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REMITTANCES

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REMITTANCES Powered By Docstoc
					Ofelia Scanlon
       Lily Tso
Trends
 Senders  and Receivers
 Problems with Transfer System
 Potential of Remittances
 Problems of Remittances
 A transfer   of money by a foreign worker to his home
  country.
 Money sent home by migrants constitutes the second
  largest financial inflow to many developing
  countries.
 Family  remittances - This is money sent by
  individual immigrants to family and friends back
  home.
 Community remittances - This is money sent by
  individual immigrants and by hometown associations
  to communities in their home country.
 Can help to reduce poverty
 Help smooth household consumption
 Lead to increase household expenditures
Source: www.sela.org
Source: www.sela.org
          Country                  $ billion
Mexico                               25.0
Colombia                              4.6
Brazil                                4.5
Guatemala                             4.1
El Salvador                           3.6
Dominican Republic                    3.2
Ecuador                               3.2
Honduras                              2.6
Jamaica                               2.0
Peru                                  2.0
         Source: World Bank Migration and Remittances Factbook 2008
          Country                % of GDP
Honduras                            25.6
Guyana                              24.3
Haiti                               21.6
Jamaica                             18.5
El Salvador                         18.2
Nicaragua                           12.2
Guatemala                           10.3
Dominican Republic                  10.0
Ecuador                              7.2
Bolivia                              5.5
        Source: World Bank Migration and Remittances Factbook 2008
   Remittances began to slow down in the third quarter of
    2008.

   This slowdown is expected to deepen further in 2009 in
    response to the global financial crisis.
   Florida
    73% - 50%
   Georgia
    85% - 53%
   Utah & New Mexico
    57% -31%
   North Carolina &
    Virginia
    88% - 59%
www.worldbank.org
According to the Pew Hispanic Center:
 60% of U.S remittance senders are male.
 47% of all Hispanics born outside the U.S regularly
  send money to their country of origin.
 About 64% of remittance senders have less
  expectations of permanently staying in the foreign
  country.
   60% of 16.5 million sent estimated $30 billion during
    2004
   Sent approximately 10% of household income
   “Traditional sending” states:
    ◦ New York, California, Texas, Florida, Illinois, New Jersey
   Two–thirds of all recipients of foreign remittances are
    women.
   Remittance money received is normally spent on
    necessities.
   Remittances 50-80% of household income.
   Formal vs. Informal Channels
   Cost of Transfer
   Inadequate Financial Infrastructure
   Formal
    ◦ Banks
    ◦ Money Transfer Operators

   Informal
    ◦ Mail
    ◦ Friends
    ◦ Self
   15-20% of total
   MTOs charge more for smaller amounts
   Other fees
    ◦ Currency conversion fees
    ◦ Expedite fees
    ◦ Recipient fees
   Financial institutions lacking in rural areas
   Smaller institutions fill market
   Financial education needed
   More stable than capital flows
   Some countries use remittance flows as guarantees to
    obtain loans
   Two types:
    ◦ Family remittances
    ◦ Collective/community remittances
Source: www.sela.org
Type of         Sender       Receiver              Uses
remittance
Family          Individual   Relatives in the      Coverage of basic
remittances     migrants     country of origin     needs of the families

                             Relatives, partners   Investment in small
                             or the same           businesses and
                             migrant               enterprises
Collective or   Migrants’    Organizations or      Social projects:
community       groups       leaders in            Small-scale
remittances                  communities of        infrastructure
                             origin. Local         projects.
                             governments
                             Partners/             Productive
                             investors             investments in
                                                   small- and medium-
                                                   size enterprises.
   Governments want to harness the potential of
    remittances.
   Can teach recipients about the potential of remittances.
   Ultimately, remittances are private.
   “Ghost-town” phenomenon
   “Easy money”
   Inequality
   Long-run effects of remittances inconclusive
   Short-term effects vary from country to country
   Remittance flows might decrease as migrants return to
    country of origin

				
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posted:10/4/2011
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