This document summarizes a presentation on remittances given at a workshop. It begins with an introduction and overview of remittances that defines them as money flows sent by immigrant workers to relatives. It then discusses key topics like the huge and growing volumes of remittances globally, important characteristics of remittance corridors and providers, and migrants' expectations and behaviors. The document outlines main issues around the formal vs informal sector, costs of remittances, reaching remote recipients, and use of funds. It concludes by summarizing approaches to remittances by organizations like AFD, the African Development Bank, and PlaNet Finance which focus on partnerships, financial products, and financial literacy.

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. 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
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
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
Huge and still growing volumes…
Total 401 billion US dollars ; source World Bank
Geographical repartition
SECTIONI

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
Example : outbound remittances Switzerland 2010
Population : source office des migrations
Outbound remittances : source Worldbank
… but be careful with statistics
SECTIONI

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
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
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
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
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
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. Section I – General overview
14
Section II – Main issues
Section III – Existing solutions
 Formal vs informal
 Prices
 The last mile
 What for ?

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
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
Costs of remittances remain quite high
Trends in Remittances Prices Worldwide
SECTIONII

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
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
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
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. 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
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
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
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
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. 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
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
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
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
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. Contacts :
Dominique Villeneuve
PlaNet Finance
dvilleneuve@planetfinance.org
Thanks !