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DAI Magister, a boutique investment bank offering full advisory services for transactions within the climate, deep tech, B2B SaaS, fintech, and healthcare technology sectors, has projected Africa’s remittance market to grow to $500 billion by 2035.

According to Risana Zitha, Managing Director and Head of Africa at DAI Magister, the growth of remittances in Africa is expected to continue. Based on the compound annual growth rate (CAGR) of 12.1 percent between 2019 and 2022, the continent’s formal remittance market, valued at $100 billion in 2022, could potentially reach $283 billion by 2035.

He said the informal remittance market is estimated to be between 35 percent and 75 percent of the total value of formal channels, with Sub-Saharan Africa (SSA) experiencing a higher proportion of informal transactions than the global average. “As a result, total remittance market in Africa could be worth $500bn by 2035,” said Zitha.

Despite the importance of remittances to the African economy, the cost of sending money to the continent remains very high. The UN Sustainable Development Goals state that remittance fees should be less than 3% by 2030, but data from the World Bank suggests that at present the global average is twice this target, with the figure as high as 20% in some parts of Sub-Saharan Africa.

According to Zitha, increased competition, stakeholder collaboration, and investment in financial infrastructure can all contribute to lower global remittance fees.
 
Remittances comprise a significant portion of African Gross Domestic Product (GDP), with the total value of remittances across the continent reaching nearly $100 billion in 2022, $20 billion of which was intra-African flows.
 
“Mobile money has emerged as a game-changer in tackling the challenge of high remittance costs in Africa,” Zitha said in a note to Financial Nigeria. He said he expects increased mobile money interoperability, better financial literacy, and streamlined legal frameworks to further drive down fees across the African region.
 
He also cited improvement in access to digital remittance services as a crucial way to boost remittance flows in SSA at a time when many countries in the region are experiencing acute hard currency shortages.