When it comes to transferring money, abroad migrant workers and the poor are being fleeced because of the high fees and lack of transparency that goes with it according to Raphael Grojnowski, founder and director of fintech start-up Mama Money.
He said South Africa is the most expensive country in the world to send money out of. “According to the World Bank, the average cost to send the equivalent of $200 (R2953.37) from South Africa to SADC countries is 18.69%. The global remittance price average is 8.9%.
“The South Africa-Zimbabwe corridor has the highest volume regarding people and money transfers. But families in Zimbabwe who receive money from Zimbabweans working in South Africa receive far less because of the excessive pricing of money transfers.”
Grojnowski points out that the actual cost of making the transfer is minimal. “It is therefore not right for money transfer services and banks to charge such excessive prices. Established providers such as Western Union, MoneyGram as well as Mukuru charge a minimum of 10% and on top of that, add their own exchange rate margins. They are making huge amounts of money on the backs of poorer people and, their pricing is not transparent.”
The big South African banks offer SWIFT transfers but these are not suited for low-value remittances as bank costs can be up to 40% of the amount sent, while the informal ways of getting money from SA to Zimbabwe are dubious and dangerous, and often cost as much as 20% or more.
“We researched the vast development potential of reducing remittance costs from South Africa to Zimbabwe. The impact would be instant, immediately helping both senders and receivers. More money would go into the pockets and bank accounts of recipients. In turn, they would have more money for essentials – basic food, better quality food, education, health and then housing.”
About Mama Money
Mama Money rates are set at 5%, with no margin charged on the exchange rate. Grojnowski explained that what Mama Money, together with other recent entrants to this market such as Hello Paisa and Exchange4Free are doing, is introducing healthy and vital competition into the market. “Our overarching goal is for South Africa to move from having the most expensive money transfer charges in the world to having the lowest charges in the world within three years. We want to drive down costs and bring livelihoods up,” he said.
The launch pad for Mama Money was Zimbabwe because this is where the immediate need to assist people was the greatest. Current estimates suggest that there are between one to three million potential Zimbabwean remitters in South Africa. A pricing analysis conducted by Eighty20 Consulting found that the average price to send $200 (R2953.37) over the SA-Zimbabwe corridor is 8.92% which is higher than the global average cost of 7.53% (as at Q1 2016) calculated by the World Bank.
Mama Money partners
Mama Money launched the SA-Zimbabwe remittance service in February 2015 and now have 25,000 clients. In March 2015 the World Bank reported Mama Money as the most low-cost operator in the South Africa-Zimbabwe corridor.
Mama Money's transfer facility is safe and licensed by the South African Reserve Bank (SARB).
“In March this year Mama Money launched cash payments via major retailer channels. A few months later, our footprint became national through a partnership with PEP stores, which has one of the largest retail national footprints. Our partnership with PEP is particularly exciting as it has unblocked the issue of Zimbabwean migrants not being able to open bank accounts in South Africa,” says Grojnowski.
Zimbabweans, Malawians, Basotho, Mozambicans, Zambians and Congolese across the country can now register at PEP. Mama Money will be rolling out transfers to all those countries.
“We also have accounts with the key big South African banks for Mama Money customers to use EFTs.”
“Right now, cash shortages in Zimbabwe are our key challenge. However, this also represents an opportunity to promote the use of mobile money, mobile banking and mobile payments. After all, cashless electronic payment systems are the future. We will be launching our connection to the Zimbabwean Telecash mobile money wallet in the next few weeks.”
Mama Money will add a new pay-out partner in Zimbabwe to its existing partner, CABS, through an agreement with TeleCash Wallet. CABS isZimbabwe'slargest building society and a subsidiary of Old Mutual Zimbabwe.