Money transfer costs may have fallen over the years, but they continue to be costly for a lot of people, with charges still exceeding 30% to 50% of the funds in some markets, according to a new analysis by the International Monetary Fund (IMF).

The G20 countries have set a target to bring down the cost of sending money to no more than 3% by 2030, but as of the first quarter of 2023, some remittance corridors like Turkey to Bulgaria and Tanzania to Uganda are still charging fees of 34% and 52%, respectively, the lender said in its blog on Wednesday.

“Fees exceed 50% for funds sent from Turkey to neighbouring Bulgaria… Costs are notably high for sending money in sub-Saharan Africa, where Tanzanian remittances to Uganda and Kenya incur fees over 30%," wrote Kieran Murphy, Senior Financial Sector Expert in the IMF’s Monetary and Capital Markets Department.

"In South Africa, it’s particularly costly to send across its borders with Botswana, Eswatini and Lesotho.”

Cost of sending $200 (in percent)

The main driver of remittance costs, especially for corridors between emerging markets and developing economies, are fees levied on transfers between banks. However, Murphy noted that such fees tend to be much lower when the money transfers originate in advanced economies, while foreign-exchange margins can be 50% or more of the cost in some corridors.

To help reduce costs, Murphy suggested that international organisations such as the IMF and the World Bank will need to play a key role by sharing best practices through technical assistance for member countries.

“Technical assistance can help because, while targets are set at a global level, they require coordinated and customised assistance at the country level to address specific challenges,” he noted.

In the coming years, Murphy added, the IMF will focus on improving access to payment systems, extending and aligning operating hours, interlinking of payment systems, combating money laundering and the financing of terrorism, and harmonising payment systems.

“We will also collaborate with the World Bank at the country and project level.”

As of the first quarter of 2023, the global average cost of sending $200 from one country to another stood at $12,50, or 6.25%. The average cost has further dropped, but only slightly, to 6.18% in the third quarter of the year, according to the World Bank’s latest Remittance Prices Worldwide database.

The World Bank said the global average has remained below 7% since the first quarter of 2019. Overall, the latest global average represents a decline of 3.49 percentage points since the first quarter of 2009, when the average cost worldwide was at 9.67%.

(Writing by Cleofe Maceda; editing by Brinda Darasha)