Migrant money able to reduce poverty and inequality in Sub-Saharan Africa

A new study, published in The Quarterly Review of Economics and Finance, has shown that poverty and inequality in Sub-Saharan Africa can be reduced by international remittances.

The research, conducted by Eric Akobeng (pictured), PhD candidate from Ghana, West Africa and Graduate Teaching Assistant in the Department of Economics, discussed the extent to which money sent home by Sub-Saharan Africa migrants working abroad (international remittances) could reduce poverty and inequality by bridging the gap between the rich and the poor.

Eric, who has worked as a development policy worker at the Ghana Ministry of Finance and Economic Planning for 13 years, said: “Remittance payments are great ways of sharing wealth between Sub-Saharan Africa countries and other nations. Sending money home from abroad is a hidden force for breaking the cycle of poverty and inequality in Sub-Saharan Africa."

The results suggest that a 10% increase in remittances as share of gross domestic product (GDP) will lead to a 1.2% decline in the number of people living on less than US$1.25 per day, 2.4% decline in the depth of poverty, 3.1% decline in the number of people living in extreme poverty and 1.5% decline in inequality.

Additionally this research demonstrated that remittance payments empower poor households and may be an important means of sharing prosperity between Sub-Saharan Africa and other countries in the future.

When asked about future policy implications, Eric said: “In the future there is a need for Sub-Saharan African policy-makers not to depend solely on foreign aid and foreign direct investment but to look at remittance payment as a poverty-reducing and income-equalizing tool in designing poverty-reduction strategies.”