In 2022, Uganda received USD 1.3bn in remittances from its diaspora community according to a World Bank and KNOMAD report. This would account for about 4.5% of Uganda’s GDP and make Uganda the 8th biggest recipient of remittances below Sudan and DRC, but ahead of Mali and South Africa.
In general, remittances to sub-Saharan Africa increased by 6.1% to USD 53bn in 2022 driven by several African countries dealing with food insecurity, supply chain disruptions, severe drought (Horn of Africa), floods (in Nigeria, Chad, Niger, Burkina Faso, Mali, and Cameroon), and high youth unemployment/underemployment rates (Uganda) that force people to flee to the West or Middle East in search of better opportunities.
Speaking at the launch of the report, Dilip Ratha, head of KNOMAD said, “Remittances have become a financial lifeline in many economies through the pandemic and will become even more so in the foreseeable future,”.
Nigeria took the largest share of remittance fees, accounting for 38% or $20.1bn due to its strong diaspora community in countries like the USA, Canada, the UK and the Middle East. It was followed by Ghana and Kenya. Zimbabwe and Senegal followed further behind.
Remittances have understandably become an ample business opportunity with many startups facilitating transactions directly to Mobile Money in Uganda. The more popular ones include World Remit which is popular with the diaspora community in the USA, Canada and the UK. Other small players include Nala, LemFi and the likes of Eversend and Chipper Cash which can also facilitate such transactions.
These startups have emerged to take on the dinosaurs like Western Union, Money Gram and Dahabshill which dominated the industry for a long time, but have struggled to remain relevant in the smartphone/mobile money era. However, despite all the innovations from the startups, sending remittances to sub-Saharan Africa is still the most expensive in the whole world. To send $200 or shs 754,000 to the region in the last quarter of 2022 cost an average of 8.0% of the amount (about $16 or shs 60,000).