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General meeting-10-1-12

General meeting-10-1-12






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  • Also Net Unilateral Transfers in Current AccountBetween Individuals Across Countries
  • - Inherent problems not allowing African remittancemarkets to catch up with other developing regions remittance markets
  • US$40 billion a year by 30 million individualsTop 5 most expensive corridors in world in Africa (30-40% of all flows)Underdeveloped Rural Remittance ServicesCosts range from 12% to 25% of the remitted amount
  • Have to sign exclusivity agreements with MTOs to enter market65% of payout locations partner Western Union & Money GramHigh travel costs due to scarcity of branchesPost offices have large geographical presence butExceptions: Algeria (95% post offices with help of French postal services)Nigeria banned exclusivity agreementsOnly Congo, Ghana and Kenya authorizes MFIsAlso restrictions on amount for remittance inflows & outflowsMexico hads more payout locations than whole African continent
  • In Paper discuss informal means such as cell phone transfers etc.
  • Incentives forIncreased Competition will bring costsdownAllowing Microfinance services will provide remittances in addition to credit, interest, deposits, loans and other financial mechanisms to low income housholdsWill enable them to effectively use the remittances for poverty alleviationMFIs would double the number of payout locations in Africa (currently equal to Mexico)Providing training & resources to post offices in utilizing their presence in rural areas for remittancesCell phones transfer money directly (without any cost? – low cost?) and are fast, without being expropriatedIncreased technology increases payment networks and coverage in rural areas Financial Literacy for local population would not only increase those willing to use remittances, but can also encourage new entrants to the market. For instance, retail stores, post offices and local banks can enter the market and expand coverage in rural areas

General meeting-10-1-12 General meeting-10-1-12 Presentation Transcript

  • Undergraduate Economics Association 10/2/2012
  • Announcements  European Union in Crisis: Hopes and Woes of Politics and Economics  Rishi Chakraborty-- Africa’s Challenge in Developing Migrant Remittance Markets  Daniel Currie-- Problems With Small Governments  Abdul Hannan-- The Multilateral Trading System: Strengths & Challenges from Least Developed Countries PerspectiveUndergraduate Economics Association 2
  • Economics Majors Expo Members of the undergraduate club to join the economics department in staffing the table at the Majors Expo October 18th 12:00-3:00, GSU Metcalf Ballroom (775 Commonwealth Avenue) Email uea@bu.eduUndergraduate Economics Association 3
  • Africa’s Challenge in Developing Migrant Remittance Markets Rishi Chakraborty
  • What are Remittances?• IMF Definition:  Compensation to Foreign Employees  Migrant Worker’s Remittances• Transfer of Funds between Individuals• Migrant Workers to Country of Origin• $375 billion & 12.1% growth (2011)• Income to Households• Development & Poverty Alleviation• Human Capital FormationUndergraduate Economics Association 5
  • Stable Source of Foreign ExchangeUndergraduate Economics Association 6
  • Regional Remittance FlowsUndergraduate Economics Association 7
  • Migrant Remittance CostsUndergraduate Economics Association 8
  • Africa’s Remittance MarketsUndergraduate Economics Association 9
  • Factors for High Costs & Inefficiencies 1) Low Competition  100 MTOs dominate 90% of Remittance Services  Post offices lack cash flows, training & infrastructure 2) High Regulation & Barriers to Entry  Exclusivity Agreements (Western Union & MoneyGram)  Only Banks, MTOs & Foreign Exchange Bureaus authorized 3) Poor Rural Coverage  64% of branches serve 83% of population  High transport costs 4) Lack of Access to Financial Instruments  Low savings, loans, interest & insurance  Prevents Effective usage of Remittance flowsUndergraduate Economics Association 10
  • Lack of CompetitorsUndergraduate Economics Association 11
  • Potential Areas for Improvement• Need for Research & Timely Information  Enhancing impact of public policy on remittances• Increased Competition to Lower Costs  Reducing Regulations & Exclusivity Agreements  Providing Incentives for New Entrants  Microfinance for rural coverage & poverty alleviation• Improving efficiency of Remittance Markets  Providing training & resources to post offices  Encouraging technological innovation (Cell phones)  Educating rural population in financial servicesUndergraduate Economics Association 12