Investigating the Challenges and Opportunities Faced by Small Island Nations
In this on-the-ground video documentary, we delve into the remittances market, cash economies, and the unique challenges faced by small island nations. Our focus is on Cape Verde, a nation consisting of 10 main islands in the central Atlantic Ocean. Situated west of Senegal, Cape Verde struggles with cultivating and exporting goods due to its small land mass.
A significant number of Cape Verdeans live abroad, outnumbering those residing on the islands themselves. The economy heavily relies on tourism as a means to stimulate growth. Additionally, relatives living overseas play a vital role in supporting the local economy by sending money back home.
The Issues with Tourism and Remittance-based Economy
The combination of a tourism and remittance-based economy presents several challenges for Cape Verde. One of the major issues is the use of multiple currencies. Due to the constant influx of tourists, Sal, one of the islands in Cape Verde, accepts three currencies: the local Escudo, US dollar, and Euro. Customers often face high transaction fees imposed by Mastercard and Visa, which can reach up to 4%.
Remittance services like Western Union and MoneyGram also impose high charges on customers for sending money across borders, with fees reaching as high as 15%. This acts as a significant burden on Cape Verdean workers living abroad who send money back home.
The Challenges of the Cash Economy
Cape Verde’s cash economy faces additional hurdles such as high ATM and bank access fees. Moreover, banks in Cape Verde close at 5:00 pm local time on the islands and frequently run out of cash during bank holidays. This poses challenges for full-time workers who rely on these services for their financial needs.
Furthermore, despite being pegged to the Euro, Cape Verde experiences higher inflation compared to the eurozone. This inflation, combined with the limitations of the existing financial systems, impedes Cape Verdeans from freely spending, saving, and sending money as Westerners do.
Hot Take: The Struggles of Small Island Nations
Small island nations like Cape Verde face unique challenges in their economic development. Reliance on tourism and remittances provides opportunities for growth but also brings about various issues. High transaction fees and remittance costs act as a burden on workers abroad and hinder the local economy.
The cash economy in Cape Verde is further hampered by high ATM and bank fees, limited access, and inflation. These hurdles prevent Cape Verdeans from fully participating in modern financial systems. As we explore the struggles faced by small island nations, it becomes evident that innovative solutions are necessary to address these challenges and foster sustainable economic growth.
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