Remittances Boost Educational Attainment in the Developing World

Garad Nor serves as the CEO of two Minnesota-based international money transfer companies that cater to the needs of the state’s Somali and East African populations. Since Garad Nor founded Banana Pay in 2018, the company has processed more than $120 million in remittances to countries in the developing world.

Millions of people in the developing world use remittances to pay for education costs and fill the gaps left by insufficient government funding. According to a 2017 United Nations report, a third of all education costs in developing countries are covered by families. For this reason, cost reductions in remittance transfers can free up money to meet educational costs.

Improvements in money transfer speed and reliability can also increase educational attainment. Faster transfer times and options to send money directly to schools will ensure that more children remain in school and have the supplies they need to succeed. According to one report, remittances have prevented more than three million children from dropping out of school in the past year.

How Digital Payments Boost Entrepreneurship

In response to the needs of the people in East Africa, Minneapolis-based businessman Garad Nor has established money transfer companies to help facilitate remittance payments between the United States and Africa. Garad Nor is the CEO and president of the successful remittance firm Banana Pay.

Evidence suggests that digital payments and expanded mobile banking options increase opportunities for entrepreneurs due to facilitated financial transactions, increased access to business loans, and cheaper payroll processes. Entrepreneurship is vital to the economy of developing countries such as Somalia, where years of civil war and government instability have resulted in weak financial institutions and no significant bank presence. 

In addition, formal work opportunities can be difficult to find. Youth unemployment hovers just under 70 percent in Somalia. 

However, because of mobile banking services, small business owners can safely and conveniently collect payments from their customers, pay their expenses, and raise capital. Today, the fintech (financial technology) sector itself is ripe with opportunity for Somali entrepreneurs.

The Importance of Remittances on the East African Economy

Focusing on the money transfer needs of the African diaspora in Minnesota, entrepreneurial senior executive Garad Nor heads two successful international remittance operations, which process millions of dollars in transfers every year. As a reflection of the lucrative remittance market, Garad Nor’s latest venture, Banana Pay, handles over 10 million dollars in international transfers every month. 

The earnings of East Africans in Europe, Canada, and the U.S. are often sent back to relatives in their home countries. In Kenya, nearly four percent of the Gross Domestic Product comes from remittances. 

The billions of dollars infused into the economy helps boost flailing currencies and drives business growth. Moreover, the increased purchasing power of remittance recipients contributes to increased spending on education, healthcare, and other sectors that support economic development. 

Researchers have found that remittances can have ripple effects throughout a community. Recipients often use their extra income to buy more goods, which increases localized production and creates more jobs. 

However, remittances may deepen economic inequality and reduce participation in the workforce. In an attempt to democratize the benefits of remittances, the Kenyan government has enacted a series of policies to increase diaspora investment in nationwide projects.