Migrants Remittances and Financial Inclusion:

1
Migrants Remittances and Financial Inclusion
What do migrants and policy-makers in countries
of origin (for migration) think? Remittances
and Financial Inclusion Cross-Regional
Perspectives Brussels, 19-20 May 2005, WSBI and
IDB
Nilim Baruah, Head, Labour Migration Service
Area International Organization for Migration,
Geneva
2
Outline

• Introduction
• 2. What do Migrants think?
• 3. What do States think?
• Facilitating managed labour migration
• Remittance services
• Enhancing the development impact of remittances
• Baseline and policy-oriented research and sharing
  of good practices
• 4. Concluding remarks

3
1. Introduction
1.1. Definition 1.2. Importance of Migrant
Remittances 1.3. Migration 1.4. Stakeholders 1.5.
IOM experience
4
1.1. Definition

• IOM Definition defined broadly as the monetary
  transfers that a migrant makes to the country of
  origin. This can include
• Personal transfers
• Funds invested, deposited or donated
• Temporary and permanent migrants
• Financial flows associated with migration
• In-kind transfers

5
1.2. Importance of Migrant Remittances
In 2003, workers remittance receipts of
developing countries over USD 90 billion
(World Bank 2004) Far more than official
flows The value of remittances flowing through
informal channels could be up to as large as
through official channels.   At the house-hold
level remittances help to reduce poverty.
6
1.3. Migration

• Remittances are an outcome of migration.
• 175 million migrants doubled in the last 35
  years
• Driving forces
• - Pull factors
• - Push factors
• - Inter-country networks
• Decisions of individuals and families
• State regulation inflows, outflows, migration
  man.
• Proportion of migrants in total population
  constant
• Regional and South-South flows

7
1.4. Stake-holders

• Private funds - Remittance senders and recipients
  are stake-holders
• Other Actors that influence remittances
• Governments in countries of origin and
  destination
• Organizations and institutions engaged in the
  transfer of remittances
• Organizations and institutions that work to
  enhance the development impact of remittances.
• Individuals and institutions engaged in res. and
  data collection
• Those involved in migration management
• 1.5. IOM Experience
• Presentation draws on IOM research, policy
  dialogue and project experience

8
2. What do migrants think?
2.1. Motivation to Remit 2.2. Transfer
Mechanisms 2.3. Use of Remittances
9
2.1. Motivation to Remit

• Guatemala
• To provide for the family and provide better
  education
• To increase assets in the country of origin
• Tajikistan, Moldova
• Coping mechanism and family support

10
2.2. Transfer Mechanisms

• Guatemala
• Money orders (King Express)
• Electronic transfers (Western Union)
• National banks -- Tajikistan
• Money transfer organizations (MTOs)
• more costly
• Hand-carrying

11
2.2. Transfer Mechanisms
Table 1 Cost comparison of transfers to
Armenia Source USAID 2004

12
2.3. Use of Remittances

• Guatemala
• House-hold expenditure on basic items -- food and
  clothing (53)
• Education and health (11)
• Savings, economic purposes, assets (36)
• CIS
• Survival strategy
• IOM-UNDP Pilot project - Tajikistan
• Investment (India, Development bonds)
• Donations (HTAs)

13
3. What do States think?
3.1. Facilitating managed labour migration 3.2.
Remittance Services 3.3. Enhancing the
Development Impact of Remittances 3.4. Base-line
and Policy Oriented Research and Sharing of Good
Practices
14
3. What do States think?

• An increasing number of developing countries
  actively promote the foreign employment of part
  of their work-force
• Remittances are an important consideration in
  this.
• Labour migration from Asia protection, relieve
  unemployment and augment FOREX earnings.
• Relations with the diaspora
• Ten Asian labor sending countries Colombo
  Process
• Protection of migrant workers and support
  services to migrant workers,
• Optimising benefits of organised labour
  migration, and
• Institutional capacity building and interstate
  cooperation.

15
3.1. Facilitating managed labour migration

• Recommendation at Asian Ministerial Consultations
  on labour migration (Manila, 2004)
• Labour migration policy should not be limited to
  
• the regulating and protecting function of the
  State
• and give adequate emphasis to the promotion and
  facilitation of managed external labour flows
• specific modalities through which states can
  engage in the facilitation and promotion of
  international labour migration
• Labour market monitoring
• Information dissemination
• BLAS

16
3.2. Remittance Services

• To reduce remittance costs,
• To increase accessibility, and
• To increase the flows through formal channels
• Incentives and mandatory measures
• A. Information dissemination and advice
• Pre-departure orientation Philippines, Sri
  Lanka
• MRCs Tajikistan, IOM and OSCE

17
3.2. Remittance Services

• B. Financial products to attract remittances
• NRI Deposits - higher interest rates, exchange
  rate guarantees, repatriation, tax exemption. In
  place since 1970s.

18
3.2. Remittance Services

• C. Simplification of transfer procedures and
  extending financial network
• Extension of bank network South Asia
• Stream-lining of transfer procedure Bangladesh
• Tax reform and transfer facilities by banks
  Tajikistan

19
3.2. Remittance Services

• D. Cooperation between countries of origin and
  destination
• Mexican consular identification cards
• introduction of irregular migrants to the
  formal financial sector and low cost transfers.

20
3.2. Remittance Services

• E. Sound macro-economic policies and
  institutional framework
• Liberalized foreign exchange regime
• Transparency and accountability in banking sector
• Competition in transfer market

21
3.2. Remittance Services

• F. Other measures recommended in the Colombo
  Process
• Innovative linkages between IT and transfer
  systems
• Linking emigration clearance with opening of bank
  accounts
• Access to pre-departure loans
• Enhanced coordination among remittance actors.

22
3.3. Enhancing the Development Impact of
Remittances

• Colombo Process States no longer look at
  only as a source of FOREX but also in terms of
  productive investment and social development. But
  recognise that it is private funds - incentives
• Financial Instruments to attract remittances,
  investment, capital
• Non-resident Deposits
• Other investments on a repatriation basis
• Development Bonds (1998,Resurgent India Bonds
  4.2 Billion, 2000, Indian Millennium Deposits
  5.5 Billion ADB forthcoming)
• Establishing remittance-backed bonds through
  securitization of future remittance flows

23
3.3. Enhancing the Development Impact of
Remittances

• B. Business Development Schemes for Migrants
• Facilities for importing capital goods and raw
  material
• Business counselling and training
• Entrepreneurship development
• Access to loans
• The Philippines
• Migrants Welfare Fund
• Information Desk- OWWA onsite gt20 countries
• Savings and Investment Options- banks and FIs
• Training- Skills development and entrepreneurship
• Livelihood and Business Development Assistance
• Credit and Microfinance

24
3.3. Enhancing the Development Impact of
Remittances

• C. Banking remittances
• Mixed record of migrant specific investment
  programs in Asia
• Banks, credit unions and regulated MFIs --
  better position to leverage impact

25
3.3. Enhancing the Development Impact of
Remittances

• D. Home Town Associations (HTAs)
• Matching funds
• E. Sound macro-economic policies and
  institutional framework
• That promote capital inflows, including
  remittances

26
3.4. Base-line and Policy Oriented Research and
Sharing of Good Practices
The Ministerial Consultations at Manila (Colombo
Process) recommended The sharing of best
practices and technical expertise and expanding
the remittances knowledge base, access to
information and know-how among governments and
other stakeholders.
27
4. Concluding remarks

• Increasing migration flows and importance of
  migration management
• Some observations made on the basis of IOM and
  wider experience
• Motivation and use family support, basic needs,
  but also asset building and economic purposes
• Remittance transfer scope to reduce costs
• Role and interest of States Four areas