Remittances are economic lifelines for African households that receive them. However, the cost of those financial flows sometimes becomes a hindrance for recipients in rural areas.  

For the first time, the United Nations' International Fund for Agricultural Development (IFAD) will fund a digital payment company. The lucky beneficiary is Pan-African fintech MFS Africa, which will receive a €1.2 million grant funded by the European Union under the PRIME program managed by the IFAD.

In a statement released on Monday, September 12, the fund indicates that the funding aims to promote the use of mobile money in the marginalized rural areas of five African countries namely Ghana, Kenya, Senegal, Gambia, and Uganda. MFS Africa and its partners are co-financing the grant with €0.64 million.

According to Jyotsna Puri, IFAD's Associate Vice President for Strategy and Knowledge, "this grant is an investment to develop a model linking mobile remittances and financial inclusion that can be scaled up across Africa, and benefit not only remittance families but also their communities.”

According to IFAD's latest estimates, mobile remittances represent only 3% (€15.7 billion) of the total remittances sent by migrants to their families. The average cost of remittances to low and middle-income countries is 6%. However, in African countries, that cost is 7.8%, far from the Sustainable Development Goals' target 10.C, which aims to reduce it to less than 3% by 2030.

With this 2-year IFAD grant, MFS Africa will enable its partners (remittance operators in European and African countries) to send money directly to mobile wallets in selected African countries with a focus on beneficiaries in rural areas.

“MFS Africa will also test and scale micro-insurance products linked with remittances and distributed through selected partners.” The grant will benefit individuals as well as businesses in the remittance industry. It will also improve transparency and encourage competition, particularly in segments often overlooked by traditional remittance operators due to low transaction volumes.

For MFS Executive Director Nika Naghavi, the funding will help enhance the “financial resilience of the African diaspora and their families back home by unlocking the challenges in the remittance value chain, covering both the sending and receiving sides.”

Samira Njoya