Sector study for remittances from europe to sri lanka

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This presented by Saminda Kodithuwakku who is a project planning consultant and remittance consultant in Sri Lanka.

He is reading for his PhD in remittances and development

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Sector study for remittances from europe to sri lanka

  1. 1. Sector Study forRemittances from Europe Presented bySaminda Kodithuwakku (Reading for PhD in Remittances , B.Sc(First class) and Project Planning Consultant
  2. 2.  Total foreign revenue generated by Sri Lankan migrant workers US $ 5.1 billion in 2011 In 2009 US $ 164 in Sri Lanka but South Asia of about US $ 35. 14 % increase in inward worker remittances to Sri Lanka between 2008 to 2009 (Source: Sri Lanka Bureau of Foreign Employment)
  3. 3. Income Quintile (Q) Income Range (US $ Region per month) Q1 Less than 150 Middle East Q2 150 – 299 Q3 300 – 544 Middle East and Asia Q4 550 – 1,000 Europe and Asia Q5 More than 1,000 Europe, Asia, AmericaQ4 and Q5 subdivided into 03 Remittance Socioeconomic Groups Based on social and remitting behaviour
  4. 4. Purposes of use Income Groups (remittance from Europe) Remi-1 Remi-2 Remi-3Consumption 62.3% 23.1% 2%Housing and 26.3% 27.1%household assets 6%Business investment 1% 15.0% 7%Savings 4.4% 29.2% 82.2%Other expenditure 6% 5.8% 2.8%
  5. 5.  Remittance from Europe represents the highest value in per capita terms - approx 400 Euros/ Rs. 60,000 per month - (approx 48,000 Euros/ Rs. 7.2 lakhs per annum)
  6. 6.  Usual poverty parameter- Monthly incomeBut… Remittance Receivers of Remi-1 Overall monthly cash balance is minus Low level of social developmentRemittance Receivers of Remi-2 Save money on simple financial instruments Opportunity cost – forego investment income 8
  7. 7. Start a business or investWork and earn in All for Europe Consumption Bankruptcy or loss of investment
  8. 8.  Sheer impact to Sri Lanka’s FOREX earnings and total GDP in monetary terms Case of the ‘missing’ money (flourishing informal sector – drawbacks and threats) Case of the ‘missing’ data (reliable case data on remittances to Sri Lanka unavailable with CBSL, SLBFE, Dept of Census and Statistics)
  9. 9.  Sender side – Sri Lankan migrants in Italy, Germany, France, Netherlands and Cyprus Fall into 3 categories:1. Legal migrants remitting through formal channels2. Legal migrants remitting through informal channels3. Illegal migrants remitting through informal channels
  10. 10.  Receiver side – remittance recipients and returnee migrants residing in Colombo, Gampaha, Kalutara, Kandy, Kegalle, Kurunegala, Puttalam and Trinco. Keen on1. Business start up/ expansion/ revival2. Investing on financial market instruments3. Investing on capital market instruments
  11. 11.  Create (indirect) incentives for legal migrants using informal channels to shift to formal (induce financial sector and policy bodies) Provide recipients/ returnees with financial literacy, SME and technical training Facilitate direct linkages to financial institutes for investment and business development purposes
  12. 12.  Banking Sector (including state, private and international banks) Non-bank financial institutes Microfinance institutes Stock brokers
  13. 13.  Create incentives to develop customer oriented remittance/ financial products Provide opportunity to present their services to Sri Lankan migrants in Europe Facilitate direct linkages to potential clients
  14. 14.  Central Bank of Sri Lanka Sri Lanka Bureau of Foreign Employment Colombo Stock Exchange
  15. 15.  Arrange advocacy workshops (National Remittance Forum) - raise awareness on remittance sector issues - a platform to discuss possible improvements - introduce socioeconomically viable remittance models Induce authorities to create a conducive environment - support to financial sector - preferential treatment to users (social benefits e.g. health, education)
  16. 16.  Present models of incorporating illegal migrants who are currently unable to utilize formal channels, into financial mainstream
  17. 17. Social remitting behavior of receivers and sender to craft socially viable, cost effective remittance products. Opening Exchange houses in different European countries Interbank remittance agreement: while maintaining a common current account Zero physical handling of cash is emphasized Prepaid rechargeable remittance cards Simple KYC to introduce pre-paid rechargeable remittances cards Intra-bank remittances: transfer money via the international banking system 22
  18. 18.  In Sri Lanka, there is no problem in disbursement of remittances Microfinance institutions are required to  Develop SME development financial products  Educate receivers to invest on sustainable businesses  Link receivers with banks to invest on advanced financial instruments  Provide pre-departure remittance literacy Decision on remittance channels done by sender after migrating to Europe 23
  19. 19. Sri Lankan migrant in Europe Europe(Exporter)Remittance receiver tends tobuy imported goodsIncrease the aggregatedemand for imports Increase deficit of BOP 24
  20. 20. Remittance is end product Need to add marketable features to remittancesProvision of preferential treatments for remittance receivers’ families Policy level and financial sector interventions 25
  21. 21. Sri Lanka Bureau of Foreign Employment integrate migrant returnees to Sri Lanka’s SocietyLiquidate skills & knowledge Educate for next trip 26
  22. 22. Black Market = Formal remittance market ? 27
  23. 23. All Formal 3.3 USD billion in Year 2009 Europe Other countries formal 0.72 Europe Informal 2.58 USD billion USD billion 3.76 USD billion (22%) 28
  24. 24.  In Europe ------------- 680,000 Remittance Active Migrants (BASUG field research) Avg. Remittance per head per year--------- 6,600 USD (SEEDS field research) Total Europe per year----------------------- 4.48 USD billion EUROPE-formal -------------------------------- 0.72 USD billion EUROPE-informal------------------------------ 3.76 USD billion Total -formal for Year 2009------------------ 3.3 USD billion Europe informal out of Total-formal--------------1.13 ≈ 1.0 29
  25. 25. Second NEEDS: PsychologicalFirst NEEDS: First NEEDS: AccessSpeed of service Speed of service •Mental Easiness or •High speed of service compatibility with •High reducesspeed ofof the risk service service providers missing the risk of reduces missing •Hide themselves and their details •Rather than loss due • to Rather than channel high cost of loss due to high cost of channel Third NEEDS: Conversion Rate Attractive FOREX rate provides Extra -Remittance 30
  26. 26. Sudden influx of income flow Response Artificial affluent Social BehaviorUnfeasible IGA Flying Mentality 31
  27. 27.  Usual poverty parameter = Monthly incomeBut remittance Receivers Overallmonthly cash balance is minus Low level of social development 32
  28. 28.  Nationalisation of Exchange houses Interbank remittance agreement Minimum physical handling of cash(not at frontline) Closer relationship at Sender side Arrange KYC for pre-departure rechargeable cards Transfer via Account to Account 33
  29. 29. Thank You 34

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