Cross border remittances into Zimbabwe surged to $1 billion in 2020, more than a 36% increase from the $636m that was recorded in 2019. This surge in remittances occurred despite the â€œsteep decline in economic activity in host countries, which in turn made it difficult for migrants in the diaspora to send money home.â€
Effects of Pandemic on Remittances
According to a report, this increase only applies to money transfers sent via formal channels. The same report also attributes the surge to the mobility restrictions that were imposed in response to the spread of the Covid-19 pandemic. The report said:
Before the imposition of lockdowns, Zimbabweans working abroad would resort to informal remittances channels such as cross border buses, truck haulage trucks, and private couriers when sending money home. However, the closure of border entry points at the start of Q2 of 2020 forced migrants to return to traditional sending channels.
Informal Channels Cheaper
The report also explains why Zimbabweans and other African migrants use informal remittance channels despite these being prone to theft or fraud. According to the report, migrants preferred informal channels because the â€œservice fees (charged) were usually lower than those imposed by the official money-transfer agencies (therefore) making these informal channels more appealing to the diaspora.â€
As previously reported by Bitcoin.com News, Zimbabwe is located within a region that has the highest money transfer costs globally and this may partly explain why informal channels are still popular. Meanwhile, also gaining popularity are remittances channels that use cryptocurrency rails. For instance, some Zimbabweans working in South Africa resorted to using BTC when sending money during the lockdown period.
Referring to this use of informal or alternative channels by migrants, the report concludes that Zimbabweâ€™s â€œheadline figure of higher remittance inflows in 2020 could be a misleading representation of the true picture.â€ In fact, the report suggests that â€œactual remittances inflows probably declined from the levels of previous years, owing to the fallout of the pandemic.â€
Do you agree that informal remittances into Zimbabwe could be higher than formal ones? Tell us what you think in the comments section below.