For many Africans living abroad, the challenge of finding affordable ways to send money home is no longer about the absence of such options, but the limited awareness and lingering trust deficit.

While Africa remains the costliest region in the world to send money to, some experts believe cheaper options are within reach, especially in high-volume remittance corridors.

Fuelled by the rise of financial technology (fintech) firms, the long-standing goal of cutting remittance costs to below three percent appears closer than ever, if information gaps can be bridged.“There are companies that have actually done that and reached that goal; it’s just that they are not known by the people that need them,” said Vincent Aberi, East Africa growth manager for US and Canada at international payments company LemFi.

Yet, World Bank data shows most remittance corridors remain well above the desired three percent, raising doubts about whether the target is achievable.

Sending money from the United States to Kenya costs about seven percent, while sending from Canada costs 7.3 percent. Transfers from the US to South Sudan average 5.3 percent, and from Canada to Rwanda, about six percent.

Read: Kenya diaspora remittances up 19pc in first quarter as inflationary pressure easesIn the quarter to March, the average cost of sending money to Africa was 8.2 percent – more than double the target – and it shows little sign of falling fast enough.“Although costs are coming down, they are doing so slowly, and it is almost certain that the 2015 United Nations Sustainable Development Goal of reducing them to below three percent of the value remitted by 2030 will be missed,” said David Christianson, a policy commentator, in a recent blog published by the Trade Law Centre (Tralac).

But the picture isn’t entirely bleak. A closer look reveals that while overall costs remain high, some corridors are already within reach of the target.

Sending money from the US to Nigeria, for instance, now costs less than three percent, while remittances from the United Kingdom to Kenya average about 3.9 percent – placing both countries within striking distance of the global goal.

According to Mr Christianson, the cheapest corridors share a key characteristic: high transaction volumes that attract many money transfer providers, making it viable to compete on price.

Indeed, Nigeria and Kenya rank among Africa’s top remittance recipients. In 2024, Nigeria received $21 billion, while Kenya got $4.9 billion, placing them second and fourth respectively – behind Egypt and Morocco.

Across these corridors, a handful of FinTech firms have emerged offering near-zero-cost transfers, earning instead from foreign exchange margins – a model that relies on high transaction volumes.

Sasai, for instance, enables users in the UK and South Africa to send money to Kenya, Uganda, and Nigeria at no sending fee, while PayAngel offers zero-fee transfers from the US, UK, and Canada to Ghana and Kenya.

Read: Africa now fastest growing source of diaspora flows to KenyaLemFi provides a similar model to some 15 countries on the continent, including Nigeria, Ghana, and Kenya, relying on foreign-exchange margins rather than transaction fees. SwyChr also uses a similar model.“The only way this business model can be sustainable is if there are large volumes of money being moved,” explains Mr Aberi. “We don’t charge transaction fees. Meaning that we can only make money from the forex margins, which are very small. So it can only make sense in high-volume corridors.”That means for smaller markets such as Burundi, which received only $49 million in remittances in 2024, cheap transfer options may remain out of reach – simply because too few providers find it profitable to serve them.

But high volumes alone don’t guarantee lower costs, Mr Christianson adds. Currency stability, regulation, and digital infrastructure in the destination country are equally important.“Currency stability, infrastructure, internet penetration, and mobile phone adoption are all significant elements in the equation,” he says.

© Copyright 2022 Nation Media Group. All Rights Reserved. Provided by SyndiGate Media Inc. (Syndigate.info).