Remittances from the Rwandan Diaspora contributed at least 2 per cent to Gross Domestic Product in 2016 and grew by 34 per cent over the last decade, a report by International Fund for Agricultural Development (IFAD) shows.

In 2016 alone, remittances stood at $163 million, the report, released last week, shows. The report, "Contributing to the SDGs, One Family at a Time,” studied trends in remittances as well as impact to beneficiaries.

However, despite the growth over the years, statistics from the National Bank of Rwanda indicate that remittances into the country have been going down over the last three years.

The remittances began taking a dip after 2013/14 fiscal year when it stood at $128.6 million; 2014/15 saw the remittances drop to $113.6 million and $100.7 million the following year.

Experts and analysts have attributed this to the global economic slowdown that has affected most developed countries which are the sources of the remittances.

Others explain the trends to be due to changes in money transfer systems and avenues some of which are not detected by the central bank.

Louise Antoine Muhire, chief executive of Mergims, a firm that facilitates migrant workers to transfer money to their home countries, said  the global economic slowdown could have affected remittances.

"Whenever there is a slowdown, disposable money becomes less,” he told The New Times.

Global economic growth decelerated in 2015 and 2016 to stand at 3.1 per cent last year with advanced economies growing very moderately compared to Africa.

The multiple money transfer and remittance avenues could also have gone uncaptured by the central bank, causing the drop in the latest figures.

Cost divides

Some Rwf9.7 billion is sent to Rwanda each year by 4,781 Rwandans living in the UK. However, the average cost of sending Rwf129,000 from the UK is 13 per cent, one of the highest in the region, and almost twice as much as sending money to Kenya.

In general, sending money to Africa is more expensive than anywhere else in the world, according to new research published at recent Global Remittance Conference in New York.

The report argues that existing technology – like regional automated clearing houses, remittance payment processing hubs and aggregators – could all make sending money from the UK to Africa cheaper.

The UN Sustainable Development Goals says that, by 2030, the global average price for remittances should not exceed 3 per cent of face value, with even the most expensive countries not being more than 5 per cent.

The report was commissioned by Financial Sector Deepening Africa and written by Developing Markets Associates. Waringa Kibe, the  country director at Access to Finance Rwanda, said this gap reveals opportunities for the emerging Africa financial technology firms to develop digital solutions that would increase efficiencies in service provision and reduce the cost of cross-border money transfers.

"The findings also draw attention from all stakeholders such as policy makers, regulators and private financial sector players to put in place and accelerate mechanisms that will facilitate the flow of money transfers to the Rwandan economy,” said the Access to Finance Rwanda chief.

The digital impact

A section of the Diasporan community prefer to pay for goods and services for their friends and relatives back home directly as opposed to transferring cash. This has led to the rise of e-Commerce platforms.

"There are multiple technologies that are facilitating remittances and payment of bills by people in the diaspora. There are about 10 players in Africa offering direct payment of bills from the Diaspora. The central banks are having a hard task to monitor and classify the activities which can be considered as e-Commerce platforms or money transfer,” Muhire said.

Beyond that, he added, the reduction in poverty, improvement of living standards as well as  government initiatives  have seen a huge section of citizens rely less on remittances.

"For the case of Rwanda, many people are also relying less on remittances since the Government provides services such as healthcare through public insurance. Due to the improvement of living conditions, there is less need or expectation for remittances. It is a mix of factors that are making the recorded numbers go down,” he said.

According to Remittance Prices Worldwide, a World Bank funded agency that monitors remittances, the largest transfers to Rwanda come from Canada, Kenya, Tanzania and the UK.

Rwandans living in the Diaspora who spoke to The New Times said the reduction could be as a result of increase in cost of living brought about by the economic turbulence while others cited the high cost of remittances.

Although transaction costs have fallen globally, the African market remains the most expensive, with a 10 per cent average cost to remit $200. This is largely because the continent is mainly composed of low-volume transactions which make costs reduction difficult to achieve.

Vincent Mbaraga, a Rwandan living and working in the UK, told this paper that many Rwandans living abroad have been affected by the performance of the economies they live in.

He said transaction costs eat up a significant amount of what the beneficiaries would have received.

Uses of the remittances

A 2013 journal, The Role of Remittance in Development: The Case of Rwandan DiasporaRemittances, by Jules M. Rubyutsa of National University of Rwanda (now University of Rwanda) showed that some Rwandans prefer informal channels to avoid transactional costs.

The journal also showed most of the money sent into the country is for supporting family and friends and pay for such needs as healthcare and education.

"Specifically, the informal channels are used when avoiding transaction costs,” the journal reads in part.

It says the rationale for remittances included education and health care issues; improvement of family life, that is to say, poverty reduction; investment in business; building houses; purchasing animals and important items.

The problems faced during the process of transferring money were transaction costs, foreign exchange costs, taxation on remittances, and restrictive legislations of the host country, according to the journal.

Bring down the cost of sending the remittances

According to National Bank of Rwanda vice-governor Monique Nsazabaganwa, the concerns about the high cost of remittances can be addressed by use of financial technologies as well as efforts by countries to remove transborder charges.

"I believe that there is room for fin-tech to improve things as well as plans to remove trans-border charges. We have seen the cost reducing within the EAC. There are many ways but harnessing technology is one of the ways,” Nsazabaganwa told The New Times.

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