Ghanaians, living abroad transfer monies back home regularly to support their families and friends. These money transfers are mostly for consumption and in some cases, to assist their business endeavours.
Remittance contribution to individuals cannot be underestimated. It contributes to the economic growth of many developing economies. Even during this period of COVID -19 pandemic, where many African migrants have lost their jobs, the World Bank projects that remittance to Sub-Sahara Africa for the year 2020 will be about US $37 billion from the previous year’s figure of US $48 billion.
Due to advancement in technology, it has become very easy to transfer monies to family members back home for consumption and projects such as starting small businesses that are intended to boost the family’s finances. Ghana is among the top countries that receive remittance yearly in Africa. In the year 2019, looking at the remittance flow to Sub-Saharan Africa, Ghana received US $3.5 billion from the diaspora, the second-largest recipient of remittances in the region according to the World Bank.
Top Remittance Recipients in Sub-Sahara Africa in 2019 ($ billion)
Source: World Bank
The challenge is how the funds are used. There are instances where monies meant for family projects have been squandered or mismanaged.
Some startups, as far back as 2014, had taken the initiative to innovate African’s remittance hike; they were ventures that focused on making transfers cheap and easy since many people were paying more for transfers. This included companies like Kitiwa (Ghana) and BitPesa (Kenya). Over the past years, companies are using innovative methods to make the transfer of monies to Africa, and for that matter, Ghana, less expensive. But this solves the cost problem and not the usage or investment problems.
Some banks have developed products that give families abroad the opportunity to make direct payments for services like water bills, electricity, school fees and buy phone credit for relatives in Ghana.
To reduce the burden on Africans, especially the Ghanaian diaspora, in terms of investing in and monitoring of projects back home, the German government has developed an innovative project that facilitates, monitors and supports small private investments of Ghanaians and other Africans living in Germany. An online platform called “WIDU” has been developed to facilitate this project. This portal serves as the medium for managing private remittances which are for the establishment and expansion of businesses by families and friends. The remittance project uses technology to improve sustainability in transfers that come to Africa. “The project redirects existing remittances into sustainable investments for startups and small businesses” (www.widu.africa). The process begins when the donor in German and entrepreneur register on the platform. Upon successful completion of the project, the entrepreneur receives a grant from the German government to expand the business.
WIDU Remittance process
African diaspora, as tradition expects, have to support their families and friends back home in Africa. Other platforms serve as means to send money, but on the WIDU platform, people are encouraged to put funds in sustainable ventures. Besides these platforms, the need for other approaches to solving the challenges associated with remittance from the Ghanaians diaspora has become imperative.
When remittances are adequately managed, there will be enough money available for investment. Jobs will be created, and there will be a steady income for families in Ghana. This will lessen the burden on families abroad. As more businesses are built with the remittances and adequately managed, they can also employ others, and this will gradually improve the livelihood of people who are indirect beneficiaries of monies from abroad.
The use of technology has improved transparency in the management of remittances in Africa. Previously, people abroad had to give monies to friends travelling to Ghana for their families. There were instances where the funds never reached the families in Ghana.
Some startups provide platforms for people abroad to build or support family construction through the purchase of hardware from their website that are delivered to the construction sites or the one in need of such materials. There are other platforms in Ghana where food can be purchased and delivered to homes in Ghana by families abroad. These platforms make it possible to monitor and control what the monies are used for.
With the example of the WIDU project, the donors supervise entrepreneurs in Ghana by checking the receipts and picture evidence that are uploaded on the platform. The entrepreneurs are able to engage the donor over the platform, describing the business needs and goals which have to be fulfilled. When grants are received from the German government, the entrepreneurs will also have to upload receipts showing proof of how the funds were disbursed on the platform. The entrepreneurs are offered coaching support, as well. These checks on the platform serve as a means to improve transparency in the process.
Innovating approaches that maximize the use of monies transferred to families in Africa will bring about sustainable economic growth. The success story of the various platforms has improved the welfare of most people in Africa. The development of innovative methods and approaches by startups and organizations to support the transfers from abroad will go a long way to improve further the economic conditions of the people in Africa – technology will play a vital role in this endeavour.
The author is an Entrepreneurship and Innovation Management Expert | Member, Institute of ICT Professionals Ghana
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