VZCZCXRO7692
PP RUEHMA RUEHPA
DE RUEHDK #1868/01 2571127
ZNR UUUUU ZZH
P 141127Z SEP 07
FM AMEMBASSY DAKAR
TO RUEHC/SECSTATE WASHDC PRIORITY 9195
INFO RUEATRS/DEPT OF TREASURY WASHDC PRIORITY
RUEHLMC/MCC WASHDC
RUEHZK/ECOWAS COLLECTIVE

UNCLAS SECTION 01 OF 02 DAKAR 001868 
 
SIPDIS 
 
SIPDIS 
 
DEPT FOR AF/W, AF/EPS, AND EB/IFD/ODF 
AND PASS AID/AFR/SWA AND AID/PPC/DC 
TREASURY FOR OIASA/IDB:EBARBER 
 
E.O. 12958: N/A 
TAGS: EFIN ECON EAID SG
SUBJECT: REMITTANCES TO SENEGAL ARE AN ECONOMIC FORCE 
 
 
DAKAR 00001868  001.2 OF 002 
 
 
¶1.  (U) SUMMARY: Formally recorded remittances to Senegal topped USD 
800 million in 2006 and are undoubtedly higher this year.  Informal 
money transfers are not quantified, but are also significant, 
perhaps equaling the formal flow.  These funds are an important 
source of foreign currency and alleviate somewhat Senegal's balance 
of payments deficit.  Most of these funds are sent to family members 
to help with basic living expenses or to contribute to investments 
in residential housing.  The international network of traders and 
workers affiliated with Senegal's Muslim Mouride Brotherhood 
transfers tens of millions of dollars or more to their leaders in 
Touba as religious tithes.  GOS policy to date has encouraged 
Senegalese to use formal banking and money transfer systems (and pay 
the associated high fees).  To date, however, there has not been 
much movement to take advantage of these financial in-flows to 
create broader investment instruments.  END SUMMARY. 
 
THE SIGNIFICANCE OF REMITTANCES 
------------------------------- 
¶2.  (U) Remittances back to Senegal from citizens living overseas 
(mostly in Europe, the U.S., the Middle East, and Gabon) are a major 
source of foreign currency, providing a counterweight on Senegal's 
balance of payments deficit.  According to a recent report published 
by the GOS's Department of Forecasting and Economic Studies (DFES), 
remittances from expatriates reached USD 820 million in 2006 
compared to USD 681.6 million in 2005, an increase of 17 percent. 
This upward trend will undoubtedly continue in 2007 and beyond. 
These transfers have contributed to lessen the deterioration of 
Senegal's current account deficit (9.5 percent of GDP in 2006 and 
8.5 percent of GDP in 2007). 
 
¶3.  (U) The DFES report also noted that the majority of remittances 
are not formally recorded and that the official estimates likely 
capture only 50 percent of the actual volume.  Actual remittances 
(formal and informal) are therefore likely well above USD 1 billion 
this year, the equivalent of half of Senegal's total planned revenue 
collection and equaling more than ten percent of GDP.  In 
comparison, Senegal's FY 2007 investment/development budget to 
address poverty reduction and basic needs calls for spending 
approximately USD 764 million of GOS funds and an additional USD 512 
million from donors. 
 
WHERE DOES THE MONEY GO? 
------------------------ 
¶4.  (U) According to the report, remittances have become the highest 
legal source of external income for Senegal, and major source of 
income for a large percentage of Senegalese families and, though 
difficult to quantify, a major contributor to poverty reduction.  In 
general, it is estimated that more than 40 percent of Senegalese 
households benefit from remittances.  These contributions, often 
sent in USD 100-150 increments on a monthly basis through services 
such as Western Union, are used to directly support households with 
daily consumer items, for health and education costs, accumulation 
of assets including property and livestock, and for housing 
construction.  Senegalese living overseas also send cash, clothing, 
and documents through an informal network of "runners" in an 
apparent effort to avoid shipping, customs, and money transfer fees. 
 A relatively small percentage of family remittances go into formal 
bank accounts or investment funds.  Some also provide family members 
in Senegal with bank cards that allow them to withdraw money from a 
foreign-based account. 
 
¶5.  (U) The source of the remittances is mostly from traders and 
small business people working in Europe and the U.S., many without 
legal status.  However, a significant amount also comes from 
Senegalese with legal residence or dual citizenship, who continue to 
support family members in Senegal.  Surprisingly, some Senegalese 
children who apply for immigrant visas do not appear to benefit 
educationally from these remittances.  Many appear for their 
interviews unable to speak French, not having benefited from formal 
education as one might have otherwise expected.  Perhaps the largest 
contributors to this phenomenon are members of Senegal's Muslim 
Mouride Brotherhood, who are well known as small traders operating 
abroad.  The brotherhood has amassed considerable economic power 
through tithe-like remittances.  In addition to supporting their 
families, Mourides are very faithful in sending money back to Touba 
(the "sacred" town of Mouridism) in the name of the Kalif.  It is 
not possible to know the amount of money flowing back to the Mouride 
leadership, but it is likely more than USD 100 million per year. 
 
¶6.  (U) In Dakar and Touba the impact of remittances can be seen in 
new investments, particularly in residential construction in Dakar 
and improvements to the grand mosque and other Mouride institutions 
in Touba, a city that has grown much faster than national GDP over 
the last decade.  Investments have pushed up the real estate values 
in Dakar as real estate "back home" has become one of the most 
attractive forms of investment for many overseas Senegalese.  Other 
cities with high rates of remittances, such as Tambacounda, Matam, 
 
DAKAR 00001868  002.2 OF 002 
 
 
and Kedougou, do not appear to be benefiting as much, at least in 
terms of new construction or employment-generating activities.  One 
commentator noted that remittances have encouraged "laziness" among 
recipient families who receive more from abroad than by working in 
the local economy. 
 
THE GOS ROLE 
------------- 
¶7.  (U) The GOS has highlighted the positive impact of remittances 
in its Poverty Reduction Strategy (PRSP) and has proposed strategies 
to further promote remittances by formalizing contact with Senegal's 
diaspora.  For example, the GOS has been active in encouraging more 
flexible arrangements between banks and post offices and 
organizations such as the Western Union and Money Gram.  At the same 
time, when the report was publicized, there was criticism of the 
government for "permitting" Western Union and banks to charge 
"outrageous" fees for money transfers.  Some commentators called on 
the Government to establish a "solidarity bank" linking overseas 
Senegalese with family members at home to permit the establishment 
of joint accounts and cheaper transfer mechanisms. 
 
¶8.  (U) One area that is not yet being addressed is the potential 
role the microfinance institutions (MFIs) might play in banking 
remittances.  Only two of Senegal's one hundred-plus MFIs are 
formally involved in the remittance market (UNACOIS and Djoloff 
Mutuel d'Epargne et de Credit) and the legal framework for 
microfinance institutions in the West African Monetary Union (WAEMU) 
does not facilitate MFIs access to the remittance market. 
 
COMMENT 
------- 
 
¶9.  (U) While contributing to boosting family income and lessening 
poverty, the GOS needs to do more to enhance remittances' positive 
effects, by, for instance, encouraging investment instruments that 
can turn remittances into capital for new business ventures. 
Furthermore, the government needs to create economic platforms that 
would encourage migrants to return to Senegal to set up Small and 
Medium Enterprises thus applying their foreign educations and skills 
at home. 
 
SMITH