The remittances game of chance: playing with loaded dice? January ...

More documents

Recommendations

Info

Empowering consumers The remittances consumer is not necessarily ignorant of the opaque practices of the MTCs. However, a large portion of the consumers at issue are low-wage immigrants who “are not financially sophisticated, and who base their money transfer service provider decision based on word of mouth”. 11 They are also often recent arrivals in the country, and as a group do not generally have much clout with law and policy makers. In a number of countries, efforts have been made to provide consumers with more information about the costs of transferring money. Information is often provided through price-comparison websites but also through targeted public-awareness campaigns. Supporting financial inclusion The MTCs currently dominating the market have only one product to sell: the remittance service. This represents a major lost opportunity to promote financial inclusion amongst a group of consumers, many of whom are currently unbanked. Consumer, migrants and human rights advocates could work together with community development financial institutions (CDFIs), like cooperatives, microfinance institutions and post banks (and regulators) to determine how these organisations can better serve migrant populations and their array of financial services needs; not only remittances. 6
Migration and international money transfers I. Global migration & the remittances it generates Approximately 200 million consumers live outside of their country of birth according to the International Organization for Migration driven by the desire to earn a living wage or having fled political instability or natural disasters or environmental degradation. From 1965 to 1990, some 45 million people emigrated globally. And the number of migrants continues to grow at a rate of 2.9% per annum. 12 Collectively, these millions of migrants transfer hundreds of billions of US dollars per year to family members back home. 13 These funds, called remittances, are used primarily to purchase food, household goods, clothing and medicine; and occasionally, to purchase homes, agricultural land and to invest in small business opportunities. Not surprisingly, migrants flock to wealthy countries and countries in transition as their primary destinations, and, as a result, OECD countries are also the main source of remittances to developing countries. The USA is the frontrunner as a remittances-sending nation remitting approximately USD95 billion in outward flows annually, with the largest proportion of those funds going to Mexico. Russia and Germany are in the second and third positions as sending nations. 14 Generally, global migration patterns are from the South to North, and thus remittances flow in the reverse direction. However, as increased attention has been directed to remittances due to their economic importance in recipient countries, it has been noted that South-South remittances also play an important role, and account for 30-45% of all remittances received in the South. For example, remittances from Argentina to Bolivia or from South Africa to Zimbabwe or from Malaysia to Indonesia are all examples of South/South flows. 15 In addition, domestic migration from rural to urban areas is on the rise with some 700 million persons falling into the category of internal immigrants according to the World Bank (millions of Indian and Chinese farmers relocating to coastal cities for example). This paper does not address these domestic flows; however, it is an important area for further study and, unfortunately, has received relatively little scholarly attention to date. Remittances volumes to developing countries have grown consistently and considerably over time, and are predicted by the World Bank to continue to grow at a rate of 7% annually through 2013. 16 Remittances also appear to be responsive to natural disasters and instability; rising to meet the increased needs of family members in the country of origin during times of crisis. And on the macro level, remittances shore up hard currency reserves in developing countries, which in turn can increase their creditworthiness in the capital markets. II. The economic impact of remittances on developing countries Not only do recipient families rely on remittances for household consumption needs but, as mentioned above, governments rely on them for hard-currency reserves, and even as collateral for loans from the capital markets. 17 Remittances are a substantial part of many developing countries’ gross domestic product (GDP). In fact, they represent 10% of the GDP for more than 40 developing countries, 18 and for some countries rise to the level of one-third of the country’s GDP. 19 India, China, Mexico and the Philippines are the top remittance-receiving countries per the World Bank’s Remittances Factbook 2011. The Philippines excluded, these are sizeable economies with strong growth patterns. However, for the most part, remittance-recipient countries tend to be smaller in terms of land mass, as well as population size and market production capacity. 7
Page 1 and 2: The remittances game of chance: pla
Page 3 and 4: List of acronyms AFD: Agence Franç
Page 5: Bank, it cost on average 6.87% to s
Page 9 and 10: Ironically, the typical remittance
Page 11 and 12: Likewise, the number two money-tran
Page 13 and 14: ecognise the potential value of the
Page 15 and 16: agents. Further, as competition inc
Page 17 and 18: savings clubs, which can operate in
Page 19 and 20: international person-to-person tran
Page 21 and 22: 32 Gopinath, Shreyas, Justin Oliver

The remittances game of chance: playing with loaded dice? January ...

Create successful ePaper yourself

Delete template?

Save as template?