Unctad tips Malawi, other son maximising remittances
The United Nations Commission for Trade and Development (Unctad) has urged developing economies, including Malawi to promote consumer protection measures to maximise the poverty-reducing power of remittances.
Unctad said in a statement among others, developing economies need to regulate transfer fees and exchange rates to reduce costs and ensure more funds reach the intended recipients as well as promote financial literacy to help consumers make informed decisions.
Unctad has also urged economies to encourage digital remittance services to provide more affordable and accessible money transfer options, enhance transparency and combat fraud to protect consumers from hidden fees and deceptive practices and develop effective dispute resolution mechanisms to provide recourse for issues like delayed transfers or discrepancies in amounts received.
Unctad Secretary-General Rebecca Grynspan said the protection of consumers in financial markets like remittances is “a matter of great importance and urgency”.
“These remittances enhance resilience, enable investment in housing and provide stability,” she said.
Unctad data show that remittances, a critical lifeline for millions of people in developing economies, reached nearly $800 billion in 2022 with approximately 80 percent of these funds, sent by migrants to their home countries, going to low and middle-income nations.
This amount, about four times greater than last year’s official development assistance from all advanced economies, highlights the potential role of remittances in poverty reduction.
Studies also show that a 10 percent increase in international remittances as a share of a country’s gross domestic product can lead to a 1.6 percent drop in poverty rates.
But high transaction costs, averaging around 6.2 percent globally, according to Unctad data, reduce their effectiveness.
On the domestic front, Malawi ’s net remittances have been on a downward spiral necessitated by declining inflows as well as those taken out of the country for other imports, Reserve Bank of Malawi data show.
The net remittances, money that remains as foreign exchange that can be used to finance imports, have since declined from about $21 million (about K36 billion) in 2019 to about $6 million (about K10.2 billion) in 2022.
Malawi University of Business and Applied Sciences associate professor of economics Betchani Tchereni earlier observed that since people are shunning official channels when transacting, Malawi is losing a lot.
According to the International Fund for Agricultural Development, over 50 percent of remittances are sent to households in rural areas where 75 percent of the world’s poor and food-insecure live for improving their livelihoods, increasing their resilience and achieving their sustainable development goals.
