04/07/2013
at the Frankfurt School of
Finance & Management
1
WELCOME to the 10th
“University Meets Microfinance”
Workshop
...
Section I – General overview
2
 Huge and still growing volumes…
 … but be careful with statistics
 Some important chara...
3
Definition
SECTIONI
Remittances are, roughly speaking, defined as the money flows that immigrant workers send home
to th...
4
Huge and still growing volumes…
According to the World Bank, officially recorded remittance flows to developing countrie...
5
Huge and still growing volumes…
Total 401 billion US dollars ; source World Bank
Geographical repartition
SECTIONI
6
… but be careful with statistics
Source Amount
Banque de France 2004 : remittances France – Algeria 283 million euros
Ev...
7
Example : outbound remittances Switzerland 2010
Population : source office des migrations
Outbound remittances : source ...
8
A key factors : Corridors
Source : The migrant expectations for remittances in the Euro-Mediterranean area ;
Study condu...
9
In Europe, there exists a multiplication of corridors
Source : demo.istat.itc
Source :INSEE
Total : 4 179 000
Source “In...
10
Some important characteristics : providers
Individuals Hawala Cash to Cash Account to Cash Account to Account
Informal
...
11
Some important characteristics : providers by corridors
Example : Corridors France vs Morocco, Senegal,Mali & Comoros
S...
12
Some important characteristics : migrants expectations
Source : The migrant expectations for remittances in the Euro-Me...
13
Some important characteristics : migrants behaviour
Source : The migrant expectations for remittances in the Euro-Medit...
Section I – General overview
14
Section II – Main issues
Section III – Existing solutions
 Formal vs informal
 Prices
 ...
15
Informal vs formal
SECTIONII
Main reasons for informal
• Costs
• Existence of a black market for the exchange rate of t...
16
Informal vs formal
A global trend towards more formal remittances
Example : Mali
According BCEAO statistics, formal inb...
17
Costs of remittances remain quite high
Trends in Remittances Prices Worldwide
SECTIONII
18
Commitments towards a decrease of remittances cost face
tough resistance
5 x 5
Commitment [#77]
“We will work to reduce...
19
The last mile
As mentioned previously, proximity with the recipient is the most
important factor for migrants to select...
20
What for ?
The issue of the use of remittances is a very sensitive question because
it handles with private money and n...
21
What for ?
Example : Repartition according to the use of remittances from France in 4 corridors
Family help Housing
pro...
Section I – General overview
22
Section II – Main issues
Section III – Existing solutions
 Suggestions made by AFD- Afric...
23
Suggestions made by AFD- African Bank of Development
SECTIONIII
Study made by Epargne sans Frontieres for Agence França...
24
Enhancement of existing offers
As the « last mile » is always a tough issue, all the solutions enabling to reach the fi...
25
Promotion of bi-bancarization
Services of bi-bancarization aim to enable the possibility for money senders to have
acce...
26
Special care for productive investment
All the steps are crucial
Detection
Set up of
the project and training
Assistanc...
Special care for productive investment
27
Migrants Remittances Investment Local
Businesses
Salaries EmploymentMFIs
MFIs re...
28
Use of new technologies
Channel : mobile phone - examples
Channel : internet - examples
Type Companies
Sending
countrie...
29
PlaNet Finance approach
A comprehensive approach
Promote cheap and convenient remittances
by building adequate partners...
30
Remittances Building Linkage for Development of
Migrants and their Families through Microfinance Services
Establish 6 p...
31
PlaNet Finance – UPU project in Western and Central Africa
Leader Partners Associate
 PlaNet Finance  Union Postale
U...
Contacts :
Dominique Villeneuve
PlaNet Finance
dvilleneuve@planetfinance.org
Thanks !
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"Introductory Presentation on Remittances" by Dominique Villeneuve, PlaNet Finance

  1. 1. 04/07/2013 at the Frankfurt School of Finance & Management 1 WELCOME to the 10th “University Meets Microfinance” Workshop Thursday, July 4th 14:30 – 16:00 Introductory Presentation on Remittances Dominique Villeneuve, PlaNet Finance
  2. 2. Section I – General overview 2  Huge and still growing volumes…  … but be careful with statistics  Some important characteristics  Corridors  Providers  Migrants expectations  Migrants behaviour Section II – Main issues Section III – Existing solutions
  3. 3. 3 Definition SECTIONI Remittances are, roughly speaking, defined as the money flows that immigrant workers send home to their relatives. International migrant stock by origin and destination 1990- 2010 Source United Nations Department of Economic and Social Affairs International migration is impacting more than 200 million people in the world (1/3 from North to South and 1/3 from South to South) In milions
  4. 4. 4 Huge and still growing volumes… According to the World Bank, officially recorded remittance flows to developing countries reached an estimated $401 billion in 2012, growing by 5.3 percent since 2011. Remittance flows are expected to grow at an annual rate of 8.8 percent on average between 2013-2015 to reach about $515 billion in 2015. SECTIONI
  5. 5. 5 Huge and still growing volumes… Total 401 billion US dollars ; source World Bank Geographical repartition SECTIONI
  6. 6. 6 … but be careful with statistics Source Amount Banque de France 2004 : remittances France – Algeria 283 million euros Evaluation Ecorys study 1 500 million euros Statistics World Bank : inbound remittances 2007 2 906 million US $ Statistics Rapport co-développement 2003 remittances France Algérie 3 150 million euros Statistics IFAD : inbound remittances 2006 5 399 million US $ Example inbound remittances : Algeria SECTIONI
  7. 7. 7 Example : outbound remittances Switzerland 2010 Population : source office des migrations Outbound remittances : source Worldbank … but be careful with statistics SECTIONI
  8. 8. 8 A key factors : Corridors Source : The migrant expectations for remittances in the Euro-Mediterranean area ; Study conducted by PlaNet Finance 2009 Morocco Algeria Tunisia Turkey Spain France Italy Egypt Libya Albania Greece Example : stock of Mediterranean migrants in Southern Europe SECTIONI Corrido factors remitta dynam Stock o status system countri from on anothe
  9. 9. 9 In Europe, there exists a multiplication of corridors Source : demo.istat.itc Source :INSEE Total : 4 179 000 Source “International Migration and the United Kingdom, 2010.” Report of the United Kingdom SOPEMI Stocks of migrants repartition in Europe SECTIONI
  10. 10. 10 Some important characteristics : providers Individuals Hawala Cash to Cash Account to Cash Account to Account Informal Money Transfer Organizations (MTOs) Banks Posts MFIs > > 80 % of formal flows SECTIONI
  11. 11. 11 Some important characteristics : providers by corridors Example : Corridors France vs Morocco, Senegal,Mali & Comoros Source : Bank African of Development Morocco Senegal Mali Comoros SECTIONI
  12. 12. 12 Some important characteristics : migrants expectations Source : The migrant expectations for remittances in the Euro-Mediterranean area ; Study conducted by PlaNet Finance 2009 SECTIONI
  13. 13. 13 Some important characteristics : migrants behaviour Source : The migrant expectations for remittances in the Euro-Mediterranean area ; Study conducted by PlaNet Finance 2009 Cost driven  Is looking for the less expensive service  Very sensitive to fees  Women are more sensitive to costs Convenience driven  Is looking for a cheap and easy-to-use service  Sensitive to the opening hours Habit driven  Uses always the same service by habit  Is very sensitive to the employee that he used to work with  Prefers confidence and someone speaking in his language Community driven  Prefers the informal channels  Has more confidence on the people he knows  Lack of real other choice than informal SECTIONI
  14. 14. Section I – General overview 14 Section II – Main issues Section III – Existing solutions  Formal vs informal  Prices  The last mile  What for ?
  15. 15. 15 Informal vs formal SECTIONII Main reasons for informal • Costs • Existence of a black market for the exchange rate of the currency • No tax records • Weakness of the banking system of the migrants country of origin Volumes Surveys of migrants and remittances recipients and other secondary sources suggest that informal remittances flows, which are not included in the IMF estimation, could be equal to or exceed official figures for Sub-Saharan Africa (Page and Plaza 2006; IFAD 2009). Central banks in some African countries, such as Uganda, are making efforts to estimate these informal flows—through, for example, foreign exchange transactions data and remittances beneficiaries surveys—but these efforts appear to be limited to a few countries.
  16. 16. 16 Informal vs formal A global trend towards more formal remittances Example : Mali According BCEAO statistics, formal inbound flows in Mali have been twice as much important for a three- year period from 80 billion in 2005 FCFA to 180 billion in 2008. Meantime, the stock of migrants has just slightly changed. This would signify that informal flows share fell from 73 % in 2005 to 42% in 2008 Source Etude de capitalisation des initiatives et mécanismes en matière de transferts de fonds au Mal 2010 Frédéric Ponsot Bruno Obegi Benefits from more formal remittances (1) as bank deposits from remittances increase, banks are able to make more loans (2) remittances receivers who use banks can gain access to other financial products and services (3) banks that provide remittances transfer services are able to “reach out” to unbanked recipients and those with limited financial intermediation (Aggarwal et al, 2006). Also, in economies where the financial system is underdeveloped, remittances made through official channels can help alleviate credit constraints and promote growth (Giuliano and Ruiz-Arranz, 2006). SECTIONII
  17. 17. 17 Costs of remittances remain quite high Trends in Remittances Prices Worldwide SECTIONII
  18. 18. 18 Commitments towards a decrease of remittances cost face tough resistance 5 x 5 Commitment [#77] “We will work to reduce the average cost of transferring remittances from 10 percent to 5 percent by 2014, contributing to release an additional 15 billion USD per year for recipient families.” G20 Summit Document, November 2008 According to World Bank, progress towards reducing the cost of sending remittances have paused in 2012. SECTIONII
  19. 19. 19 The last mile As mentioned previously, proximity with the recipient is the most important factor for migrants to select the remittances channel Rural areas represent a large part of remittances recipients : in Africa, for instance IFAD estimates that 30 to 40 percent of remittances are going to underserved rural areas The most successful solutions will be those able to reach easily « the last mile » SECTIONII
  20. 20. 20 What for ? The issue of the use of remittances is a very sensitive question because it handles with private money and no commitment has to be addressed to the migrants for the way their families use their remittances The use of remittances will depend mostly on : - Generation of migrants (1st, 2nd,…) - Age of migrants - Country of origin, etc Financial literacy has been pointed out to be crucial to help the migrants and their families for using remittances in the most appropriate way for them. Some remarkable works have been done in this sense by GIZ and ILO SECTIONII
  21. 21. 21 What for ? Example : Repartition according to the use of remittances from France in 4 corridors Family help Housing project Investments Source : African Bank of Development SECTIONII
  22. 22. Section I – General overview 22 Section II – Main issues Section III – Existing solutions  Suggestions made by AFD- African Bank of Development  PlaNet Finance approach
  23. 23. 23 Suggestions made by AFD- African Bank of Development SECTIONIII Study made by Epargne sans Frontieres for Agence Française de Développement and African Bank of Development Four main preconisations Enhancement of existing offers Promotion of « bi-bancarization » Special care for productive investment Use of new technologies
  24. 24. 24 Enhancement of existing offers As the « last mile » is always a tough issue, all the solutions enabling to reach the final recipient closer to his home will enhance the existing solutions Either with « technological tools » : cards,.. Or by the recruitment of new agents : MFIs example : The Postepay Gift card issued by Poste Italiane can be used to pay for purchases in Italy and abroad wherever MasterCard® is accepted. The card is issued instantly at the time of purchase and can be loaded with flexible denominations of up to E500. example : The MFIs have developed very large networks close to their clients. Depending their size and the regulatory aspects of their country they can play an active role. For instance experiment of PAMECAS in Senegal with MTO Money Express for the corridor Italy Senegal which developed innovative financial services for migrants and their families SECTIONIII
  25. 25. 25 Promotion of bi-bancarization Services of bi-bancarization aim to enable the possibility for money senders to have access to a whole range of financial services in their country of origin Some examples : same bank Attijariwafa Bank Agreement between Banks Attijariwafa and la Banque Postale Key question : the existence of bank accounts for non-residents : for instance, there were some problems in Senegal about this issue Some success stories especially for the corridor between Spain and Ecuador but some limits for the obtention of a credit in the North for a project in the South SECTIONIII
  26. 26. 26 Special care for productive investment All the steps are crucial Detection Set up of the project and training Assistance for the financement Orientation – Advice for the entrepreneur Assistance for the realization of the project SECTIONIII
  27. 27. Special care for productive investment 27 Migrants Remittances Investment Local Businesses Salaries EmploymentMFIs MFIs resolve the information and institutional constraints facing migrants by:  Developing and offering a financial product for migrants to invest in  Diversifying the migrants’ money across many borrowers  Providing monitoring services to the migrant-investors Information & financial services Monitoring SECTIONIII
  28. 28. 28 Use of new technologies Channel : mobile phone - examples Channel : internet - examples Type Companies Sending countries Receiving countries Product type MTO + Telco Western Union + Orascom Middle East, Asia, Europe Algeria, Tunisia, Pakistan, Egypt, Bangladesh, Cash to Mobile Telco Orange Côte d’Ivoire Côte d’Ivoire Mobile to Mobile Type Companies Sending countries Receiving countries Product type Bank + posts La Banque Postale France 22 countries Account to cash Bank Barclays UK India Account to account Source : Remittances - how to shorten the long way home Gera Voorrips ING SECTIONIII
  29. 29. 29 PlaNet Finance approach A comprehensive approach Promote cheap and convenient remittances by building adequate partnerships Foster the creation of new financial products fitted to the needs of the migrants and their families Train migrants and their families on financial literacy and entrepreneurship SECTIONIII
  30. 30. 30 Remittances Building Linkage for Development of Migrants and their Families through Microfinance Services Establish 6 partnerships between remittance service providers and microfinance institutions. Train 700 migrants and their families on financial literacy and entrepreneurship. Assist MFIs to develop 3 products that help 500 clients per MFI save $100 each, and 250 clients per MFI access credit. Objective/targets I. Build partnerships II. Train migrants and their family members III. Help MFIs offer migrant-oriented products Component 5 partnerships between remittance service providers and microfinance institutions. Train 1598 migrants and their families on financial literacy and entrepreneurship. • 15 products developed • 2571 clients have saved $67 each on average (thru May) • 2199 clients borrowed $552 on average (total $1,300,000) • 1230 clients have life insurance Achievements Target group and area: Filipino migrants’ organizations in Spain, Italy, and Dubai; and families in the Philippines of Filipino migrants living in Spain, Italy and Dubai. SECTIONIII
  31. 31. 31 PlaNet Finance – UPU project in Western and Central Africa Leader Partners Associate  PlaNet Finance  Union Postale Universelle  La Poste de Côte d’Ivoire  Campost  La Poste du Mali  SONAPOST  Le Groupe La Poste  Improve the quality of service of International Electronic Money Order by checking the good implementation of procedures  Provide financial literacy to migrant populations and their families in the target countries (sending and receiving)  Extend the access by creating new points of contact in postal branches or with local shopkeepers  Develop a new offer of financial services for the partnering Posts fitted to the migrants needs  Organize and coordinate regional workshops in order to mutualize the results with neighboring countries SECTIONIII
  32. 32. Contacts : Dominique Villeneuve PlaNet Finance dvilleneuve@planetfinance.org Thanks !

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