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					Crossing the Border: Financial Access,
 Remittances, and Directo a México    SM


   Challenges and Opportunities in
   Account-to-Account Remittances
               Manuel Orozco
          Inter-American Dialogue

         Washington, June 5th, 2006
   Problem—although there exists a relationship between
  remittances and finance, banking rates are low because
intermediation is limited and structural problems in demand
    and supply persist: urgency to implement leveraging
    policies is imperative because there is an underlying
                      development issue


What we know:
   Senders and recipients increase their demand
   for financial services over time;
   A small percentage already have more
   accounts than non recipients
   50% of remittance payers are financial
   institutions
   Leveraging through design and marketing
   works when is done
   1. Empirical considerations between finance, remittances and
                            development
Having a savings account in home country increases remittance
sending by 25%;
When senders have a savings account, they are 3 times likely
to send money to support a family business;
Each year of remitting is associated with a 20% increase of
sending money to pay off loans;
The older the recipient remittances will increase by 4%;
Receiving remittances over longer periods of time will increase
by 10%;
Those visiting relatives in the U.S. staying in greater contact are
more likely to receive more money;
Recipients with bank accounts receive 27% more;
The longer receiving remittances the higher the likelihood to run
a business;
Moreover, having a bank account increases the chances of
having a business
             2. People with bank accounts among recipients and
                        non recipients of remittances

70%
      66% 65%
60%         60%
        58%                                                Recipient
50%
                            52%                            Non-recipient
                             45% 46% 44%
40%
                                                           41%
                                                                       37%
                                       34% 35%                           35% 34%
30%
                                                                                          31%
                                                                                                        29%
                                                                                                         28%

20%                                                                                         19%
                                                             17%                16%
10%                                                                                                                10%
                                                                                                                  10%

0%
      Dominican   Jamaica   Colombia   Ecuador   Bolivia   Guatemala    Peru   Honduras   El Salvador    Mexico   Nicaragua
      Republic
        3. Percent distribution of locations
               by type of business
                                                       Bureau of   Retail   Post
Country              Bank      CUs        MFI          Exchange    store    office
El Salvador           67.50%     6.40%        1.80%        1.40% 16.40% .
Honduras              61.50%     1.10%        1.70%        8.90% 26.80% .
Ecuador               59.40%     4.30% .               .           36.30% .
Mexico                55.30%     2.10%        0.00%        2.30% 40.20% .
Haiti                            50.90%       0.60%        9.80% .            38.60%
Peru                  50.80%     3.50%        3.20%        6.60% 35.10%        0.80%
Bolivia               47.50%     12.40%       18.60%       0.10% 20.30%        1.10%
Colombia              39.50% .            .                46.80% 13.70% .
Dominican Republic    39.10%     2.40%        0.10%        10.30% 48.20% .
Jamaica               26.60%     13.20%       1.00%        0.70% 46.10%       12.40%
Guatemala             23.50%     3.30%        0.40% .              72.80% .
Nicaragua             17.70%     18.60%       9.70% .              53.90% .
Guyana                 7.70% .            .            .           56.90%     35.40%
    4. Number of accounts opened among
       remittance recipient households
Institución   Nuevas          Transf.           Conversión
              cuentas         mensuales
Salcaja                 500           1000            50%
Red de la           2500             25000            10%
Gente
Banco               4000              5000            80%
Solidario
Fedecaces           4375             22000            20%
Guayacan             533              5426            10%
Coosadeco            529              4780            11%
Acacu               3000              2703           110%
Acocomet             800              2383            34%
El Comercio             80                800         10%
 Why are banking rates so low?
     Demand side:
1.     Remittances and financial literacy is small or inexistent
2.     Limited disposable income: cost of living is 90% of
       remittances received;
3.     Knowledge of the possible is fixed: poor quality of life
     Supply side
4.     Gap between FIs and individuals;
5.     Not always present where demand is;
6.     Assumptions about the poor and costs of banking;
7.     Cross-selling is not designed;
8.     No standards, metrics or methodologies;
     Enabling environment
1.     Productive base of local economy is fragile
2.     Entrepreneurial class is yet to modernize
3.     Government outreach is limited or inexistent
                   2. High cost of living
                                 Jerez    Catamayo Suchitoto     Salcaja
                                 (Mexico) (Ecuador) (El Salv.)   (Guat.)
       Cost of living . . .

Food                                 219        228        209      201
Services (utilities)                  60         44         40       43
Education                             13         32         29       56
Health                                40         41         34       68
Entertainment                         27          3         40       35
          Income . . .

Wages                                323        303        125      162
Monthly remittances received         637        331        515      181
Total earnings, w/ remittances       930        501        622      353
3. Low quality of life: Banking rates are strongly related
 to low education levels, low income, age, and gender
                                                    Más de          45   MENOS DE 150
                                                                         DOLARES
                                                    35,000
                                                     Entre 30,001   40   DE 150 A 300
                                                                         DOLARES
                                                       y 35,000     35
                                              Entre 25,001               MAS DE 300
                                                                         DOLARES
                                                y 30,000            30
                                         Entre 20,001
                                           y 25,000                 25
                             Entre 15,001
                               y 20,000                             20
                    Entre 10,001
                      y 15,000
                                                                    15
               Hasta 10,000                                         10
                                                                    5
                                                                    0
 0        20          40           60          80          100
     80
     70
     Universidad Completa                    Algo de Universidad/College         Secundaria Completa
      60
     Primaria Completa                       No completó primaria
     50
     40
     30
     20
     10
      0
                             Sender                                       Recipient
        4. No correspondence between MTO where
        money is picked up and having a bank account
        (%)*

                                 Ecuador Guatemala Honduras El          Mexico    Colombi
                                                            Salvador                 a
Recipients with bank accounts    34       17       16         19        28        45
MTO type where they pick up money . . .
Post office                      6        6        5 (11)     5 (14)    20 (57)
Western Union                    20 (14) 33 (52)   43 (36)    26 (32)   20 (60)   (31)
MoneyGram                        10 (5)   7 (50)    17 (33)   3 (33)    3 (90)
Main company                     36 (15) 37 ()      7 (80)    18 (33)   2
Other MTOs                       4        3
Bank                             17 (28) 6 (20)     17 (38)   34 (40)   44 (60)
Travelers                        6        3 (43)   9                    7
          5. Payers by type and ratio in the capital
 0.7


 0.6


 0.5


 0.4


 0.3


 0.2


 0.1


   0
              Bank                 credit union       MFI                  Retail store
  Nicaragua          Peru                 Ecuador     Dominican Republic    Haiti
  Colombia           El Salvador          Guatemala   Jamaica               Bolivia
  Guyana             Mexico               Honduras

Average flow of remittances to a capital is 35%
                   Other issues
6.   Assumptions about the poor and costs of banking
     1.   The poor don’t save
     2.   Setting bank branches is expensive;
7.   Cross-selling is not designed
     1.   Financial product design
     2.   Marketing
     3.   Market research;
     4.   Technology adaptation
8.   No standards, metrics or methodologies
     1.   Goals set are missing
     2.   Projections are missing
9.   Gender approach is missing
   Gender and Remittances
Two thirds of remittance recipients are
women
Although women receive more money,
they are also more disadvantaged: live on
lower income, are unpaid and have more
dependents to take care of
Hierarchy of needs varies between men
and women
            Remittance recipients
                Male                       Female
                Unemployed Student Other   Unemployed Homemaker Student Other


Total income          408    503 569             411       395     481   513
  (including
remittances)
     Income           277     210 253            191        201    196   219
Remittances           138    299    316          217        219    298 295
   Received
 Number of              3       3      3           3          4      4      3
beneficiaries
         (%)            3      12    85            1         26      6    67
 Challenges: Enabling environment


1.   Entrepreneurial class is yet to modernize
2.   Government outreach is limited or inexistent
3.   Productive base of local economy is fragile
 Productive                  demand
 base


              Economic
              interactions




supply                         Enabling
                               environment
     Eight opportunities for the near
               future . . .
1.    Accelerating financial access
     1.   Targeted goals and standards to increase
          access to financial services and access
          (who would be benefited)
     2.   Develop methodologies to accelerate
          banking rates
     3.   Increase a critical mass of the policy
          network: consider Directo a Mexico
     4.   Underserved vs. marginality
2.    Partnerships between MTOs and
      depository institutions
             Opportunities . . .
     3.   Increase the risk propensity…
     4.   Innovation: card based transfers
                                       Rewards/Loyalty/Discount Cards
80                                     ID Card
                                       Transit System Card
                                       Credit and Debit card
70                                     Debit
                                       Gift Card

60                                     Payroll Card
                                       Electronic Benefit Card
                                       Reloadable Card
50                                     Credit
                                       Prepaid Debit Card
                                       Washing Machine Card
40                                     Affinity Card
                                       Remittance/Money Transfer Card

30
20
10
0
           Bank Acc.            No Bnk. Acc.
     Percent of remitters who have calling
    cards and use any of those other cards
                                                         Remittance/Money
                                                           Transfer Card

                                                                 Affinity Card


                                                    Washing Machine Card

                                                          Prepaid Debit Card


                                                Credit

                                                          Reloadable Card


                                                 Electronic Benefit Card

                                                         Payroll Card


                                                     Gift Card

                                   Debit


                                                 Credit and Debit card

                                                     Transit System Card


                                                          ID Card

                                                Rewards/Loyalty/Discount
                                                         Cards



0    10   20   30   40   50   60     70    80               90             100
       Other short term solutions
5.   Estimate cost-structures of investment;
6.   Explore investing in point of sales;
7.   Invest in market research, product
     design, marketing tools and IT
     adaptation;
8.   Development intermediation to leverage
     financial and banking investment;
             People with bank accounts
     (remittance recipients and non-recipients)
 70%


 60%                              Recipient
                                  Non-recipient
 50%


 40%


 30%


 20%


 10%


  0%
           Dominican    Jamaica      Colombia    Ecuador      Bolivia    Guatemala      Peru      Honduras    El Salvador   Mexico   Nicaragua
           Republic



Source: Multilateral Investment Fund-Inter-American Development Bank, Receptores de Remesas en Mexico, Octubre 2003; Receptores de
remesas en Guatemala, El Salvador y Honduras, Septiembre 2003; Receptores de Remesas en Ecuador, Mayo 2003. Washington, DC: MIF-
IADB/FOMIN-BID.
           MFI Relevance: Zacatecas
Municipalities (pop.)   Banks               Credit Unions   MTOs              FINRURAL


Jerez (55,000)          Bancomer,           Caja Popular    Thirteen money
                           Banamex,             Mexicana        transfer
                           Bital, Banorte                       ‘centros de
                                                                cambio’
Tepetongo
   (5,000)
Tlatenango              Bancomer, Bital,    Caja Popular    Five
    (24,000)               Banorte              Mexicana
Tepechitlan             Banorte                             One
   (5,000)
Momax                                                       One

Jalpa (20,000)          Bancomer, Bital,    Caja Popular    Three
                           Banorte              Mexicana
Juchipila               Bancomer, Bital,                    Three
                           Banorte
Rationales and Assumptions
about MFIs and remittances
Geographic presence
Offer of financial services
to an underserved market
           70.00%                                         Urbana
Lower cost transaction
           60.00%                                         Rural
due to development
           50.00%
commitment 40.00%
Gender commitment
           30.00%
         20.00%
         10.00%
          0.00%
                  México   El Salvador Nicaragua   R.D.   Guyana   Ecuador
   Basic indicators leveraging the relationship between
         financial intermediation and remittances

Remittance market service coverage The institution
provides remittance transfer operations to its clients or
members, as well as to the communities where its
branches operate;
Low cost remittance transfer The institution seeks to
offer a competitive pricing product making it attractive
to sender and recipients. Simultaneously, lower
transaction costs mean more money available to the
migrant and remittance recipient households;
Accessible financial services The institution markets,
design and provide recipients with an array of various
product options, including savings, credit, insurance,
pension funds.
             Transfer volume, number of account holder and
                     branches by institution (2004).
                                    Transfer cost          Volume of         Number of        Total         Number of
    Transfer volume, number of account holder and branches by institution (2004).
                                    (company /             transfers         remittance       number of     branches
                                    market                 per               recipients       clients
                                    average)               month             that are
                                                                             clients
 FEDECACES                             3.9% / 4.2%               17,500               4,375       90,000            26
 Banco Salvadoreño                     3.9% / 4.2%               58,000              17,000          n/a           110
 (BSal)
 Salcaja                               6.1% / 5.8%                 1000               7,650       15,000                3
 El Comercio                           9.8% / 8.7%                   200              1,330        7,000            11
 Banco Industrial (BI)                 6.5% / 5.8%             200,000              100,000      500,000      Over 250
 Banco Solidario (BSol)                      0% /4%              12,000               4,000       91,600            32
 BANSEFI                               5.4% / 5.4%               25,000               2,500      500,000           550
 Wells Fargo                          5.4 % / 5.4%               70,000             250,000       Over 1     Over 3000
                                                                                                  million


Source: Orozco, Manuel, Survey commissioned to Borge & Asociados, 2004; Institutional interviews, January 2004 & 2005.
     Number of accounts opened
     among remittance recipient
            households
Institution       New             Monthly       Conver
                  accounts        transfers     sion
                  opened                        rate
Salcaja                  500             1000      50%
Red de la Gente         2500           25000       10%
Banco Solidario         4000             5000      80%
Guayacan                 533             5426      10%
Coosadeco                529             4780      11%
Acacu                   3000             2703     110%
Acocomet                 800             2383      34%
El Comercio                  80           800      10%
              A success case? . . .
120000000            Remittance transfers by FEDECACES

                                                                  $100,000,000
100000000
                                                            $88,000,000

80000000

                                                    $60,000,000
60000000


40000000

                                           $22,023,000
20000000

            1998
             $57,0001999    2000 $1,203,000
                     $89,000$175,000
                                   2001  2002        2003    2004     2005
        0
                          Banco Solidario remittance transfer and
                             banking information (2002-2004)




Year    Annual               Volume              Accounts           ($)               Credits
       Transfers

2002          1,800         $6,000,000                     270             $150,000        50     $70,000


2003         14,000       $23,000,000                      860             $670,000       230    $525,000


2004        60,000        $50,000,000                    4,000        $3,500,000        1,700   $4,000,000
            (5,000
            month)




       Source: Banco Solidario officials’ interview, January 2004 & 2005
          Remittances and opportunities for
                   development
1.        Market competition,
2.        Financial democracy:
     1.     Financial services provision and
     2.     MFIs role,
3.        Macroeconomic policy
4.        Data measurement, and
5.        Regulatory environment
6.        Millennium development goals: education,
          health, gender
Investment on remittance related projects by international donors
in Latin America and Caribbean

 Donor                         Aggregate Investment 00-
                               05
 IADB                                          $38,285,830

 USAID                                         $10,000,000

 Ford Foundation                                  $700,000

 IFAD                                           $1,000,000

 Rockefeller                                      $200,000
          The donors’ approach . . .
          Projects funded by the Multilateral Investment Fund, 2001-2004.
Project                                                             Country              Amount
Expansion and strengthening of a microfinance institution FIE       Argentina              $2,396,060
Remittance Fund for Entrepreneurs                                   Brazil                 $5,000,000
Mobilization of remittances through microfinance institutions       Colombia                 $824,770
Distribution Channels for Remittances                               Dominican Republic     $2,500,000
Financial and business services for remittance recipients           Dominican Republic       $840,000
Support Micro-Enterprises Utilizing a Line of Credit                Ecuador                $2,200,000
Strengthening of Financial Services and Remittances                 El Salvador            $1,500,000
Capitalization of Remittances for Local Economic Development        Mexico                 $1,115,000
Strengthening Savings and Credit Unions                             Mexico                 $3,500,000
Investment of Remittances                                           Mexico                   $460,000
Investment in Financiera Nicaraguense de Desarrollo                 Nicaragua              $1,750,000
Support for returning entrepreneurs                                 Peru                     $500,000
Enhance dev. impact of Peruvian workers' remittances from JP        Peru                   $7,200,000
Financing for micro and SMEs thru formal financial intermediaries   Regional               $8,200,000
MIF-IFAD partnership facility for rural private sector dev-LAC      Regional               $4,000,000
Total                                                                                    $41,985,830
               Preliminary results
     Looking at the performance of these institutions in
     relationship to the range of issues addressed, some
     issues are identified:
1.   Transfer costs are not necessarily competitive across
     companies.
2.   The institutional strength of a business helps determine
     their distribution capacity.
3.   Offering financial services depends more on the
     institution’s initiative rather than institutional resources.
4.   Foreign assistance enhance an institution’s capacity
               Global remittance flows
                    Premises:
                    1. Impact of remittances is significant
$250,000,000,000.00
                    2. The impact however is not a solution to the challenges of
                       development: Structural problems of poverty and inequality are
$200,000,000,000.00
                       beyond migration and remittances; and the broader effect
                       depends on the productive base of local economy to absorb
                       foreign savings;
$150,000,000,000.00
                    3. Policies can be implemented that can leverage the economic
                       relationships migrants have with home country;
                    4. Any development approach demands a transnational outlook
$100,000,000,000.00    and a gender perspective


$50,000,000,000.00                                              Latin America

                                                                Workers' remittances and compensation
                                                                of employees, received (US$)

            $0.00
                1,980   1,982   1,984   1,986   1,988   1,990   1,992   1,994   1,996   1,998    2,000   2,002   2004
               Remittance recipient households
    70.00%                                                                                      Urbana
    60.00%                                                                                      Rural

    50.00%
    40.00%
    30.00%
    20.00%
    10.00%
      0.00%
                        México          El Salvador Nicaragua                     R.D.            Guyana            Ecuador

Source: El Salvador, Honduras and Guatemala: Bendixen and Associates survey; Dominican Republic: Emmanuel Sylvestre & Associates survey
(commissioned out by the author); Guyana: Laparkan Trading survey (commissioned out by the author); Ecuador: Mauricio Orbe (PulsoEcuador);
Mexico: El Colegio de la Frontera Norte. “Problemas y Perspectivas de las Remesas de los Mexicanos y Centroamericanos en Estados Unidos,” El
Colegio de la Frontera Norte: Departamento de Estudios Económicos. Mexico: 2002, p. 30.
Gender dimension of
   remittances
     Sender characteristics
Percent of senders by sex varies from regions:
50% of Latino migrant senders are women; 75%
of Filipino and Indonesian migrant senders in SE
Asia are women; 40% of Ghanaian and Nigerian
senders in the U.S. are women;
Men send more than women: their income is the
primary determinant;
Among Latino migrants, males propensity to
remit is higher, but not so among other groups
                  Latino Remitters by sex
20                                                                                                                                  500
                                                                                   Over 35,000
                                                                                                      150
18                                           Female
                                             Male                               Between 25,001                          306
16                                                                                and 30,000                      249
                                                                                                                                Male
14                                                                                                                              Female
                                                                                Between 25,001                     277
                                                                                  and 30,000            193
12

10                                                                              Between 20,001                          319
                                                                                  and 25,000                200

8
                                                                                Between 15,001            216
                                                                                  and 20,000
6                                                                                                       190


4                                                                               Between 10,001           203
                                                                                  and 15,000            185
2
                                                                                                         205
                                                                                   Up to 10,000
0    Up to     Between Between Between Between Between                  Over
                                                                                                       180
     10,000   10,001 and 15,001 and 20,001 and 25,001 and 25,001 and   35,000
                15,000     20,000     25,000     30,000     30,000

                                                                                                  0   200                     400         600
             Other migrant groups
               Propensity to remit is different among Indonesian and Filipinos:
               their obligations are greater

Country of                                Annual      Monthly     Propensi
  origin?       Sex           Income        Rem         sent         ty
Indonesia       Male             13927        2422          514        0.17
                Female            4233        2166          317        0.51
Malaysia        Male             11774        2062          428        0.18
                Female           12350        1603          445        0.13
Philippines     Male             19174        6054          509        0.32
                Female            9003        4331          346        0.48
GHANA           Male             50000        4812          401        0.10
                Female           45000        4250          354        0.09
NIGERIA         Male             50000        4802          400        0.10
Beneficiaries of Latino remitters

                   Female            Male
                 %    Average     %    Average
      Spouse      7.60 233.71     23.93 353.33
 Mother/Fath
            er   40.65   210.38   36.62   250.75
     Children    15.73   258.68   11.79   216.06
      Siblings   17.00   197.48   12.21   210.57
 Grandparents     5.49   138.94    3.86   200.89
 Other Family     7.71   260.63    6.21   261.53
Beneficiaries of South East Asian
           Migrants. . .


                       Philippines               Indonesia


                Male        Female        Male         Female
Spouse                 29            15           43            49
Mother/Father          49            50           39            34
Children                8            14            6            2
Siblings                8            11            1            0
Grandparents            0            2             1            6
Other Family            4            7            12            9
             People with bank accounts
     (remittance recipients and non-recipients)
   50%
                                                                     Recipients
   45%
                                                                     Non-Recipients
   40%
   35%
   30%
   25%
   20%
   15%
   10%
    5%
    0%
                 Guatemala              Honduras              El Salvador               Mexico               Ecuador

Source: Multilateral Investment Fund-Inter-American Development Bank, Receptores de Remesas en Mexico, Octubre 2003; Receptores de
remesas en Guatemala, El Salvador y Honduras, Septiembre 2003; Receptores de Remesas en Ecuador, Mayo 2003. Washington, DC: MIF-
IADB/FOMIN-BID.
The 5Ts of integration in
  the global economy
            Phone calls to selected Latin American countries,
                           $22    (x000)
                                 55,651
            Colombia               96,195
                                                                         634,940
                                                                                          838,903

                           $27
                              51,226
    Dominican Rep.                 124,328
                                                                             660,806
                                                                                       780,344         Monthly pay
                                                                                                       Pay out country
                           $60                                                                         Revenue--USA
                                   95,946
           Honduras                 108,623                                                            Household minutes
                                        169,418                                                        Minutes 2003
                                                         411,481

                           $33
                                   103,677
          Guatemala                               299,989
                                                  305,442
                                                                                                                                     1,455,877

                           $26
                                  90,267
         El Salvador                129,727
                                                               492,510
                                                                                                       1,016,670

                           $45
                            18,670
           Nicaragua         38,868
                                   120,280
                                      152,067

                         0           200,000       400,000         600,000       800,000         1,000,000    1,200,000    1,400,000      1,600,000

Source: Encuesta de inmigrantes en New York; US Census Bureau; 2000 and 2001 International Telecommunications Data, Linda Blake and Jim Lande.
Washington, FCC, December 2001, and January 2003. * calculo basedo en un promedio de 4 llamadas al mes por 5, 8, 15, 25 y 30 minutos por llamada
Formula utilizada es ∑ de llamadas = minutos anuales * Porciento que llama * Porcentaje inmigrantes que remiten (Censo 2000 de pobl.)
                                          Goods bought by Guyanese diaspora
           Confectioneries                    21%

                 Cigarettes                       22%
                Craft Items                        25%

                    Pickles                             27%

             Cook utensils                               29%

                      Other                                   32%
                     Sugar                                    32%

            Processed fruit                                     36%

                      Peas                                          38%

                       Rum                                                42%
Fresh Fruits and vegetables                                                 46%

                   Noodles                                                      47%

                Salted Fish                                                      49%

                   Peppers                                                        51%

                Fresh Fish                                                              58%

            Spices (curry, )                                                                  62%

                               0%   10%     20%         30%         40%         50%     60%         70%
                 Level of engagement
     Index for extent of engagement         50
                                                      Engagment with home country (%)
1.   At least traveling once a year;        45
2.   At least calling once a week;
                                            40
3.   Buying home country goods;
                                            35
4.   Helping family with other economic
     obligations;                           30
5.   Has bank account in home country;      25
6.   Has a mortgage loan in home country;
                                            20
7.   Sends over US$350
                                            15

                                            10

                                            5

                                            0
                                                 South America   Central America   Mexico   Caribbean   LAC
       Level of transnational
    engagement for Ghanaians in
Country                    Germany   U.K   U.S.A.

Calls once a week          43        83    67

Sends over $300            100       100   80

Buys HCG                   88        83    99

Travels once a year        49        65    63

(& Spends over US$1,000)   78        52    87

Belongs to HTA             37        28    21
    Level of migrant engagement
Migrants in home country who                45
   Have a bank account,                            Philippines
                                            40     Indonesia
   Have a Mortgage,                                Malaysia
   Have a small family or commercial        35
   business,
                                            30
   Have a loan to maintain personal
   business                                 25
   Have a student loan
                                            20
   Have a pension plan
   Lends money for family investments       15
   Stays in regular contact with families
                                            10
   Leaves with the family half the cash
   it brought in the last visit              5
   Support or contribute to hometown
                                             0
   associations or clubs that help your          Japan     Hong   Singapore Malaysia
   home country                                            Kong
       Extent of Impact


This impact however is not a solution to the
     challenges of development: Structural
     problems of poverty and inequality are
  beyond migration and remittances; and the
   broader effect depends on the productive
    base of local economy to absorb foreign
                    savings;
 Productive                                                demand
 base


                             Economic
                             interactions




supply                                                           Enabling
                                                                 environment
                                   El Salvador                        Mexico

                                   Expenses            Income         Expenses        Income

Minimum salary                                                  101                            110

Remittances                                                     250                            350

Basic food basket                                137                           450

Extended basic food basked                       274                           900

Market food basket                               674                           1500
          Opportunities for development

i.      Reduce Costs
ii.     Savings, Credit and Banking with a gender
        focus
iii.    Link with hometown associations
iv.     Promote nostalgic markets and tourism
v.      Create institutional ties with the diaspora
vi.     Link remittances and technology;
vii.    Social products: health and education;
viii.   Knowledge development: skills transfer,
        sharing
   Transfer costs to main recipient countries (to send
                       US$200)

18.00%


16.00%                               2001        2002       2003           2004.01             2004.06        2004.11             2005.06

14.00%


12.00%


10.00%


8.00%


6.00%


4.00%


2.00%


0.00%
         Bolivia



                   Colombia



                              Cuba



                                     Dominican


                                                  Ecuador



                                                             El Salvador



                                                                           Guatemala



                                                                                       Haiti


                                                                                                   Honduras



                                                                                                               Jamaica



                                                                                                                         Mexico



                                                                                                                                       Nicaragua


                                                                                                                                                   Peru



                                                                                                                                                          Venezuela
                                      Republic
                                          Transfer costs using electronic cards
                                                                                                             Latin America --(MTO), 20.0
                                                                                  Mexico --(MTO), 15.0
                                                                                                           First time charge, 19.5
                           Shipping fee, 3.2
                        Cost of one card, 2.6
US$300
                                                                           Regular cost, 13.7
               Monthly fee, 0.5
                    Withdrawal (1), 1.6
                          FX Comission, 3.1
                                                     Fee, 8.5



                                                                             Latin America --(MTO), 14.0
                                                                        Mexico --(MTO), 13.0
                                                                                               First time charge, 17.3
                           Shipping fee, 3.2
                        Cost of one card, 2.6
US$200
                                                                  Regular cost, 11.5
               Monthly fee, 0.5
                    Withdrawal (1), 1.6
                      FX Comission, 2.1
                                                Fee, 7.3


         0.0                      5.0                      10.0                15.0                        20.0                    25.0
Country        MFI                       Cost   MTO                     Conversion
Bulgaria       Procredit                 ↑      Western Union
Mali           NYESIGISO                 ↑      Western Union                    15%
Mali           Jemeni
Ghana          Procredit                 ↑      Western Union                    15%
Ghana          Rural Bank of Ghana       ↑      Western Union/Ecobank                ?
Ghana          Citi Savings & Loans      ↑      Western Union                    30%
Senegal        UM-PAMECAS                ↑      MoneyGram
Senegal        UMECUDEFS                        MoneyExpress
Philippines    Rural Bank
Philippines    Rural Bank                ↔      Uniteller
Guatemala      Fenacoac                  ↓
Guatemala      Banrural                  ↔      various
El Salvador    Procredit                 ↑      Western Union
El Salvador    Fedecaces                 ↓      Vigo
El Salvador    Integral/Consorcio        ↓      MFIC
Mexico         People's Network          ↓      various
Mexico         AMUCCS                    ↓
Haiti          Fonkoze                   ↔
Paraguay       El Comercio               ↑      Western Union
Ecuador        Banco Solidario           ↓                                       40%
Bolivia        FIE                       ↓      Viamericas
Bolivia        BancoSol                  ↓
South Africa                             ↔      Moneygram
Mali           BMS (Banque Malienne de   ↑
Type of payers in Latin America
               Bank    Credit   MFI    Cambios   Retail    Post
                       Union
 Guyana        6.6%         .      .         .   54.8%    38.6%
 Jamaica       19.2%   10.0%    .7%        .5%   60.5%    9.1%
 D. Repub.     40.2%    2.8%    .1%       8.9%   48.0%        .
 Nicaragua     40.7%    9.5%    5.8%         .   44.0%        .
 Colombia      45.7%        .      .     39.2%   15.1%        .
 Peru          48.7%    5.3%    2.1%      6.2%   36.5%    1.3%
 Bolivia       50.9%   15.0% 16.2%         .5%   16.0%    1.3%
 Average        51%    6.25% 4.95%       8.53% 32.22% 12.58%
 Haiti         54.9%     .8% 12.2%           .   32.0%        .
 Ecuador       57.6%    4.9%       .         .   37.5%        .
 Guatemala     67.8%   12.0%       .         .   20.3%        .
 Mexico        70.2%    3.5%    .0%       2.6%   23.7%        .
 El Salvador   78.6%    3.1%    2.5%      1.8%   14.0%        .
 Honduras      81.8%    1.8%       .         .   16.5%        .
Costs of Calling to Selected Latin American
         and Caribbean Countries
 Country                                 Global AT&T MCI
                                         Cell
 Guyana                                    0.90   0.88 0.87
 Haiti                                     0.56   0.51 0.49
 Jamaica                                   0.46   0.47 0.45
 Guatemala                                 0.44   0.31 0.29
 El Salvador                               0.32   0.31 0.29
 Trinidad & Tobago                         0.30   0.37 0.35
 Colombia                                  0.26   0.31 0.29
 Mexico                                    0.20   0.21 0.25
 Dominican Rep.                            0.20   0.31 0.29
 Source: Global Cell, AT&T, MCI rates.
      Strategy II: Savings, Credit and
               Remittances
a.   Monitoring transfers, especially the exchange rate
b.   Motivate savings and credit institutions to attract
     remittance senders and recipients
c.   Bring low cost banking centers where there is a
     high concentration of families who receive
     remittances
d.   Offer incentives to households that receive
     remittances;
e.   Allow micro-finance and credit unions to become
     agents of remittances and savings institutions
      Number of accounts opened among
       remittance recipient households
Institución   Nuevas          Transf.           Conversión
              cuentas         mensuales
Salcaja                 500           1000            50%
Red de la           2500             25000            10%
Gente
Banco               4000              5000            80%
Solidario
Fedecaces           4375             22000            20%
Guayacan             533              5426            10%
Coosadeco            529              4780            11%
Acacu               3000              2703           110%
Acocomet             800              2383            34%
El Comercio             80                800         10%
    Strategy III: Alliances with Home Town
                   Associations

Seek communication and dialogue with HTAs;
Social development
   Donor technical assistance for project identification;
   Support of a transnational community radio;
   Donor support on governance and democratic participation;
   Donor partnerships in social (health and education) and
   infrastructural projects
Economic development
   Government incentives to attract private sector involvement;
   Government support in investment feasibility analysis;
Financial infrastructure
   Support education on financial services;
   Support to link technology to education, communication and
   remittances in the rural areas.
Definition of four criteria for evaluating development potential
Ownership                     Correspondence                  Sustainability                 Replicability
Community members             Project meets basic needs;      Project enables                Resources for the project
participate in decision       needs met are a                 development goals;             are easily available in other
making;                       development priority; and       does not constitute a          communities; and
community members             implementation occurs in        burden or entail added         institutional environment
participate in                association or coordination     costs; and                     facilitating implementation
implementation; and           with other institutions.        has a long life cycle.         is available in other
community members have                                                                       communities.
control of project after
completion.



Three-for-One Program projects and communities in Jerez, Zacatecas
Type of project         Specific activity       Community                 Three-for-One            Population
                                                                          contribution
                                                                          (US$ as of 2003)
Educational             School renovation       San Juan del Centro       68,000                   419
infrastructure
Microenterprise         Sewing workshop         Jomulquillo               7,224                    305
Public infrastructure   Potable water           Sauz de los Garcia        175,263                  138

Business investment     Lamb raising project    El Briseño                19,200                   91

Source: SNIM n.d.; SEPLADER 2004.
          Tourism: one of the 5Ts. . .
600,000

                      Dominicans living abroad who visit the Dominican Republic
                                                                                                         577,500
550,000

                                                                                               523,588
                                                  514,527
500,000
                                        501,676                                      502,148
                                                                  487,176


450,000



                              418,681
400,000
                    399,119



350,000                                                     Dominican tourists (#)
          339,542



300,000
      1996           1997      1998      1999      2000             2001               2002     2003        2004
                                          Impact of Remittances
Strong (3)                           Medium (2)                               Low (1)
Guatemala,                           Paraguay,                                Argentina,
Ecuador,                             Colombia                                 Panama,
Nicaragua,                           Peru,                                    Antigua and Barbuda,
El Salvador,                         Dominican Republic,                      Trinidad and Tobago,
Haiti,                               Brazil,                                  Venezuela, RB
Honduras,                            Suriname,
Bolivia,                             Costa Rica,
Guyana,                              Belize,
Jamaica,                             Grenada,
Mexico                               Barbados


  Ratio of remittances: 1: < .66; 2:0.67-1.5; 3: > 1.51; Remittances as % of GDP:1: < 1%; 2: 1 to 4%; 3:>4%;
  Remittances per capita: 1<36; 2: 37-100; >100; Remittances cost: 1: > 7.5; 2: 7.6-9.5; 3: <9.5.
                 Dominican Republic: Remittances, non-trad
                       exports, tourism, and maquila
$6,000,000,000                                                                                                                         600000000
             r2: 0.4 adj. r2: 0.27          Tourism          Non-tradit.     Remittances          Maquila
             Beta (Unstandardized)          -0.202           0.286           0.368                0.01536
             Beta (Standardized)
$5,000,000,000                              -0.164           .333 *          .486 ***             0.006

             Quarterly flows 93-03                                                                                                     500000000

$4,000,000,000




$3,000,000,000                                                                                                                         400000000




$2,000,000,000

                                                                                                                                       300000000

$1,000,000,000




           $0                                                                                                                          200000000
                  1990      1991     1992    1993     1994   1995     1996   1997       1998    1999      2000    2001   2002   2003

                                            Remittances        Tourism       Maquila           Nontrad. (right axis)
Guatemala and the coffee crisis
250                         80.00

                            70.00
200   Remesas
      Café valor millon     60.00

                            50.00
150

                            40.00

100
                            30.00

                            20.00
 50
                            10.00

 0                          -
       Distributive effect of remittances

2500                                                                                                  4
                                            GDP per capita
                                            Average annual amount received
             3.47          2171
                                            Ratio (right axis)
                                         2104                                                         3.5
                                                           2077                 2059.25 2037.666667
2000
                                                                                                      3


                                                                         1592
                                                                                                      2.5
1500
                    1296
                                                                                                      2


1000
                                                                                      1.395           1.5


                                  0.97
                                                                                                      1
                                                                  0.77
 500
       374
                                                                                                      0.5



   0                                                                                                  0

             Haiti          Jamaica                   Dominican Republic             LAC
Country               and GDP     Per capita    Cost      R/gdppc     Average transfer    Annual volume
Mexico                    2.3%           162      6.88%        0.73              351.00     16,613,000,000
Brazil                    0.6%            34      8.13%        1.85              541.00      5,928,000,000
Colombia                  3.9%            87      7.45%        1.31              220.00      3,857,000,000
Guatemala                 8.7%           218      7.22%        2.60              363.00      2,681,000,000
El Salvador               14.3%          390      6.18%        1.91              339.00      2,548,000,000
Dominican Republic        14.1%          279     10.39%        0.87              176.00      2,438,000,000
Ecuador                   5.7%           134      4.94%        2.57              293.00      1,740,000,000
Jamaica                   17.2%          566      8.11%        0.79              209.00      1,497,000,000
Peru                      1.4%            50      6.48%        0.95              169.00      1,360,000,000
Honduras                  12.4%          163      7.67%        2.91              225.00      1,134,000,000
Haiti                    27.8%           122      7.72%        3.17              123.00      1,026,000,000
Argentina                 0.8%             21     9.02%        0.36              225.00        700,000,000
Nicaragua                 10.8%          146      6.93%        2.07              133.00        800,000,000
Paraguay                  3.7%            89      9.11%        2.24              263.00        500,000,000
Bolivia                   1.6%            48      7.19%        2.77              235.00        422,000,000
Costa Rica                1.8%            80      9.46%        0.82              301.00        320,000,000
Panama                    0.7%            77     10.50%        0.56              196.00        231,000,000
Guyana                    8.6%           186     10.14%        2.27              179.00        143,000,000
Barbados                  4.3%           418     11.66%        0.29              220.00        113,000,000
Trinidad and Tobago       0.8%            30     10.41%        0.45              200.00        100,000,000
Uruguay                   0.3%             71    11.28%        0.22              198.00         93,000,000
Belize                    1.7%           281      8.78%        0.73              220.00         77,000,000
Suriname                  2.1%            114    10.17%        1.17              220.00         50,000,000
Grenada                   5.2%           220    ND           0.6838              220.00         23,000,000
Remittances to Latin America and the Caribbean


    $45,000,000,000.00



    $40,000,000,000.00



    $35,000,000,000.00



    $30,000,000,000.00



    $25,000,000,000.00



    $20,000,000,000.00



    $15,000,000,000.00



    $10,000,000,000.00



    $5,000,000,000.00



                $0.00
                         1980


                                1982


                                       1984


                                              1986


                                                     1988


                                                            1990


                                                                   1992


                                                                          1994


                                                                                 1996


                                                                                        1998


                                                                                               2000


                                                                                                      2002


                                                                                                             2004
Intra-regional patterns of
       remittances
Remittances from Costa Rica and the D.R.
 45                                                                                 ¿Quién es el principal receptor de sus remesas?

 40                          US$ 1 - 50
                             US$ 51 - 100                     60
 35                          US$ 101 - 150
                                                              50
 30                          Más de US$ 150
                             No respondió                                                                                                   Padres
 25                                                           40                                                                            Esposo/esposa
                                                                                                                                            Hermano/hermana

 20                                                           30                                                                            Otros miembros de la familia
                                                                                                                                            Hijos
                                                                                                                                            No respondió
 15                                                           20                                                                            Abuelos
                                                                                                                                            Amigos
 10
                                                              10
     5
                                                                  0
     0                                                                          Dominicana                                     Costa Rica
                Costa Rica                      Dominicana


50              Tiempo de estar enviando
                                                             30
40                                                                                                                                            Dominicana
                                                             25                                                                               Costa Rica
30                           Dominicana
                                                             20
                             Costa Rica
20
                                                             15
10                                                           10

 0                                                            5
     Menos de   Entre 4y 6    Entre 10 y      Entre 13 y
      un año      años         12 años         15 años
                                                              0       Dos o más       Una ve z a la   Una ve z cada Una ve z al me s Con muy poca   Nunca llamo   No re spondió
                                                                      ve ce s por       se mana       dos se manas                    fre cuencia
                                                                       se mana
   Peruanos en el mundo . . .
País        Población    (%)            Promedio   Volumen
                                           de
                                           envío
EEUU           878,501         50.68%        200   $ 1,254,499,428
Argentina      125,880         7.26%          65   $    38,947,272
Venezuela      117,460         6.78%         100   $    55,910,960
Spain          112,331         6.48%         350   $ 280,715,169
Italia          86,410         4.98%         300   $ 185,090,220
Chile           81,270         4.69%          65   $    25,144,938
Bolivia         69,755         4.02%          65   $    21,582,197
Japan           56,442         3.26%         350   $ 141,048,558
Ecuador         41,600         2.40%          65   $    12,871,040
Brazil          25,023         1.44%          65   $
                                                       7,742,116.20
Canada          21,057         1.21%         200   $    30,069,396
Others         117,810         6.80%          65   $    36,450,414
           Outbound flows: migrants in Argentina

País          Migrantes Total sent




Peru            150000   $   38,947,272


Bolivia        300,000   $ 147,000,000


Paraguay       400,000   $ 196,000,000


Otros          100,000   $ 49,000,000
              South East Asian intra-regional flows:
    average remittance amount sent each time by migrants

                                            Hong Kong,
                    Japan                                                Singapore                  Malaysia
                                              China



                         Lowest                      Lowest                      Lowest                       Lowest
              Average                Average                        Average                  Average
                         40%                         40%                         40%                          40%




Philippines      $572        $377           $264            $190         $265        $182          $100           $70




Indonesia        $838        $472           $305            $174         $291        $182          $100           $70


                                                                                                         --
Malaysia         $970        $283    n/a             n/a                 $329        $242


Source: ADB regional survey of senders. NOTE: 95% of remitters in HK are women (domestic workers); 90% in Singapore;
60% in Japan.
SE Asian Intra-regional remittance flows
                         Philippines
$1,000,000,000
 $900,000,000            Indonesia
 $800,000,000
 $700,000,000            Malaysia

 $600,000,000
                         Malaysia--cross
 $500,000,000            border jobs
 $400,000,000
 $300,000,000
 $200,000,000
 $100,000,000
           $0
                 Japan      Hong Kong,     Singapore   Malaysia
                              China
 West African Migrants in Ghana
20
                                              60
15                                            50

10                                            40

                                              30
 5
                                              20
 0
                    (% )                      10

                                               0
     Togo      Guinea          Burkina Faso                         (%)
     Mali      Niger           Nigeria
     Liberia   Cote d’Ivoire   Senegal        Less than $200   $200-$400    $401-$600
     Benin     Gambia                         $601-$800        $801-$1000   Over $1000
                 Banks, Credit Unions and Microfinance
                    institutions offering remittances

Institution                                               Country       Type
                                                                        Commercial
Banco Industrial (BI)                                     Guatemala
                                                                        bank
Cooperativa de Ahorro y Crédito Salcajá                   Guatemala     Credit Union
                                                                        Commercial
Banco Salvadoreño (BSal)                                  El Salvador
                                                                        bank
Federation of Salvadoran Savings and Credit Cooperative
                                                          El Salvador   Credit Union
(FEDECACES)
                                                                        Transformed
Banco Solidario (BSol)                                    Ecuador
                                                                        MFI
National Savings and Financial Services Bank (BANSEFI)    Mexico        State bank

Oaxaca Bank                                               Mexico        Microbank
                                                                        Commercial
Wells Fargo                                               Mexico
                                                                        bank
Financiera El Comercio                                    Paraguay      MFI
                     Economic dimensions of
                      transnational migrants
                                   Immigrant economic practices
                                       (annual expenses)




                                                        Consumption              Capital
Family remittances          Donations                                            investment




                          Community                        Trade and          Property
  Household economy       (US$10,000 year)                 servicesServices   and other I
  (US$2700)                                                retail             (US$5,000)
                                                           (US$3,000)
                     Transnational engagement
Country            COL    CUB    ECU    ELS       GUA    GUY    HON   MEX    NIC   DR        BOL   JAM   LAC
Calls once a
    week             80     48     98     41        56     42    57     66    70        77    33    75    61

Sends over $300      27     15     33     32        43     33     8     46    13        17    21    42    31

Buys HCG             88     29     95     66       50     84     74    86     83    65        70    64    73

Has a saving
    account.         39      2     55     16       19     48     16    21      5    29        10    58    27

Travels once a
    year             34     13     51     24        9     45     12    23     19    69        13    69    32

(& Spends over
    US$1,000)       (61     50     90     61       48     54     43    70     26    64        91    58    60)
Has a mortgage.
    Loan             12      2     14     13        4     18     12     3      6        6     36    15    10
Owns a small
   bus.               5      2      1         3     2      8      4     2      3        3      4     2     3

Helps. Family w/
    mort.            21      1     24     13        1     21      8      5     7        13    31    16    12


Belongs to HTA        6            10         2      3     29     7      2     4         3     1    16     6
            Policy dimensions of remittances



Dynamics of remittances
1. Benefit to households        Problems
2. Distributive nature          • Transaction Costs
    1. Rural Sector             • Limited competition
    2. Country                  • Limited participation of S&C
3. Macro-economic Impact           institutions
    1. FC source                • Security
    2. Counter-cyclical role    • No economic or social policy
    3. Multiplying effect
4. Tied to finance
5. Part of a broader process:
The 5Ts: ‘nostalgic’ trade

				
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