my computer 'caus i can't see the list of countries right now, as a result my arguments/ statements are from a global or general view point, i'm not sure what countires zambia was compared against.


    as well, i don't knwo what tool the world bank is using to determine how money is sent back home, is it western union, banks or what? money could be going home through various other means.

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  4. "You need to look at the sub-saharan average which is 4.6. That is your "middle".

    Oh, okay I see what you are saying. Anyway maybe it is a positive thing because it may mean that Zambia has fewer emigrants because it is a peaceful place compared to say Sudan.

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  5. Check this out on page 6. Zim has $1.3 billion remittances from Jan-Sept 2004, so per capita remittance of at least $106. A lot of refugees!

    http://www.nedap.org/programs/documents/MigrantRemittances--April2007_2.pdf

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  6. "Anyway maybe it is a positive thing because it may mean that Zambia has fewer emigrants because it is a peaceful place compared to say Sudan" - Kafue001.

    Worth looking at Table 1 in the paper:
    http://www-wds.worldbank.org/external/default/WDSContentServer/IW3P/IB/2007/02/22/000016406_20070222100116/Rendered/PDF/wps4145.pdf


    To quote the commentary: The table shows that the "emigration rate from Zambia is lower than the african average but comparable to the average in Southern Africa".

    In that sense we are not really special, and therefore our contributions per capita should be broadly the same.

    By the way that paper has some interesting nuggets in there too, beside this issue. Worth reading it if you have sometime to spare, and then come back and contribute on the blog......:)

    Now on ba Mukolwe's analysis....let me think....

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  7. Kafue001,

    By the way, your point is very valid on Zim.

    There are a lot of Zimbabwean's outside - but equally we need to look and learn from other countries like Uganda that are peaceful with greater contributions than us.

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  8. Ba Mukolwe,

    "i had a nice little send off party of ifyumbu, imbalala, tute umunkoyo na mahewu. i didn't have to pay someone to ship me across...."

    lol!!!!

    You got a point though......obviously there are different reasons why people go abroad and one of those is certainly due to insecurity at home and the need to send back cash...

    But I don't know why Zambia is special compared to Seychelles (which is more affluent even) or Uganda. From what you are saying at the "macro" level, poorer nations actually should have more incentive to send back money!!!!
    Which is precisely the opposite of what we are seeing in our case..:)


    "i'm going to have to do a browser clean up on my computer 'caus i can't see the list of countries right now, as a result my arguments/ statements are from a global or general view point, i'm not sure what countires zambia was compared against".

    I hope you are successful. If not, please refer to the PDF file below....
    Page 31, Table A2
    http://www-wds.worldbank.org/external/default/WDSContentServer/IW3P/IB/2007/02/22/000016406_20070222100116/Rendered/PDF/wps4145.pdf

    It has some other interesting stuff in there...

    "as well, i don't know what tool the world bank is using to determine how money is sent back home, is it western union, banks or what? money could be going home through various other means".

    The table refers to official remittances, so it definitely excludes informal channels.
    But again I see no reason why that would alter the results across nations.

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  9. "While statistics can always be debated, it does raising an interesting "why?" question."

    I wholeheartedly agree Cho, and I've been trying to find both newer data and a better understanding of what is being measured and how given the "tacked on" nature of the remittance table in the report. I suspect that the report's authors did not research this topic in detail, and may have simply seen the chart as supportive of their central thesis mandating temporary migration. It did not take me long to come across this excerpt from the International Technical Meeting on Measuring Remittances, World Bank 2005:

    "14. The data are far from perfect. Aggregate data are subject to the variations of compilation on a national basis. Concepts and methodologies are not applied uniformly across all countries. Data sourcing and compilation is better in some countries than others. Some countries report no data to the Fund, or not on all items. Therefore, data comparison and aggregation have to be approached with caution"
    http://www.imf.org/external/np/sta/bop/pdf/rem.pdf

    The general opinion appears to be that overall remittance flows are about 50% higher than reported amounts worldwide, and that remittance flows are an underappreciated force in development and poverty reduction. The costs of international money transfers can be prohibitive, especially in relatively small amounts and/or when the recipient does not have an accessible bank account of their own. Some articles of interest:

    http://www.imf.org/external/pubs/ft/fandd/2005/12/picture.htm
    http://www.nextbillion.net/newsroom/2005/12/09/remittances-to-africa-overtakes-foreign-direct-investment
    http://www.worldchanging.com/archives/003986.html

    Given the state of Zambian banking services, there may be simple technical barriers to the potential flow of remittances into the country. Perhaps some effort on the part of the GRZ to secure a share of the newly available development aid for this sector is in order.
    http://www.un.org/apps/news/story.asp?NewsID=21924&Cr=IFAD&Cr1=

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  10. I found this additional 2005 paper on Zambia....

    http://www.iom.int/jahia/webdav/site/myjahiasite/shared/shared/mainsite/published_docs/serial_publications/MRS21.pdf

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  11. Yakima,

    Very useful links.

    I agree the data by and large contains some underestimation. A lot of informal channels are used and those aren’t often reflected. However I guess this shouldn’t be a problem for inter country comparisons if we assumed the error was randomly distributed. I mean unless we have reason to believe why the underestimation is more relevant to Zambians than other countries then we can accept the comparisons.

    A key area as you have pointed out is the developed nature of the banking services. Where banking services are more advanced once can expect the “official remittances” to be closer to the true picture than where there are not so developed. And of course further development of the banking system as you say is itself an incentive for sending more money – where it is more developed access for recipients could be easier and hence likely to get the money more regularly – as opposed to having to wait till the person brings it person (informal channel).

    The “next billion” article is particular interesting as it reflects the inclination that most solutions possibly lie on the side of western Governments to make it work for us:

    ”Private transfers are large and stable sources of foreign exchange for poor countries and are more likely to reach poor households than other capital flows. The average per capita remittance by migrants in developed countries is around US$ 200 per month.

    In the light of this it is becoming imperative that the cost of transmitting remittances needs to be reduced to allow African countries receive larger private capital flows.”


    I guess the fundamental question from our end should, be what can Zambia do to make it work? One idea may be to strongly encourage Zambians abroad to set up small enterprises back home – for example we should be encouraging Zambians abroad to partner each other to come up with solutions and these could command a special tax break!

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  12. Yakima,

    In the light of this it is becoming imperative that the cost of transmitting remittances needs to be reduced to allow African countries receive larger private capital flows.”

    Check out Cashmo.

    Their prices are reasonable. It would still be better of course if you could just transmit money electronically through ones bank account.

    I haven't tried them, and I don't even know if they work for Zambia, but they advertised on a Zambian website.

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  13. MrK

    The charges are very low with Cashmo...Zambia is not listed though..I'll investigate..

    I once had the idea that this would be a good viable business to go into...A Zambian Western Union..

    I stopped when I saw Western Union branches in Mansa!! Then I appreciated their global reach...

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  14. Cashmo's transfer rates are indeed very reasonable at 3-5%, and the flat rate is especially attractive for the smaller amounts most africans are able to send. From what I am able to gather, the company operates exclusively through local bank branches, so penetration of the greater Zambian market would be dependant on the expansion of the existing network. At the moment Cashmo does not have such a relationship with the BoZ. Sender locations also appear to be limited to the UK and New York, though they have opened three offices in Washington DC and are planning expansion into Spain.

    Western Union is definitely the juggernaut of the industry, with over 100 receiver locations within Zambia. Their rates for small transfers are rather predatory however. UK (online processing) transfer fees on amounts in pounds start at:
    100 = 14.0%; 200 = 10.5%; 300 = 9.0% ; 400 = 8.0%; 500 = 7.4%; 999 = 4.7% (maximum amount allowed per month)

    Western Union also admits that they will make additional money from currency exchange processing and reserves the right to impose further fees on the recipient. For transfers originating in the US the company is apparently basing fees on the amount of competition they encounter from region to region. Sample fees for a US$200 transfer (approx UK100) are:
    New York = 5.25%; California = 8.0%; New Jersey, Washington DC, Illinois, Georgia, Texas = 13.5%

    Getting competition capable of overcoming the WU advantage in distribution seems to hinge on expansion of access to basic banking services, such as branch offices or secure ATM locations. For recipients with reasonable access to services, other remittance organizations become viable. Examples include pre-paid VISA debit cards from companies like iKobo, http://www.ikobo.com/africa/money-transfer-zambia.html, mobile phone banking as described in these articles: http://www.fundamo.com/index.asp?pgid=45, http://www.developments.org.uk/articles/loose-talk-saves-lives/, and most interestingly from my point of view Micro Finance Institutions as alluded to in this paper: http://www.microfinancegateway.org/files/37017_file_Hastings.pdf

    It is hard for me to imagine people like Hammer Simwinga not providing significant improvement in cost and service over Western Union et al.

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  15. I found this website which is quite useful. It gives information on the money transfer costs compare across provides.

    http://www.sendmoneyhome.org/

    Hopefully in the future it will be more comprehensive. At the momement for example it does indicate my bank - alliance and leicester which allows me to send ANY AMOUNT to Zambia through electronic transfer just for £16

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  16. Hi, I actually manage www.sendmoneyhome.org and we are in the process of making it as comprehensive as we possibly can. It is a mammoth task so it would be very helpful if you could visit http://sendmoneyhome.blogspot.com and leave any comments and suggestions there so we can add teh input to the project. Also if you want to contact me directly you can at huw@sendmoneyhome.org.

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  17. Remittance is very important in certain country because it has big part in economy.

    -Stephanie

    ReplyDelete

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