Postbank, partners move to slash remittance costs
In a quest to reduce the cost of remittances to Uganda, Postbank, Posta and Eurogiro have launched Postalpay Uganda, an app that will allow users send money from the EU to Uganda at a charge of 1% only.
According to the World Bank, more than 200 million migrants send remittances to 800 million family members in low- and middle-income countries (LMICs). Remittance flows to LMICs proved resilient despite setbacks related to the COVID-19 pandemic and had reached USD 597 billion by the end of 2021, a 10.2% increase from 2020.
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Uganda is one of the leading beneficiaries of remittances and ranks in the top 10 remittance recipient countries in sub-Saharan Africa.
In 2021, international remittance flows to Uganda reached USD 1.08 billion, representing a 3% of GDP for the past decade.
However, the cost of sending remittances to Uganda remains high by both global and African standards. The average cost of sending a USD 200 remittance to Uganda in 2021 was 11.3%, significantly higher than the global average of 6.3% for Q3 2022 and the African average of 8.46%.
The cost of remittance is exacerbated by other external factors including limited access by recipients to financial service providers including banks, transport among others especially for the rural poor.
The Postalpay Ugandan app is part of efforts to reduce remittance costs and increase financial inclusion for Ugandans. The mechanism was lauded for its clear objective to set up an end-to-end solution to send money to Uganda at an affordable cost in line with the specific SDG for remittance which global targets remittance cost below 3%.
