Cracking the remittances confusopoly
By Andrew Leigh
Okeny Secondo is a disability support worker in his early 30s who lives in Redbank Plains, a suburb of Ipswich. Born in Sudan, he fled to Uganda as a child, then migrated to Australia. Mr Secondo and his wife, who works as a meat industry processor, send almost one-third of their income back to help friends and families in Africa.
“I know what it’s like to live with uncertainty in a war-torn country”, he says. “I’m very happy to be able to support my family and friends to make them more secure. Sometimes we get urgent requests for emergencies and it’s great to be able to get money to them immediately.”
Mr Secondo is among thousands who send remittances to help people in developing nations. With international migration projected to account for a growing share of the population in the future, remittances will only grow in importance. When a grandparent falls ill, or a child needs to pay school fees, families in developing countries often turn to generous relatives in countries like Australia to send over some cash.
Globally, remittance flows are almost a trillion Australian dollars. For many developing nations, remittances are worth more than foreign aid. Some economies would collapse without remittances. In Tonga, remittances account for more than one-third of national income. Behind that statistic are thousands of hard-working Tongans, putting in a few extra hours at work so they can give some of their pay check to less fortunate family members.
Unfortunately, the remittance market is a confusopoly, with providers routinely pulling the wool over their customers’ eyes. The problem arises because international money transfers have two costs – a flat fee, and an exchange rate mark-up. Plenty of providers are telling their clients about the flat fee, but not disclosing the mark-up. …read more