Remittances: characteristics and development perspective

1
Remittances characteristics and development
perspective
Judith van DoornSocial Finance Programme, ILO

www.ilo.org/socialfinancevandoorn_at_ilo.org
2
Whats next

• Remittances and the ILO
• ILO field studies - characteristics-
  development issues
• Suggested future work areas

3
Remittances and the ILO

• ILO Labour Standards
• migrant workers have the right to transfer
  (part of) their earnings and savings through
  their preferred channel
• Migration Labour Conference 2004
• Access to finance
• - market-conform, and incentives-based-
  partnerships

4
Remittances and the ILO

• Activities
• Platforms
• Field studies - Bdesh, Nepal, Senegal
• Pilot projects .. (next step)

5
Characteristics

• Volume of remittancesBangladesh 1.8
  billionNepal gt 1 billion Senegal
  300 million Informal transfers are huge..

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Characteristics

• Why are informal transfers so popular?
• Better exchange rate (hundi Nepal)
• Non-financial services
• No access to banking services
• No experience with banking (Nepal example)

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Characteristics

• Remittances as of recipients income
• Bangladesh gt 50
• Senegal up to 90...

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Characteristics
Use of remittances

• Top 5
• Consumption
• Land
• Housing
• School fees
• Collective investments (food depots, mosques,
  schools, health centres)(Nepal India savings
  and credit associations)

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Development

• Savings
• Availability of suitable savings products?
• Trust in formal savings mechanisms?
• Demands from the (extended) family?
• Some migrants are saving abroad

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Development

• Access to banking services
• Bangladesh- Islami Bank
• Pro-active approach to attract remittances.
• Staff visited migrants at work place and at
  home.
• Developed fine-tuned products (e.g. accounts
  for migrants associations)

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Development

• Policies and regulation
• NepalCentral Bank encourages establishment of
  private operators. Formalising hundi
• SenegalBanking law only allows banks and
  regulated institutions to engage in intl money
  transfers. Inhibits the establishment of private
  operators.

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Development

• Policies and regulation
• Bangladesh
• Government encourages Bdeshi banks to open
  correspondent relationships with financial
  institutions abroad.
• Remittances are tax free

13
Development

• Remittances are mainly used for consumption.
• What is their development impact?
• Study, Bangladesh multiplier effect 3.3 on GNP
  2.8 on consumption
• 0.4 on investment
• Remittances often larger than ODA
• Remittances to Senegal increased over the last 5
  years7 -gt 82 of ODA. ODA decreased during
  that same period.

14
Development

• Do remittances create inequalities in the
  community?
• No clear answer. Example Nepal

15
Suggested work areas

• Development actorsLink financial institutions
  (e.g. banks MFIs)Assist financial insitutions
  to develop follow-up products
• EmployersTransfer remittances
• Trade unions / civil societyInform migrants of
  remittance issues
• GovernmentsFacilitate / stimulate

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Remittances characteristics and development
perspective
Judith van DoornSocial Finance Programme, ILO

www.ilo.org/socialfinancevandoorn_at_ilo.org