Remittances: Can Business and Policy Interests Converge Remittances and Financial Inclusion: CrossRe

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Remittances Can Business and Policy Interests
Converge? Remittances and Financial Inclusion
Cross-Regional PerspectivesWSBI IDB/MIF19-20
May, Brussels

• Douglas Pearce
• Head, Financial Sector Team
• UK Department for International Development
• d-pearce_at_dfid.gov.uk

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Remittances Development Impact

• Somewhat controversial some suggest that
  remittances
• increase social/income equality
• lead to lower productivity
• are spent on un-productive uses
• result in house price inflation
• lead to Dutch disease problems
• have a negative association with GDP (but link is
  with out-migration and crises)

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Remittances Development Impact

• Data is weak but we can note that
• Remittances can directly reduce poverty and
  vulnerability, and increase labour productivity
• Remittances spent on the priorities of the poor
  (fees on remittances are lower than overheads on
  aid)
• Multiplier effects
• Remittances can make up a sizeable of GDP and
  also household income
• Access to secure and accessible deposit accounts
  would increase productive uses, and promote
  formalisation.

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Remittances as a market entry point

• Remittances are significant in size and
  increasing
• Migrants represent new market segments
• e.g. London 6 ethnic Indian, 5 Black
  African
• Sending end
• Money transfer may be first financial service
  migrants use
• Transfer services offer leverage for expanding
  market share
• Receiving end
• Remittances can also attract new
• clients and deposits
• Potential market of 2.5bn clients

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Market Concentration in the UK
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Convergence between Policy and Business Interest
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UK Private-Public Sector Working Group

• DFID initiated Remittances Working Group to
  present (low value) remittances as a commercial
  and development opportunity, and to identify
  barriers
• Working Group objective to increase the value
  and frequency of remittances to the developing
  world and encourage these flows to reach wider
  groups of senders and receivers.
• The Working Group has produced report that builds
  on the convergence between business and policy
  interest

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UK Private-Public Sector Working Group

• Findings and Recommendations re. Data
• Lack of market info/understanding research
  needed
• Customer awareness low www.sendmoneyhome.org
• Customers unaware of full costs move towards
  APR/AER
• Findings and recommendations re. Regulations
• Regulations not always clearly or consistently
  applied
• Incentives needed for informal MTOs to formalise
• Needs to be easier for senders to use formal
  channels
• Regulations should not add unnecessary costs
• Other Findings and Recommendations
• Small MTOs need support to form trade body
• Quality standard to help consumers select
  provider/product

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Regulations and Supervision that promote
convergence of business-policy interest

• AML and CFT enforcement appropriate to developing
  countries
• MTO regulatory regime
• Proportionate and risk-based (e.g. why not
  liquidity ratio rather than minimum capital?)
• Effective backed up by market knowledge ,
  capacity, enforcement
• Focus also on access and information/awareness
• Framework for e-payments
• Diverse receiving outlets/channels

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Remittance Country Partnerships to promote
convergence and positive development impacts

• Objective to remove policy, legal, funding
  barriers to remittance flows
• Actions
• Improve payments infrastructure
• Household surveys
• Challenge fund grants to promote competition and
  extend access
• TA to regulators
• Review MTO licensing regime
• Implementation of AML/CFT measures (linked to
  Access)