Capturing a market share? Migrant remittances and money transfers as a microfinance service in Sub-Saharan Africa

Abstract

In maturing microfinance markets where there is increasing competition, the possibility of being able to offer an additional financial product, such as money transfer services, is particularly attractive. This article looks at migrant remittances to and in Sub-Saharan Africa and the link with the microfinance industry as a provider of money transfer or ancillary financial services to remitters and receivers. It demonstrates with case studies what transfer services microfinance institutions (MFIs) currently do or could provide and discusses the opportunities and challenges of such serces for MFIs. Most small MFIs that are not licensed financial institutions will find it difficult to offer money transfer services, partly because of their lack of capacity and partly because they will not be granted central bank permission. However, by collaborating with specialized forex services MFIs can sometimes act as agencies, dealing only in local currency, or they may specialize in domestic transfers.