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West African Financial Flows
Promoting economic integration in West Africa by facilitating
intra-regional remittances and trade settlements
Experts theorize that a significant proportion of intra-regional
remittance and trade settlements in West Africa cross borders informally.
This is due to the fact that formal financial sector players and
regional governments are not doing enough to facilitate the efficient
flow of resources for individuals and private businesses. This represents
a lost opportunity cost for the private financial sector, an obstacle
to intra-regional trade, and a limitation to the potential development
impact on remittances.
As a means to help guide future USAID interventions within the
region, the USAID West Africa Regional Program (WARP) requested
a study to:
- Attempt to quantify the amount of money crossing West African
borders through legal and informal channels.
- lack of awareness—to a smooth flow of financial resources
within West Africa. Identify the barriers—legal, regulatory,
cost, risk,
- Understand the impact of the weaknesses in financial flow systems
on national and regional economies, various demographic groups
and financial service providers.
- What are some of the options for USAID interventions on a national,
regional, and multilateral basis with the objectives of: a) Increasing
the efficiency of the flow of financial resources; b) Assisting
the private sector tap into this market, and; c) Assisting governments
and regional organizations to facilitate the smooth flow of financial
resources throughout the region.
This study was supportive of USAID/WARP’s SO 4—Regional
economic integration strengthened, and its two principal Intermediate
Results, barriers to trade reduced and policy reform processes improved
Approach
This task involved desk research in Washington, D.C. and one-week
field trips to each of Ghana, Nigeria, Mali and Senegal. Specific
activities included:
- A review of existing literature including relevant studies conducted
on the formal and informal financial systems and trade in West
Africa, as well as elsewhere in the developing world.
- Collection of trade and capital flow statistics for the four
selected countries, utilizing diverse sources, with the intent
of comparing and identifying differences that may be indicative
of informal trade and financial flows.
- Interviews with about 50 formal financial sector and business/trading
companies in the four countries (about 12 per country) drawn from:
commercial banks, microfinance and credit unions, foreign exchange
houses, Western Union and others able to wire funds, trading companies,
consumer product companies with distribution in multiple countries
and commodity exporters.
a. Interviews with financial institutions provided data/estimates
on cross-border financial flows (formal and informal), costs (money
and time) of different types of cross-border transactions through
the formal system, regulatory controls, and perceptions as to
obstacles to further utilization of the formal system
b. Interviews with formal businesses were used to determine how
companies are financing cross-border trade, repatriating profits,
paying employees/costs in other countries, what channels and intermediaries
they use, and the costs and time associated with these transactions.
- Interviews with about 15 small/informal traders, and 20 migrant
workers per country to determine how much money they are moving
across borders, how this is achieved, what intermediaries are
used, and what costs they pay. These individuals were also queried
as to their understanding and perception of formal channels and
why they do not use these.
- Conducting a workshop with USAID/WARP, other relevant donors,
and invited guests from ECOWAS, WAEMU and other counterparts and
USG entities selected by WARP to discuss the findings and implications
for policy and programmatic initiatives.
- Preparation of a final report that includes three options for
follow-up by USAID/WARP.
Project Documents
West
African Financial Flows and Opportunities for People and Small Businesses
report.
Regional Remittances Conference
Click
here for details on the Remittances Conference
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