View/save PDF version of this document - La Strada International

Figure 6: Counter-cyclical Nature: Quarterly Flows to Selected Latin American CountriesSource: Central Banks of each country.4.4 Remittances and FinancesCentral to remittance transfers is their connection to and with financialinstitutions. In turn, financial institutions serve a vital function in offeringdevelopment potential. Remittances necessarily involve at least an indirectrelationship with banking institutions: Formal remittances always passthrough banks at some point. Thus remittances not only enable importantlife-enhancing expenditures but they also connect people with bankinginstitutions. Indeed, access to conventional financial services of banksand credit unions plays a vital role in creating and expanding economiccitizenship.318The importance of remittances as a potential tool to bank the unbanked isvital. Only 50 percent of Latinos in the United States have bank accounts,and the number of Latin Americans in their home countries who are bankedis significantly lower, especially among the poor. The lack of banks andbank accounts has a host of negative implications, from higher transmittingcosts of remittances to lack of credit for home ownership or investmentin productive enterprises. People who have bank accounts are likely toimprove their financial situation and enhance their economic citizenship inthe U.S., Latin America, and the Caribbean.The contribution of remittances to enabling financial citizenship isindicated by the finding that remittance recipient households in Latin