Access to formal remittance services is difficult for many migrants because of the onerous documentation requirements that banks and remittance providers impose on prospective clients.


South Africa has long been the dominant economy in the region. Statistics indicate that South Africa contributes almost two thirds of regional GDP[1]. It comes as no surprise then that South Africa has long been the net recipient of migrant labour. Young men and women from across the region trek to South Africa in hopes of finding work and better economic opportunities in the mines, farms and cities of Mzanzi.

Having made it here, migrants must bear the burden of building a life here while taking care of financial responsibilities back home. A 2012 study conducted by FinMark Trust and updated in 2016 confirms that more than half of immigrants regularly send money home. This money forms an important source of income for families back home as it supports children, spouses and elderly parents. FinMark estimates that the average migrant remits upwards of R7,000 per year – a not so insignificant figure given the entry-level work most migrants engage in. The major corridors are from SA to Zimbabwe, Lesotho, Mozambique, Swaziland.When the bus driver is the only option…

Sadly, much of this money must be remitted using back door informal channels such as with bus drivers or through shady middle men. Such informal mechanisms are expensive – anecdotal evidence indicates remitters must pay up to 20% of sums being remitted. They are difficult to access – migrants must bear the time and monetary costs in order to make their way to the bus terminus in the middle of a busy working week. Furthermore, they are also risky, with little or no recourse available if the money is not delivered as agreed. As much as 75% of remitters are forced into these informal mechanisms because the formal system locks many migrants out.

Access to formal remittance services is difficult for many migrants because of the onerous documentation requirements that banks and remittance providers impose on prospective clients. These requirements include formal proof of address and proof of income which is difficult to obtain for many migrants working informal jobs and renting informal or sublet spaces.

Thankfully these requirements may soon be relaxed as remittance service providers begin implementing the new risk based approach to client on-boarding that was made possible by the FIC Amendment Act signed last year. Essentially, this new risk-based approach moves away from the rigid, ‘tick-box’ mentality which demanded a set list of documents and rather allows institutions to fashion their own approaches to identifying and managing money laundering and terrorist financing risks and to ensure that it has implemented appropriate measures to prevent or mitigate such risks.

Under the RBA Implementation Pilot Project, FinMark Trust is working with a number of financial services institutions, including providers of cross border remittance services, to assist in developing new approaches to on boarding clients that are simpler and less burdensome. We are excited about the progress we are seeing and the innovations around risk appropriate mechanisms for identifying and on-boarding clients.

At FinMark Trust, we see simplified due diligence in the provision of remittance and low value banking services as a key enabler to the extension of formal financial services to poor citizens and migrants alike. This is in line with our mission of building a more inclusive financial services system that makes financial markets work for the poor. We will be publishing more insights gleaned from the RBA Implementation Pilot Project as participants begin to implement methodologies within their businesses.


About the author

Farai Muronda

Farai Muronda is the Head of the South Africa Financial Inclusion programme with FinMark Trust. He is a credentialed Actuary with extensive experience in the space of financial services: which expands to Strategic Financial Planning, Investment, Pricing and Anti-Money Laundering. Farai is experienced in the field of providing insurance solutions and also providing and developing insurance tools i.e. an insurance calculator as well as an advisory framework. He currently works alongside multiple partners such as National Treasury in promoting and developing Financial Inclusion in South Africa. Follow FinMark Trust @Finmarktrust.