There has been an outcry over the precipitous drop in remittances that is unfolding as a result of the COVID-19 pandemic.

The World Bank recently provided an ominous forecast revealing an anticipated 20%, or $110 billion drop in remittances to low and middle-income countries, which in addition to the families who depend on this money will impact the developing economies whose GDP is fueled in part by these funds. 

Source: World Bank

Rather than wait on the sidelines, some regions are taking the matter into their own hands. In particular, the governments of Switzerland and the United Kingdom have partnered to launch a call to action appeal.

In addition to raising awareness, the program is designed to find solutions that lessen the blow from the COVID-19 crisis on the remittance market as well as lasso in lawmakers, regulators, remittance service providers and others with the ability to do something about it. Incidentally, Switzerland and the UK were already working side by side with regard to Brexit, and the remittance call to action was a natural extension of those discussions. 

Zimbabwe in Focus 

One of the popular destinations for remittance payments from the UK and Switzerland is Zimbabwe. The UK and Switzerland Ambassadors to Zimbabwe, Melanie Robinson and Niculin Jäger, respectively, have penned an op-ed in which they outline the steps they are taking to maintain the flow of remittances during the pandemic. 

In 2018, Zimbabwean migrants sent $1.9 billion in money transfers back home, which amounts to $125 per individual, according to The World Bank. The country depends on these vital payments, trailing only Kenya and Nigeria for the amount of remittances sent from the UK. Families use the income for basic needs including groceries, housing and healthcare, not to mention if any emergencies occur. 

Zimbabwean professional footballer Marvelous Nakamba, who today plays for the English Premier League club Aston Villa and the Zimbabwe national team, didn’t have it easy growing up. During his childhood, Nakamba’s mother took low paying jobs in the country just to put food on the table. By the time he was playing at the primary level, his mother migrated to South Africa for work to continue feeding the family. 

South Africa is a popular destination for Zimbabwean migrants in the diaspora, where the average money transfer amount via the province Limpopo was ZAR 1,000 (USD 58.54) in 2018. South Africa issued a nationwide lockdown in March that has since been eased somewhat, but people still remain restricted from moving around. This has made it difficult for them to visit money-transfer service providers to send money. 

These days, Nakamba has earned enough money to buy a home for his parents but he never forgot where he came from. In March, the athlete introduced the Marvelous Nakamba Foundation, which is designed to help poor Zimbabweans and give children a better life. The foundation has paid school tuition and exam fees for 1,000 kids in Hwange, the town where he grew up. 

Source: Twitter

Source: Twitter 

Since March, remittances to Zimbabwe have declined by about 66%, as migrant workers have struggled to make their way to the physical locations of money transfer service providers during the lockdown. 

Digital Solutions 

In order to keep the money flowing to Zimbabwe and other poverty-stricken countries that need it the most, there need to be solutions, which is a major part of the focus of the Swiss-UK action plan. Switzerland touts its laws and regulatory system as a possible model for other countries to emulate, given its commitment to nurturing financial technology innovation. 

The Swiss government embraces new technologies such as the blockchain and cryptocurrencies. They have also deemed financial services including remittance service providers “systemically relevant,” which allowed them to continue operating throughout the pandemic. The UK took similar steps in the spring, which allowed them to stem the drop in remittances in the UK/Zimbabwe corridor. 

By classifying remittance services as essential, these providers can keep their doors open during the lockdown, which has been a sticking point for migrants and their families looking to send and receive funds. 

But in order to keep the money flowing, more work needs to be done. The Swiss government would like to bolster the channels by which remittances are sent as well as the digital technologies that are used to send them. In particular, they suggest: 

• Peer-to-peer cross-border money transfers directly from the sender’s mobile device to the recipient’s mobile device. 
• Remittance payments through online money transfer service providers that are members of the International Association of Money Transfer Networks (IAMTN) 

Despite the fact that many of the recipient countries for remittances are poverty-stricken nations, it’s not uncommon to find digital technologies embedded throughout their societies. In Africa, for instance, domestic mobile payments are common.

International money transfers, however, have yet to hit their stride and capture the tailwinds of regulatory policies and new products that harness the potential of digital technology, including mobile banking, the blockchain and other distributed ledger technologies as well as cryptocurrencies for money transfers. 

Digital technology in and of itself, however, isn’t enough either. The public and private sectors need to work together to promote financial literacy to build awareness and trust among migrants and their families who need to know which money transfer options are available to them as well as the financial solutions that are designed to make their lives easier. 

Meanwhile, regulators are tasked with finding a sweet spot between supporting financial inclusion and preventing financial crimes, which could involve the easing of know-your-customer standards without sacrificing integrity, according to a Swiss/UK webinar on the call to action. 

Robust Response 

The response to Switzerland and the UK’s Call to Action plan has been robust, with more than two dozen countries from different regions of the world joining the program. With Switzerland and the UK as the co-leads, other jurisdictions that signed on include:  

Ecuador; Egypt; El Salvador; Jamaica; Mexico; Nigeria; Pakistan; Sierra Leone; Zimbabwe; Yemen; Jordan; Georgia; New Zealand; Niger; Panama; Rwanda; Vanuatu; Ivory Coast; Fiji; Turkey; Honduras; Australia; Guatemala; and Eritrea, many of which are supported by ShareMoney for remittances. 

In addition, the initiative has attracted the support of more than a dozen organizations including the World Bank Group, UNCDF, KNOMAD and the Caribbean Development Bank, among others.  

The changes to the remittance system that the UK and Switzerland are spearheading may not happen overnight, but chances are they will last far beyond the time that the COVID-19 pandemic persists.