Remittances Surpass Foreign Aid In Africa

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RemittanceAccording to a new report conducted by a Ghanaian professor, remittances from Africans living outside the Continent sent to family back in Africa surpasses more than foreign aid payments by nearly $10 billion, the BBC reports.

According to Hong Kong-based Ghanaian academic Adams Bodomo who authored the study, in 2010 Africans in the diaspora sent $51.8 billion back to Africans on the Continent. During that same year, official development assistance (ODA) to Africa was $43 billion, according to figures from the World Bank.

?The fact that Africa now receives more in donations from Africans living abroad than Official Development Assistance is not necessarily a bad development, but it does indicate that the amount of ODA needs to be reevaluated,? explains Andrew Schrage, co-owner of Money Crashers Personal Finance, an online guide to money management and global finance. ?Any region receiving nearly $50 billion annually from its own citizens living abroad certainly doesn’t need as much assistance from developed countries.?

According to Bodomo, ?family aid? is much more efficient. He told the BBC, “About 12% of diaspora money sent home through formal financial channels is swallowed up by bank fees. Governments should find ways to reduce this so more funds get to people who need them.”

The stats didn’t just hold true for Africa, but for most developing regions of the world. Bodomo told the BBC that across the board, worldwide remittances from people who hail from developing countries totaled $350bn. Compare this to the $130 billion worldwide from ODA.

?Additionally, foreign aid has been ineffective in many instances, as it does little to allow Africa to shift away from a dependent economy. On a more positive note, the fact that these donations from Africans living abroad was found to be more efficient than foreign aid is a boon for the citizens living in Africa.

Schrage says as African nations become less dependant on foreign aid, remittances will only increase. And as ODA decreases, ?[t]hat could potentially improve donations made by Africans living abroad even more.?

According to Schrage, donor countries should reevaluate their aid and its effectiveness. ?The biggest donor countries (namely the United States) should look for ways to ensure that the foreign aid provided is targeted and effectively implemented to spur economic growth. That’s the only way for Africa to see its way to being independent of foreign aid,? says Schrage.