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African Remittance Startups Surge as Inflows Hit Record $56B in 2024

Startups facilitating money transfers for Africans abroad are quickly growing their operations as remittances to sub-Saharan Africa reach unprecedented levels.

Earlier this month, LemFi, a remittance company secured $53 million in funding from Silicon Valley investors after surpassing $1 billion in monthly transactions. Based in the UK and founded in 2021, the company has already attracted over a million users, mainly from Europe and North America, with most sending remittances to Africa. Nigerian co-founder and CEO Ridwan Olalere shared with Semafor that “the market has always been big” and is poised for further growth. Towards the end of last year, LemFi expanded its services to include countries such as France, Germany, Italy, and Norway.

Nala, a remittance startup founded in Tanzania in 2017, also expanded its reach this month by launching operations in the Philippines and Pakistan, aiming to serve a migrant workforce that includes Africans. Both nations are among the top five global destinations for remittances, trailing only India, Mexico, and China. In July, Nala secured $40 million in funding from investors, including Norrsken22, a prominent tech-focused venture capital firm in Africa.

LemFi and Nala are among the growing number of companies capitalizing on sub-Saharan Africa’s remittance surge, with the region receiving an estimated $56 billion from overseas migrants in 2024—marking its fourth consecutive year of growth and a new record high, according to the World Bank.

Remittance startups have introduced fresh competition into a market traditionally controlled by US giants such as Western Union and MoneyGram. Olalere stated, “Banks in Europe make remittances to Africa cumbersome,” citing the extensive documentation required for large transfers and the lengthy delays in fund arrival.

By offering quicker and more cost-effective transactions, new startups are quickly attracting customers. Additionally, they are focused on addressing persistent challenges such as fraud and fluctuating forex rates, which have deterred some financial institutions from entering the market.

Some startups are also embracing new technologies. Juicyway, a London-based company co-founded by a Nigerian, utilizes stablecoins—a cryptocurrency pegged to the US dollar—for cross-border money transfers within Africa. Since its inception in 2021, it has processed $1.3 billion for 4,000 customers and secured $3 million in funding last month from Nigerian venture capital firms.

Recently, Flutterwave, a Nigerian online payments company, has expanded its remittance offerings, taking advantage of the sector’s rapid growth. In September, the firm concluded a significant agreement with a Virginia-based bank, allowing users of its app to send money to Nigeria from all US states, excluding Texas.

Remittances make up over 5% of the gross domestic product in 15 sub-Saharan African countries. The actual volume of remittances is believed to be even higher, as many transfers occur through informal channels.

In smaller countries within the region, like The Gambia, Lesotho, and Comoros, remittances from migrants abroad account for significant portions of GDP, highlighting the crucial role of these transfers in local economies. This sector offers important opportunities for governments and businesses to enhance payment service systems, both domestically and internationally.

Despite the growth in the sector, lowering the cost of money transfers remains the primary concern for many providers and policymakers. Fees for sending money to sub-Saharan Africa are approximately two percentage points higher than the global average, according to recent World Bank data. For example, transferring money from South Africa, which hosts the largest immigrant population in Africa, is more costly than from any other G20 country.

Despite the influx of funding into remittance startups focused on Africa, sending money to and from the region continues to be challenging, according to Babacar Seck, founder of Askya IP investment firm and former Africa investor at French development financier Proparco.

“Is it easy to send money abroad today? No, it’s terrible. You face very high fees, delays, and a lot of inefficiency,” Seck told Semafor. While sending money into Africa is becoming more convenient, he noted, “the reality is that there are still forex fees” that drive up the cost of the service.

Seck added that the greatest rewards in remittances will go to innovators who transform the industry by “reducing costs and considering not only sending money to Africa, but also from and within Africa.”

Nigeria continues to be sub-Saharan Africa’s leading destination for remittances, with an estimated $20 billion expected in 2024—surpassing the combined remittance totals of eight of the top 10 countries, including Kenya, Ghana, Senegal, and the Democratic Republic of Congo.

The World Bank highlighted in its recent report that expanding job opportunities for foreign-born workers in high-income countries have contributed to the rise in remittances since the COVID-19 pandemic. It also noted that “enormous migration pressures” are expected to further accelerate this growth.

 

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Written by Grace Ashiru

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