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Comments on IFAD Report


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Comments on IFAD Report

  1. 1. Global Forum on Remittances IFAD and AfDB – Tunis 22 October 2009 Comments on IFAD Report Sending Money Home to Africa Abla Safir OECD Development Centre
  2. 2. Outline <ul><li>An important and timely report </li></ul><ul><li>Comments on findings </li></ul><ul><li>Comments on policy recommendations </li></ul>
  3. 3. An Important and Timely Report <ul><li>Need to increase the knowledge on remittances to Africa: their cost, use, recipients and the financial institutions involved </li></ul><ul><ul><li>Lower costs and diversification of institutions may allow more migrants to send more regular transfers, to make sure they reach the right recipient and achieve better control of their use. The latter two may increase the amount migrants send. </li></ul></ul>
  4. 4. An Important and Timely Report <ul><li>Wider implications than only for remittances </li></ul><ul><ul><li>Also important for small traders </li></ul></ul><ul><ul><li>Policy recommendations push for an increase in financial literacy among users and compliance with regulations among financial institutions </li></ul></ul><ul><li>Methodology: Review of bank regulations and an important effort of data collection: at least 11,400 individuals surveyed in 19 countries </li></ul>
  5. 5. Comments on Major Findings – Market Competition <ul><li>Two money transfer operators account for 65% of transfers through MTOs, which in turn represent 90% of remittances. Exclusivity agreements are widespread </li></ul><ul><li>Remittances to Africa are very costly </li></ul><ul><ul><li>The variation depends on the receiving country but also on the sending country </li></ul></ul><ul><ul><ul><li>We should pay particular attention to cost within Africa, in particular within West Africa (where perhaps 80% or 90% of migrant flows are within the region) </li></ul></ul></ul>
  6. 6. Comments on Major Findings – Regulatory Framework <ul><li>Two results that need more explanation </li></ul><ul><ul><li>Cost of receiving transfers is higher in countries that are parts of monetary unions or that have adopted legislation prior to 1998 </li></ul></ul><ul><li>Need for more evidence on the link between the regulatory framework (or the resulting market competition) and the cost of remittances </li></ul><ul><ul><li>DRC, Kenya and Ghana allow MFIs to carry out international transfers: are the costs of these lower in these countries? </li></ul></ul>
  7. 7. Comments on Major Findings – Market Access <ul><li>An impressive dataset collected in 19 countries </li></ul><ul><ul><li>Survey methodology to maximise country coverage and have comparable data </li></ul></ul><ul><ul><li>Nice effort to have data with both information on remittances and use of financial institutions </li></ul></ul><ul><li>However, survey methodology needs to be clarified </li></ul><ul><ul><li>How are the 400 non MFI clients selected? </li></ul></ul><ul><ul><li>Survey responses may depend on who conducts the survey, in this case MFI agents. </li></ul></ul><ul><li>In addition, results must be interpreted carefully </li></ul>
  8. 8. Policy Recommendations (I) <ul><li>The Easy Ones? </li></ul><ul><ul><li>Increase the role of Post offices </li></ul></ul><ul><ul><li>Discourage or forbid exclusivity agreements </li></ul></ul><ul><ul><li>Perhaps even increase the reach of MFIs: MFIs are not only small institutions. Example: apparently the crisis has been good to some MFIs: South African MFI firm expanded in other African countries because banks’ lending volumes decreased </li></ul></ul>
  9. 9. Policy Recommendations (II) <ul><li>The more difficult ones </li></ul><ul><ul><li>Increasing financial literacy is easy for simple products. For more complex products, such as insurance, they prove difficult to explain. Since the role of remittances as insurance is clearly established, there is need for products that are complements to this insurance role. </li></ul></ul><ul><li>Additional ones: </li></ul><ul><ul><li>Differences in gender use of remittances of other transfers and of financial institutions (and perhaps training of MFI agents for this) </li></ul></ul>
  10. 10. Thank you for an interesting read Global Forum on Remittances IFAD and AfDB – Tunis 22 October 2009