2. Associated Session Nairobi, April 7, 2010 2 Remittances, Microfinance, and Development: INAFI Members’ Responses Moderator: Akin Akintula, Board member, INAFI International Speaker: Leila Rispens-Noel Senior Advisor, INAFI International Resource Persons/MFI Experiences Atiqun Nabi, INAFI Bangladesh/INAFI Asia AdjibyWakil, Vital Finance (Benin)
3. What is INAFI? Nairobi, April 7, 2010 3 Established in 1995 in Cusco, Peru A global network of 313 (as of 2007) microfinance institutions Serving about 26.7 million clients in Africa, Asia, and Latin America INAFI Africa composed of 50 member organizations spread in 24 countries serving a client base of 4.2 million people, typically peasant farmers, artisans, and micro/small-scale entrepreneurs.
4. Vision Nairobi, April 7, 2010 4 INAFI envisions a world where the poor are empowered and given the opportunity to enjoy sustainable livelihood through affordable alternative financial services and active participation in their own development. A world where even the poorest of the poor enjoy life with dignity, sufficient food, and income security to meet basic needs including shelter, clothing, healthcare, and education
5. Thematic Programs Nairobi, April 7, 2010 5 Micro-insurance/Rural Finance Food Security Social Impact Measurement (SIM) Global Remittances/Migration and Development Gender Mainstreaming/Women Economic Empowerment MDGs
6. Remittances in 10 Selected SSA countries Nairobi, April 7, 2010 6
8. MFIs and money transfers Nairobi, April 7, 2010 8 The African remittance market exhibits a low level of competition and has limited payout presence in rural areas. Two major money transfer companies control 65 per cent of all remittance payout locations. Exclusivity arrangements severely limit competition and create barriers to entry. More than 20 per cent of the people within the reach of MFIs receive remittances. Yet MFIs currently represent less than 3 per cent of remittance payers. IFAD, Sending Money Home to Africa
9. Factors which influence MFIs’ effectiveness in delivering products Nairobi, April 7, 2010 9 Geographic location – proximity to remittance receiving communities Market position – ability to compete with remittances market Provision of finance services - ability to provide a broad-range of financial services and products Systematic information management – effective data management Technology – effective channel for data gathering, efficient wire transfers, and data transmission Source: Orozco, M. and Hamilton, E., MFI Intermediation: Issues and Lessons
10. Issues to be addressed in relation to financial inclusion and remittances Nairobi, April 7, 2010 10 Informality (e.g. poor international payment infrastructure in rural areas, regulatory environments) that prevent rural banking and financial institutions from making inbound and outbound money transfers, or individuals from making outbound payments. Lack of competition on remittance payments is another problem faced in Africa. Exclusive agreements is that they restrict competition by preventing agents (e.g. retail stores, MFIs) from contracting with other money transfer operators. Low financial access. Only one per cent of the 250 million people in Africa have access to financial services. High transaction costs and lack of accessibility of affordable remittance channels.
11. Advantages of MFIs Nairobi, April 7, 2010 11 Unique distribution channel (through microfinance banks, cooperatives and NGOs) Opportunities to transform the remittances into productive activities (savings, credit, micro-insurance, housing loans, productive investments, etc.) Knowledge of clients' needs and presence in rural and urban areas. MFIs contribute to creating wealth and economic empowerment to those who have no financial access from formal banking If enabled, MFIs can contribute to the financial inclusion of millions of people due to its high presence in rural areas
12. INAFI Members’ Responses Nairobi, April 7, 2010 12 International Conference on the Impact of Remittances in Latin America: Microfinance as an Alternative Remittance Channel - September 22-24, 2005, Zacatecas, Mexico International Conference on Converging Initiatives and Best Practices in Harnessing Migrants’ Philanthropy, Investments and Remittances for Local Economic Development - May 23-27, 2006 in Tagaytay City, Philippines INAFI Global Conference on Microfinance, Remittances and Development which will be conducted on November 7-9, 2007 in Cotonou, Benin
13. Some initiatives Nairobi, April 7, 2010 13 INAFI Bangladesh - ‘Institutional Support for Productive Utilisation of Migrant Workers Remittances’ with funding from Remittance and Payment Partnership-RPP program of DFID and Bangladesh Bank. The objective of the project is to To promote and provide enterprise development and business development services to the remittances recipient families of Bangladesh. BASUG-INAFI Bangladesh Remittance Project 2009whith supported Oxfam Novib, Netherlands. BASUG is a Bangladeshi migrant organisation in partnership with Uddipan, Shakti Foundation, and WARBE
14. Some initiatives Nairobi, April 7, 2010 14 FEDECREDITO - FEDECREDITO is a wholesale financial institution, founded 64 years ago to offer economic assistance to entrepreneurs of micro, small and medium enterprises and to the workers of El Salvador. Fedecredito launched a project to promote financial democracy and provides remittance payout services
15. Policy Gaps Nairobi, April 7, 2010 15 The need for strategies to increase competition in money transfers and the payment of remittance flows. Development policy to support and capacitate microfinance institutions to get involved in the market for money transfers, and to allow MFIs to play a greater role in money transfers and potentially in deposit-taking Help to inform and meet the financial preferences (needs and wants) of migrants have in their home country Capacity building of MFIs and their staff to enhance their knowledge of new services, integrate new technology and ensure regulatory compliance (KYC). Capacity building for immigrant associations (financial literacy, giving investment options and enabling environment), providing matching fund, active engagement of diasporas in policy-making process in the field of migration and development, support in strengthening transnational networks of diasporas, link with MFIs, etc.
16. Recommendations Nairobi, April 7, 2010 16 MFIs to build sustainable partnership with diaspora organizations by building confidences and raising awareness to make remittances work for development MFIs and diaspora organizations to collaborate in lobbying for an appropriate regulatory environment in money transfer, capitalizing microfinance development, and contributing to sustainable development INAFI member organisations lobby for the rightful recognition of diasporas’ contribution to development
17. Challenges Ahead Nairobi, April 7, 2010 17 Global economic crisis resulting to reduced amount of money being sent by migrants Confidence building between immigrant associations and MFIs Regulatory measures/legal barriers Capacities of MFIs to deliver remittance-based products e.g. communication facilities and technology Development of relevant products and services which respond to the needs of remittance senders and receivers.
18. Discussion 1 Nairobi, April 7, 2010 18 What is the role of microfinance in harnessing the development potnetials of remittances? What is the added value of MFIs in leveraging remittances for development practicularly in the rural areas? What are the existing practices?
19. Discussion 2 Nairobi, April 7, 2010 19 What are the obstacles that prevent MFIs from participating in the remittance market and in providing remittance-based products and services? What types of support MFIs need in developing remittance-based products and services? Experience in Africa.
20. Discussion 3 Nairobi, April 7, 2010 20 What appropriate steps MFIs should undertake to maximise the potentials of remittances? How do we link up MFIs and diaspora organizations or hometown associations?
