Using remittances to boost economic growth in Ghana
Remittances in Ghana have been around for several decades, fueled by the diaspora's desire to support family members and communities back home.
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The World Bank predicts that remittances worth $4 billion entered Ghana's economy between 2016 and 2022.
These funds are frequently used by families to meet necessary expenses such as education, healthcare, and housing.
However, beyond these immediate demands, there is a great opportunity for remittances to be deliberately used to drive economic growth.
In Ghana, a systematic approach is required to ensure that these inflows become a more powerful force in accomplishing sustainable development goals.
This article discusses practical ideas for maximizing the influence of remittances on Ghana's economic development.
Establishing diaspora investment platforms
One of the key steps in harnessing remittances is to encourage their use for productive investments.
Ghana can establish specialized diaspora investment platforms that connect remittance inflows with viable investment opportunities in sectors such as agriculture, real estate, technology, and manufacturing.
For instance, the government can partner with financial institutions to create diaspora bonds or mutual funds specifically targeted at the Ghanaian diaspora.
These platforms can provide incentives such as tax breaks, reduced transaction fees, and guaranteed returns to attract more remittances into long-term investment ventures.
A practical example is the Diaspora Investment and Savings Fund being explored by the Bank of Ghana, aimed at channeling remittances into growth-oriented sectors.
Promoting affordable and secure remittance channels
Remittance transfer costs continue to be a key obstacle to maximizing their impact.
The World Bank estimates that the average cost of sending remittances to Ghana is roughly 8%, which is higher than the world average.
Ghana may encourage economical and secure digital remittance routes to minimize costs and ensure that more monies reach beneficiaries.
Working with fintech companies to create mobile money platforms and blockchain-based transfer systems can reduce transaction fees while increasing transparency.
Promoting remittance-backed microfinance and SME development
Another strategic approach is to use remittances as collateral when providing microfinance and loans to small and medium-sized businesses (SMEs).
Many remittance recipients are unbanked or underbanked, which limits their access to financing for business growth.
Ghanaian financial institutions can create remittance-backed loan products that allow beneficiaries to use their remittance history as collateral to borrow money for business.
Recipients can start or expand enterprises by transforming remittances into productive assets, resulting in employment creation and economic growth.
Supporting Public-Private Partnerships for infrastructure development
Remittances can also be used to fund large-scale infrastructure projects through public-private partnerships (PPPs).
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Ghana's infrastructure deficit provides a big opportunity for diaspora-driven investment.
The government can implement PPP models that invite diaspora money to co-finance infrastructure such as roads, hospitals, and schools in exchange for equity in these businesses.
Such strategies create a win-win situation in which remittance inflows benefit national growth while also providing meaningful returns to diaspora investors.
The Diaspora Infrastructure Fund, established by the Ministry of Foreign Affairs, is one example of a scheme aimed to pool remittances for national infrastructure projects.
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Improved financial literacy and inclusion programmes
Many remittance users in Ghana lack the financial expertise required to appropriately manage these monies, resulting in quick depletion.
To solve this, financial literacy and inclusion programs for remittance senders and receivers should be prioritized.
Financial institutions and development agencies can work together to provide budgeting, savings, and investment instruction.
Empowering beneficiaries with financial knowledge will allow them to make more informed decisions, transforming remittances into vehicles for long-term financial security and entrepreneurship.
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Developing a diaspora engagement policy framework
Ghana requires a comprehensive diaspora engagement policy to implement any of the techniques successfully.
A clear legislative framework outlining incentives, legal safeguards, and investment criteria is critical for fostering trust and promoting more diaspora involvement.
Such a program might include tax breaks, making it easier for diaspora entrepreneurs to start enterprises, and simplifying property purchase procedures.
Furthermore, a specialized diaspora desk within the Ministry of Finance and Economic Planning can act as a one-stop shop for diaspora investors.
Conclusion
Remittances are an important part of Ghana's economy, with enormous untapped potential to drive long-term growth.
Ghana can transform remittances from ordinary consumer assistance to major development drivers by introducing strategic solutions such as diaspora investment platforms, financial literacy programs, and low-cost remittance methods.
Furthermore, remittance-backed SME finance, public-private partnerships for infrastructure, and a strong diaspora engagement policy can help ensure that these funds contribute to long-term economic success.
The objective is to create an enabling climate in which both the diaspora and receivers perceive the advantages of channeling remittances into businesses that generate wealth and support national growth.
The writer is a Lecturer/SME Industry Coach, Coordinator (MBA Impact Entrepreneurship and Innovation), University of Professional Studies Accra
ayiku.andrews@upsamail.edu.gh
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@AndrewsAyiku
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