This document discusses using remittances to fund microcredit as a tool for poverty reduction. It contains 5 sections: (1) microfinance helps the poor through small loans; (2) microfinance gets funds from various sources including remittances; (3) remittances provide stable funding and help families start businesses; (4) at a national level, remittances spur local entrepreneurship and improve balance of payments, while internationally they counteract trade domination; (5) the authors propose using remittances for microfinance and promoting international and bilateral trade to influence development.

1. From Remittance to Microcredit
A sustainable poverty-eradication
policy boost
Valentino Piana
Paulos Kesete
Penang, 5th December 2007

2. Table of contents
1. Microfinance as a tool for human and economic development
2. The sources of funds for microfinance
3. Remittances: an interesting complementary source of funds
4. Advantages at the country level and in the structure of the world
4.1. The structure of power in Asia in 2003
4.2. The main flows of remittances in Asia
5. Conclusions
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3. 1. Microfinance as a tool for human and economic development
help the poor to help themselves
activate the entrepreneurship of the family and the
community
arrive to places and social groups often overlooked
by other financial actors
enhance small projects, usually with a low
environmental impacts
ABOUT 100 MILLIONS OF CLIENTS
(SOURCE; MICROCREDIT SUMMIT 2006)
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4. 2. The sources of funds for microfinance
International donations
Governments finance
Microfinance
institution
Clients
Private donations
Loans
Remittances
Note that in 2003, remittances were higher than FDI in 66 countries out of 154
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5. 3. Remittances: an interesting complementary source of funds
ADVANTAGES FOR MFI ADVANTAGES FOR MIGRANTS
Money back
Micro repayments
Control over use
Stable flows Activate family
entrepreneurship
Efficiency
Shorter time horizon
for coming back home
We are already making an experiment in Ecuador
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6. 4. Advantages at the country level and in the structure of the world
ADVANTAGES
ADVANTAGES FOR
FOR THE STRUCTURE
THE RECEIPIENT COUNTRY
OF THE WORLD
New local Especially if channelled to
entrepreneurship microfinance, remittances
are systemic
International knowledge
countervailing factor to
transfer trade domination.
Improvement in the
balance of payments
In March 2006, we presented at Princeton University a
formalized model of bilateral power among nations
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7. 4.1. The structure of power in Asia in 2003
Integration
Dependent
Destination
Interconnection
Dominance
Mono out Integration
China Japan
Mono In-integration
Destination
Dominance
India Source Dominance
Source Dependence
Vietnam
Thailand The Philippines Dominant Destination
Interconnection
Malaysia Dominant Source
Indonesia Interconnection
Destination
Singapore Dependence
Dependence
Dependent Source
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8. 4.2. The main flows of remittances in Asia
China Japan
India
Vietnam
Thailand The Philippines
Malaysia
Indonesia
Singapore
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9. 5. Conclusions
Channelling remittances to microfinance is a
relevant opportunity.
But to influence the structure of the world
bold policies are needed. We at EWI are
working in two further directions:
Proximity international trade
Bilateral import promotion
We are networking researchers, policymakers &
businessmen to foster the change
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10. Feel free to write to us!
director@economicswebinstitute
pkesete@yahoo.com
Thank you for your kind attention.
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