Remittance inflows: BoG urged to strengthen regulatory compliance
The Bank of Ghana has been urged to continue to strengthen the country’s Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) regulations for remittance institutions.
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This is to help improve tracking of AML/CFT compliance and safeguard senders and recipients of remittances from fraud and financial abuse.
Partner and Africa Leader for Infrastructure & Capital Projects (I&CP) and Economic Advisory at Deloitte Africa Financial Advisory unit in Deloitte Ghana, Mr Yaw Appiah Lartey, made the call at the 3rd quarter edition of the Graphic Business/Stanbic Bank Breakfast Meeting in Accra last Tuesday.
On the theme: "The Remittance Ecosystem - Impact on the Economy", the event offered experts the platform to provide concrete solutions on how remittances can spur the country’s economic growth.
Tracking inflows
On how to track inflows, Mr Lartey also stressed the need for Ghana to develop and implement avenues that efficiently track the flow of remittances in and out of the country.
“These avenues should verify the identity of each customer, monitor transactions and flag any suspicious activities to prevent money laundering and terrorist financing,” he said.
For widespread understanding and acceptance, Mr Lartey also urged the government to implement initiatives to educate the public, especially individuals in rural areas, on the benefits of using formal remittance channels and put measures in place to ensure a seamless transaction from unofficial to official channels.
Disincentive
While supporting strict compliance to rules governing remittance inflows, Mr Lartey also sounded cautious arguing that strict remittance regulations often increase the compliance costs for remittance institutions, which translates into higher fees for individuals who patronise these institutions,
According to him, such an action may result in a shift in the use of official sources to unofficial sources, which may be cheaper but are harder to track.
“Strict remittance regulations increase the scrutiny of transactions, which may result in delays in the processing of transactions, impacting the speed of remittance transfers.
Strict remittance regulations limit the availability of remittance services to the unbanked population and rural areas, thus, reducing access to remittance services,” Mr Lartey said.
Inflows
A total of $54 billion in remittance flowed into Sub-Saharan Africa in 2023 alone.
The World Bank reports that Ghana, in the year under review, recorded remittance-to-Gross Domestic Product (GDP) of $4.89 billion, signalling that remittances play a key role in supporting the livelihood of individuals living in the country and represented 6.4 per cent of the country’s GDP.
Remittances are often used to support essential consumption such as food and investment in physical and human capital.
Considering its importance, Mr Lartey called for targeted government policies to facilitate remittance inflows.
According to the BoG, many Ghanaian families depend on remittances from relations living abroad to cater for various expenses including education, health, rent, housekeeping, building construction and utilities.
Some also are given their seed capital to start a business or expand existing ones through remittances.
Areas of improvement
On measures to help improve remittance inflows into the country, Mr Lartey said many rural and remote areas lack the necessary infrastructure to fully benefit from remittance services, including access to banking facilities and reliable mobile networks.
As a result, he said improving the functions of this infrastructure is key to improved services.
The current average cost of sending US$200 to Ghana is 7.1 per cent of the amount sent as of the third quarter (Q3) of 2023.
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Whilst the cost to send to Ghana is less than the African average of 7.9 per cent in Q3 2023, it is still far above the three per cent proffered by the UN Sustainable Development Goal 10.
A portion of remittances is sent through informal channels such as hand-carried cash or unregistered money transfer services, which are difficult to monitor and often go unreported, leading to inaccuracies in official remittance data.
A typical example is the fact that while the World Bank estimates remittance inflows into Ghana to be at about $5 billion in 2023, the BoG reported below $3 billion in the same period.
Mr Lartey said ensuring that recipients of remittances understand and can access different financial products remains a challenge, particularly in rural areas, and reiterated the need for that to be addressed.
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Meanwhile, overall, Ghana has made significant progress in creating an enabling environment for remittances, with a robust financial infrastructure and supportive policies.