The Ministry of Finance is hopeful that a US$2.6 million Remittance Grant Facility (RGF) secured from the Switzerland government will help bring down the cost of remitting money to the country from the current 12 per cent of every US$200 remitted to five per cent.
The reduction is needed to motivate more Ghanaian residents abroad to use the formal means in sending money back to their families and loved ones.
High patronage of the formal process should help raise the country’s remittance figures and that will go a long way to help shore up foreign exchange reserves while cushioning the cedi.
The Finance Minister, Mr Ken Ofori-Attah explained at the launch of the grant facility on May 5, that the RGF sought to reduce the cost of remitting by providing financial assistance to institutions to develop innovative remittance products and services at a relatively low cost.
The project is also expected to extend affordable and accessible products and services to the rural areas in the country, he added.
Growth of remittances
Currently, remittance constitute a significant proportion of the country’s foreign exchange reserves, coming third after gold and cocoa.
Over the years, it has had a significant impact on the economy, having served as a major contributor to total economic output and a source of employment.
In the past 10 years, total remittance, including grants and loans, has grown from US$1.4 billion to US$17 billion in 2015.
Mr Ofori-Atta, however, pointed out that this figure could have been more, if not for the expensive nature of remitting money to Ghana and Africa.
The cost, he said, had forced people to rather travel with the money in their pockets and bags rather than sending them through the various remitting channels.
Cost of remitting
The World Bank’s Send Money Africa report showed that Ghana remained one of the most expensive countries to send money to, with over 12 per cent charges on every US$200 remittance.
Remittances from Ghanaians working overseas to their families back home dropped last year for the second consecutive time to US$1.92 billion amid moderation in the global economic growth that reflects the slowdown in China’s growth prospects and falling oil prices.
Figures provided by the Bank of Ghana also show that the record of individual remittances through banks into the country in 2015 was 16.9 per cent below what was recorded in 2014.
The minister indicated that the newly launched facility was, therefore, expected to address this challenge by helping to defray cost and risks associated with developing products for remittances.
Funding amount
The pilot phase of the project has a funding amount of US$2.6 million and will be provided by the Government of Switzerland through its State Secretariat for Economic Affairs (SECO).
The SECO’s development cooperation programme in the country focuses on promoting Ghana’s inclusive and resilient economic development.
The Government of Ghana will also provide counterpart support through the Ministry of Finance.
The Charge d’Affaires at the Switzerland Embassy, Mr Roland Fischer, said the RDF aimed at roping in the private sector to come up with innovative solutions in the remittance industry.
Preparation
Since signing the agreement with the Switzerland government, Mr Ofori-Atta said, the government had taken steps in preparing the grounds for the take-off of the project.
He said KPMG International Development Advisory Services (IDAS), which would be in charge of setting up the facility, had done a stakeholder consultation already.
That consultation, he said, had resulted in the coming out with all the documents and preparatory works needed for the implementation of the project.
“Government has also constituted a steering committee to oversee the fund manager’s mandate and provide general policy direction for the project implementation,” he noted.
Mr Ofori-Atta also pointed out that the introduction of the facility was timely, considering that the country was developing its financial inclusion strategy.
He said the facility had been designed to form an integral part of the financial inclusion strategy, as it would lead to the introduction of remittance backed financial services such as loans, savings account, and insurance services that are currently unavailable.
Market constraints
The finance minister also highlighted some of the constraints to the remittance market which include the regulatory environment, which, he said, inhibited the speedy development of products and services.
Others included the inadequate infrastructure required to connect cash out agents to payment systems of the money transfer operators, the limited liquidity of rural agents to offer consistent and reliable services, and the lack of requisite skills by the rural agents.
He said the facility sought to address all these bottlenecks.
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