The Remittance Corridor of the...

Jacqueline Barendse, Christian Hiddink,Agnes Janszen, and Arjan Stavast

The Remittance Corridorof the Netherlands–Morocco

Review of obstacles and recommendationson how to increase use of the bank channel

The remittance corridor the Netherlands – Morocco Review of obstacles and recommendations on how to increase the use of the bank channel

Client: Netherlands Financial Sector Development Exchange (NFX)

ECORYS Nederland BV Jacqueline Barendse Christian Hiddink Agnes Janszen Arjan Stavast

Rotterdam, 27 October 2006

The authors take full responsibility for the contents of this report. The opinions expressed do not necessarily reflect the view of Netherlands Financial Development Exchange (NFX).

DS/AV14693

ECORYS Nederland BV

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ECORYS Macro & Sector Policies

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Table of contents

List of abbreviations 9

Preface 11

Summary 13

1 Introduction 21 1.1 Introduction 21 1.2 Setting the scene 21 1.3 Why this study? 22 1.4 Objective of the study 23 1.5 Approach and methodology 24 1.6 Outline of this report 25

2 Migrants and remittances 27 2.1 Introduction 27 2.2 Moroccan migrants 27

2.2.1 Setting the scene 27 2.2.2 Moroccans in the Netherlands 28 2.2.3 Main facts 34

2.3 Remittances 34 2.3.1 Setting the scene 35 2.3.2 Remittances in the corridor the Netherlands – Morocco 36

2.4 Main facts and findings 40

3 First mile 41 3.1 Introduction 41 3.2 How to send money? 41 3.3 What are the formal channels in the Netherlands? 41

3.3.1 The banking sector in the Netherlands 41 3.3.2 Postbank 43 3.3.3 Money Transfer Organisations 44

3.4 How is the remittance market regulated? 45 3.4.1 Regulation in the European Union 45 3.4.2 Regulation in the Netherlands 46

3.5 Main findings for the first mile 48

4 Intermediate stage 51 4.1 Introduction 51

4.2 Who is remitting and what influences the choice of channel? 51 4.3 What are the market shares? 53

4.3.1 How much is remitted through which channel? 53 4.3.2 Different estimates of market shares 54 4.3.3 Cash-based remittances 55 4.3.4 Market shares for the formal channels 56 4.3.5 Market shares for the informal channels 57

4.4 Costs, speed, transparency and requirements of transfers 58 4.5 Main findings for the intermediate stage 60

5 Last mile 63 5.1 Introduction 63 5.2 Setting the scene 63 5.3 What are remittances used for and where are they sent to? 63 5.4 What are the formal channels in Morocco? 66

5.4.1 The banking sector in Morocco 67 5.4.2 The post office 68 5.4.3 Money Transfer Organisations 69

5.5 Support to Moroccan migrants 69 5.6 Main findings for the last mile 70

6 Factors hampering remittances through formal channels 71 6.1 Introduction 71 6.2 What is hampering the use of formal channels? 71 6.3 Inefficiency of formal systems 72

6.3.1 Transparency and customer protection 72 6.3.2 Payment system infrastructure 73 6.3.3 Legal and regulatory framework 74 6.3.4 Market structure and competition 75 6.3.5 Governance and risk management 77

6.4 Potential to further formalise remittance streams? 77

7 Increasing remittances through the bank channel 79 7.1 Introduction 79

7.1.1 Background and rationale 79 7.2 Factors hampering increased use of the bank channel 79

7.2.1 Preference for cash 80 7.2.2 Preference for counter transactions 80 7.2.3 Lack of adequate products offered by banks 81 7.2.4 Lack of transparency 83 7.2.5 Absence of a commercially beneficial business case 84

7.3 Is there potential to increase use of the bank channel? 85

Annex I References 89

Annex II Real money transfers 95

Annex III Definitions of migrants and remittances 101

DS/AV14693

Annex IV Remittances peak in 2001 105

Annex V Results of customer survey 107

The remittance corridor the Netherlands – Morocco 9

List of abbreviations

AMAP Accelerated Microenterprise Advancement Project ATM Automated Teller Machine BAM Barid-Al Maghrib (post office in Morocco) BIS Bank for International Settlements BP Banque Populaire BRCA Bilateral Remittances Corridor Analysis CBS Central Bureau of Statistics DFID Department for International Development DGIS Department for Development Cooperation of the Ministry of Foreign

Affairs DNB De Nederlandse Bank EIB European Investment Bank EIM Economisch Insituut voor het Midden- en kleinbedrijf EU European Union GDP Gross domestic product GEP Global Economic Prospects GWK Grens Wissel Kantoor IBAN International Bank Account Number IMF International Monetary Fund INSEA Institut National de Statistique et d’Economie Appliquée MRE Marocain résidant a l’étranger MTO Money Transfer Organisation NCDO Nationale Commissie voor internationale samenwerking en Duurzame

Ontwikkeling NFX Netherlands Financial Sector Development Exchange OdC Office des Changes RSP Remittance service provider RTGS Real-time Gross Settlement SEPA Single European Payment Area STP Straight-through processing SWIFT Society for Worldwide Interbank Financial Telecommunication TPG TNT Post Group UK United Kingdom Wgt Wet geldtransactiekantoren Wtk Wet Toezicht Kredietwezen WID Wet Identificatie bij Dienstverlening


Preface

The Netherlands Financial Sector Development Exchange (NFX) has asked ECORYS to analyse the remittance corridor the Netherlands – Morocco and make recommendations leading to a further increase in the use of formal channels and to strengthen the role of banks in particular. A customer survey was also part of this study. This survey was conducted by Foquz Etnomarketing, a company specialising in research on ethnic groups. We are grateful for the pleasant cooperation with NFX and Jacco Knotnerus in particular. We like to thank Hans Boon (ING Bank) and Hein de Haas (University of Oxford) who provided valuable input. In addition, we thank Mohamed Khachani for his cooperation during our visit to Morocco. Furthermore, the project team would like to express its gratitude to representatives of Dutch and Moroccan banks, the Dutch Central Bank (DNB), Statistics Netherlands (CBS), Bank Al-Maghrib, King Hassan II foundation and Office des Changes. The (telephone) interviews with these organisations supported us to gain a good understanding of the remittance corridor the Netherlands - Morocco. We want to stress that the authors take full responsibility for the contents of this report and that the opinions expressed do not necessarily reflect the view of NFX. Jacqueline Barendse Christian Hiddink Agnes Janszen Arjan Stavast


Summary

Objective of the study The Netherlands Financial Sector Development Exchange (NFX) has asked ECORYS to analyse the remittance corridor the Netherlands – Morocco and make recommendations leading to a further increase in the use of formal channels and to strengthen the role of banks in particular. The recommendations should be directed towards Dutch and Moroccan banks, governments and other players in both sending and receiving countries. The following five research questions were formulated in the Terms of Reference: 1. What is the size of formal and informal remittance flows from the Netherlands to

Morocco? 2. What are the main distribution channels? 3. What are the major factors that influence the choice between informal and formal

channels? 4. Is there potential to further formalise the remittance stream in the corridor the

Netherlands – Morocco? If there is such a potential, draft concrete and practical actions;

5. What is hampering the increase of remittance flows through the bank channel in the corridor the Netherlands – Morocco? If there are hampering factors, draft concrete and practical actions to address them.

The study should contribute to the body of knowledge on remittances and should allow for (future) comparisons between corridors. Working method We have used the Bilateral Remittances Corridor Analysis (BRCA) Methodology of the World Bank for this corridor study.1 The principle of this methodology is simple: it follows the money from sender to receiver and addresses all relevant aspects of the corridor. The five main research questions were analysed with the help of desk research, interviews in Morocco, expert feedback, a customer survey among Moroccan migrants in the Netherlands, and interviews with representatives of the Dutch bank sector. Moroccan migrants

1 World Bank, 2005.


With about 325,000 migrants of Moroccan origin, the Moroccan community is the fourth largest non-Western migrant group in the Netherlands. The Moroccan migrant community is expected to grow by 11 percent (approximately 360,000) to 2010, mainly as a result of an increase in the number of second-generation Moroccans. After 2010, the growth rate is expected to decrease. Migrants of Moroccan origin predominantly live in the cities of Amsterdam, Utrecht, Rotterdam and The Hague. Size of the total remittances flow Remittance data for the corridor Netherlands – Morocco are ambiguous. There are considerable differences in how remittances are recorded in the Netherlands and Morocco, leading to different estimates of the size of the total remittance flow. Combined with information from customer surveys, we estimate that about EUR 93-132 million was remitted in 2004. Remittances have increased moderately over the last ten years. Based on historic trend analysis and the moderate growth of the migrant community, we expect that the volume of remittances will also grow moderately in the coming years. Use of remittances and regional destination The customer survey showed that remittances are mostly sent for food (23 percent), healthcare (16 percent) and housing (15 percent). The majority of recipients have other sources of income, but nearly 30 percent of senders stated that their recipients are completely dependent on the remittances they send. The most important destination regions are the Rif area and Great Casablanca. These percentages coincide with available information on the origin of Moroccans in the Netherlands. The largest group of Moroccan migrants (about 40 percent) originate from the northern part of Morocco (Rif mountains). Size of formal and informal remittance flows We estimate that around 71-76 percent of the remittances flow through formal channels (banks and Money Transfer Organisations). Approximately 24-28 percent of the remittances flow through informal channels, involving mainly cash carriage which constitutes more than 70 percent of the remittances though informal channels. International comparisons indicate that a fraction of more than 70 percent of remittances through formal channels to a developing country is rather high. Main distribution channels Around 70 percent of remittances turnover are cash-based, entailing cash handling in both Morocco and the Netherlands. The customer survey indicated that about 47 percent is remitted through Money Transfer Organisations (MTOs) involving cash transfers on both sides, 16 percent is cash carried by individuals and 6 percent is cash-based transfers


through mosques. Given the advanced level of development of the Dutch financial system and the relatively high level of development of the financial sector in Morocco, it is striking to see such a high percentage of cash-based remittances. MTOs The most important MTOs in the corridor are Western Union and MoneyGram, which hold about 62 percent of the formal remittances market segment. In the Netherlands, Western Union seems to be the dominant player. The customer survey indicated that at least three-quarters of MTO transfers are conducted by Western Union; fewer than a quarter are through MoneyGram. Western Union uses the network of post offices in the Netherlands, while MoneyGram uses the GWK (Grens Wissel Kantoor) network. Banks The banks have approximately 38 percent of the market share within the formal channels. ABN Amro is most often used, followed by Fortis Bank and Rabobank. There are no Moroccan banks active in the Netherlands. In Morocco, the most important banks for remittance transfers are Banque Populaire (BP) and Banque Credit du Maroc. We expect that Bank Populaire channels the majority of remittances from the Netherlands, because it channels approximately 60 percent of all incoming remittances of both banks and MTO (MoneyGram). Banks and MTOs have in common that nearly all of their remittance transfers go over the counter: 100 percent of MTO transfers and about 60 percent of all bank transfers. Informal channels Cash carried by individuals is the most important informal transfer method, channelling 16 percent of the total remittance flow. In addition to carrying cash, informal transfers are made through mosques. Other informal channels such as phone houses and travel agencies are hardly used. Factors influencing the choice of informal and formal channels Factors influencing the choice of formal channels are listed below. We have not found clear factors determining the choice of informal channels. Occupational status Migrants’ occupational status seems to influence highly the choice of the bank sector. Remitters who are active in the labour market, unemployed or students are more likely to remit through the banks than retirees, housewives and others. In addition, the availability of a bank account for the recipient affects positively the choice of the bank channel. The combination of both factors significantly increases the propensity to choose the bank channel. Preferred frequency and speed of remittances The choice of a particular channel is also determined by how often remitters want to transfer money and the preferred speed of the transfer. Remitters use banks one to four times per year, whereas migrants using MTOs send money more often. When the speed


of the transaction is important, MTOs are used. High-income earners seem to remit more often than low-income earners. However, well-educated high-income earners choose banks and carrying cash instead of MTOs, despite their higher remittance frequency. First or second-generation migrants Second (and subsequent) generations of migrants seem to have a higher tendency to use the bank channel, whereas the first generation seems to favour MTOs. If a first-generation migrant is also inactive (unemployed or retired) and has a lower educational background, the preference for MTOs increases. This difference between first and second-generation migrants could be explained by second (and subsequent) generation migrants probably being more financially literate. What are the hampering factors to formalise remittances? Factors hampering the use of formal channels are related to inefficiencies in the formal systems. Based on the General Principles for international remittance services,2 we located inefficiencies relating to transparency and the payment infrastructure. Furthermore, we also identified some deficiencies in the market structure and a lack of competition. Transparency The formal remittance market is not transparent. Product information can only be obtained through actual use of the different transfer services. MTOs are transparent on fee costs and speed prior to the transaction, but only provide exchange rate costs when the transaction takes place. The bank channel seems even less transparent. With the exception of Postbank, Dutch banks do not provide information on total fee costs prior to the transaction. Furthermore, banks do not provide information on exchange rates and only give an estimate of the transaction time. Fees charged by the correspondent bank are presented after the transaction. Payment system infrastructure The payment infrastructure is made up of the payment systems in both countries and cross-border payment and clearing systems. MTOs have dedicated payment infrastructures which are efficient. The banks rely on the correspondent banking system for their payments. However, the correspondent banking system seems to be inadequate for remittances, because it cannot supply exact information on speed and fee costs. Furthermore, the Moroccan giro system is still underdeveloped, despite financial sector reforms. This hampers further development of a more efficient payment infrastructure for the bank channel. Physical access points are part of the payment infrastructure. The customer survey indicated that Moroccan migrants still prefer to use counters for their transactions. The number of access points (banks and MTOs) has decreased rapidly in the Netherlands over the last ten years.

2 World Bank and BIS, 2006 and www.bis.org.


Market structure and competition Competition among service providers is not optimal, because transparency is lacking. Furthermore, there seem to be barriers for entry to the Dutch remittances market. Although the market for remittances is regarded as attractive by a number of Moroccan banks and foreign MTOs, no new players have entered the remittance market in the Netherlands recently. On the contrary, the Moroccan banks that were active in the Netherlands have left the market. The problems that these organisations have appear to be related to the Dutch law on MTOs and the fact that a Dutch banking licence is needed for Moroccan banks to offer remittance services. As both organisations have strong positions in other European Union (EU) countries, their absence from the Dutch market gives rise to the question: “Is the Dutch law and supervision (interpretation of the law) on banks and on MTOs stricter than similar laws in other EU countries?” This situation will change in the future, as a consequence of the further development of the Single European Payment Area and the adoption of the New Legal Framework. Furthermore, banks and MTOs will be allowed to offer their services in all EU countries once they have acquired a licence in one EU country. Interviews with representatives of the Dutch bank sector also made it clear that none of the Dutch banks cooperate with Moroccan banks and MTOs, because of a number of reasons e.g. (perceived) compliance costs and no possibilities for commercially interesting co-operation. A lack of cooperation hampers market innovations, such as the development of new end-to-end products. Is there potential to further formalise? Table 0.1 presents a summary list of activities that could be undertaken to make the remittance market more efficient. The potential for further formalising the remittance market lies mainly in eliminating inefficiencies in the formal market. However, the market share of the formal channels is already high, at over 70 percent. Therefore, in the short term these measures would be more likely to spark a shift of market shares within the formal channels than between the informal and formal channels. In the medium term, we expect that the market share of the informal channels could decrease further if Moroccan society becomes less cash oriented through the development of giro payment systems.


Table 0.1 Summary list of activities to improve the formal remittance market

Recommendation

Transparency

I IntEnt to further develop, in close cooperation with migrant organisations and with the support of the Dutch

Government, the website www.stuurgeldnaarhuis.nl by including information on:

• all costs (fee costs of sending + receiving and exchange costs);

• speed;

• customer protection.

Payment system infrastructure

II If banks and MTOs are considering providing financial services through cooperation with supermarkets and

other retail chains, they could also consider offering remittances through these channels

III The Ministry of Economic Affairs and the post office to investigate if opening up the post office network to

multiple remittance service providers would be an option and beneficial for the remittance market

Legal and regulatory framework

IV The Ministry of Finance could consider adapting the current MTO law in anticipation of EU Directive

2005/00245

Market structure and competition

V Anticipating this future change as a result of EU legislation, the Ministry of Finance together with the Central

Bank of the Netherlands (DNB) could investigate the possibilities, within the framework of the current law, of

mitigating the barriers to entry for organisations eager to enter the Dutch remittance market

VI Dutch banks, in cooperation with the Ministry of Finance and DNB, to investigate what issues related to

compliance are hampering cooperation with MTOs and Moroccan banks and product innovation

VII We support the Dutch Ministry of Finance request to the Netherlands Competition Authority (NMA) for

investigating the level of competition in the remittances market

What are the hampering factors for increasing the use of banks? The factors that appear to hamper the increase of remittance flows through the bank channel are outlined below. Preference for cash The cash economy in Morocco partly explains the preference of remitters for cash transactions. This preference for cash is negatively affecting the use of the bank channel. With the further development of the financial sector in Morocco, it is expected that in the longer term the number of cashless giro payments will increase and cash payments will decrease, and that the preference for cash will probably diminish. Preference for counter transactions There is also a preference for counter transactions, which is probably related to the basic need for trust and the confidence that remitters have in tangible (face to face) transactions. The MTOs have set up an efficient network of counters (agencies) at both ends of the corridor, especially in the areas where migrants live in the Netherlands and come from in Morocco. However, the banks have closed down a substantial number of branches over the last decade.

http://www.stuurgeldnaarhuis.nl/


Lack of adequate products offered by banks There is a lack of adequate remittance products offered by banks. This can be explained by a number of factors: 1. absence of competition by Moroccan banks in the Dutch market; 2. barriers in the correspondent banking system; 3. lack of cooperation between Dutch and Moroccan banks. The absence of Moroccan banks in the Netherlands is especially unfortunate as these banks have made it their business to offer attractive (remittance) services to migrants. The lack of adequate remittance products also lies in the cross-border payment system. Financial cross-border transactions are conducted using the correspondent banking system based on the SWIFT (Society for Worldwide Interbank Financial Telecommunication) transactions standards. The way that this system operates means that banks do not control the chain from end to end. In addition, it seems that Dutch banks are not cooperating effectively with Moroccan banks. This hampers the development of innovative end-to-end products. Lack of transparency Lack of transparency in the costs and speed of remittances, caused by the correspondent banking system, is also hampering the flow of remittances through banks. The correspondent banking system does not allow banks to provide their clients with the information needed to establish trust in the product. Most banks cannot give information on speed and price prior to the transaction. For information on costs (fee and exchange rate) and the speed of the transaction, the sending bank is dependent on the information provided and the fees charged by the correspondent banks in the chain. Another aspect of transparency is customer protection. It seems that most banks have less straightforward customer protection than MTOs. Absence of a commercially beneficial business case Dutch banks, with the exception of Rabobank, are not developing specific products for migrants and nor do they regard migrants as a specific target group. For two reasons, the commercial benefits for Dutch banks to (further) develop and introduce remittance products are not obvious. First, though the Netherlands is home to a large number of non-Western immigrants, each group in itself may be too small to justify the development of a dedicated product. Secondly, the banks that were interviewed often indicated that this product on its own is not commercially interesting. The driving factor for Rabobank is the philosophy that its customer base should be a reflection of society, probably using the remittance products to attract new Rabobank clients. Developing products targeting at the entire migrant community in the Netherlands is not a real alternative, as corridor studies on remittances clearly show that each corridor has specific issues which cannot be solved with general products. Is there potential to increase the use of the bank channel? Table 0.2 present a summary list of recommendations to improve the use of the bank channel. It is the challenge of the banking sector to turn cash transactions into giro flows


in order to maximise the developmental impact of remittances. There are clear quick wins for improving the use of the bank channel if banks are interested in the remittance market.

Table 0.2 Summary list of recommendations to improve use of the bank channel

Recommendations

Preference for cash

A Interpay could consider actively supporting the further development of a giro system in Morocco. Developing

a ‘gateway’ between the Dutch and Moroccan Interpay (eliminating inefficiencies in the correspondent bank

process) is also an option to be considered

B Without waiting for the development of the giro system in Morocco, banks could start offering an account-to

cash product, for instance in cooperation with banks or MTOs in Morocco

Preference for counter transactions

C If Dutch banks are considering providing financial services through cooperation with supermarkets and other

retail chains, they could also consider offering remittances through these channels

Lack of adequate products of banks

D The Ministry of Finance to supervise and stimulate the (re)opening of Moroccan banks in the Netherlands in

close cooperation with DNB

E To stimulate the development of innovative end-to-end products, investigate the reasons why there is little

effective cooperation between Dutch and Moroccan banks, and potentially address these issues

F The Dutch Government to assess if it is politically feasible to put extension of the Euro clearing system to

Morocco on the agenda in Brussels

Lack of transparency

G Banks to improve transparent information on the (full) costs and speed of bank transactions

H The Dutch Government to remind Dutch banks of their obligation to offer full cost transparency on cross-

border transfers

I Banks should clarify transfer responsibility and improve customer protection (through self-regulation)

Absence of commercially interesting business case

J The Department of Development Cooperation of the Ministry of Foreign Affairs (DGIS) may want to explore

with the banks and MTOs the possibilities of overcoming the commercial obstacles to developing remittance

products. Further, the Dutch Government could stipulate that new products, if developed, will be described

and advertised through the most relevant existing websites, thereby stimulating dynamism in the market


1 Introduction

1.1 Introduction

The Netherlands Financial Sector Development Exchange (NFX) has asked ECORYS to analyse the remittance corridor the Netherlands – Morocco and make recommendations leading to a further increase in the use of formal channels and to strengthen the role of banks in particular. These recommendations should contain actions for Dutch and Moroccan banks, governments and other players in both countries. Section 1.2 sets the scene for this corridor analysis. Section 1.3 elaborates on the objectives of this study, while section 1.4 presents the research approach. Section 1.5 then finishes with an outline of this report.

1.2 Setting the scene

What are remittances? Remittances are the money that migrants send to related people (family and friends) or into personal (bank) accounts from the migration destination (host country) to the place of origin (home country).3 The most important features of them are that: • remittances are cross-border transactions; • remittances are transactions from migrants to related people; • remittances usually involve the transfer of a relatively small sum of money. Global developments Remittance flows represent a major source of international finance. The World Bank estimated officially recorded remittance-related flows worldwide at $ 232 billion in 2005. This amount is equivalent to one third of the gross domestic product (GDP) of the Netherlands. Developing countries are the main beneficiary of remittances. More than 70 percent of all remittances sent last year were sent to developing countries. In 2000, the total recorded remittance flow was estimated to be $ 131 billion. So in the last five years, remittances have almost doubled.4 These estimates of the recorded remittances probably only form half of the actual flow or remittances, since it is estimated that informal (non-recorded) channels account for 50 percent of total remittances sent.

3 This definition is derived from the European Investment Bank (EIB) study (2006) on remittances, which reformulated the

International Monetary Fund (IMF) definition to a more operational level. 4 World Bank (2006) Global Economic Prospects (GEP).


This impressive growth in remittances has given rise to the international interest of politicians, development organisations, private banks, other private financial organisations and researchers. Remittances from the Netherlands According to balance of payment statistics, migrants in the Netherlands sent ‘home’ approximately EUR 670 million in 2005.5 In 1995, this remittance flow was estimated at EUR 300 million. The Ministry of Finance states that this increase in remittances is caused by the increase of migrants in this period. In 2006, the Netherlands is home to about 3.2 million migrants, of whom about 1.7 million are non-Western migrants. Why are remittances important? Politicians and international financial institutions recognise the developmental impact of remittances for developing countries. For many developing countries, remittances are an important source of income (and foreign currencies) comparable or larger than foreign aid and foreign direct investments. The World Bank also points out that remittances can improve a country’s creditworthiness, as traditional indicators of vulnerability, such as debt to export ratios, would rise significantly in the absence of remittance inflows. Furthermore, the securitisation of remittance flows can raise a country’s external access to finance and reduce financing costs. On a micro level, household surveys and studies generally support the notion that remittances reduce poverty, smooth consumption when income is hit by shocks, and increase investment in education and health. Why is the bank channel important? Remittances through banks provide a potentially higher multiplier effect from remittance flows. Remittances through banks are more likely to stay within the domestic banking system (i.e. deposited in bank accounts), thus increasing the asset base of banks and allowing them to increase their on-lending activities. Furthermore, an increase in the use of the bank channel offers the opportunity to securitise future remittance flows by developing capital market instruments like, for example, remittance-backed bonds. These instruments will help in mobilising additional (domestic and foreign) savings for further on lending in Morocco.

1.3 Why this study?

The costs of remitting money (fees and exchange rate costs) were the subject of questions in Parliament in 2003 and 2005. In both cases, Members of Parliament asked the Minister of Finance for measures to reduce these costs. In 2003, the Minister of Finance answered that the remittance market in the Netherlands is open and that there is enough competition. The Minister further remarked that migrants have a choice of reducing the frequency of remittances and increasing the amounts, so that the costs can be reduced. In a letter to Parliament in 2006, the Minister confirmed his earlier standpoints, but promised to conduct further research.6 He refers to this study on the corridor Netherlands

5 Tweede Kamer, vergaderjaar 2005-2006, 26234 nr. 56. 6 Tweede Kamer, vergaderjaar 2005-2006, 26234 nr. 56.


– Morocco commissioned by NFX and to a study on the corridor Netherlands – Suriname for which the Ministry of Finance is the commissioner. NFX acknowledges the possible contribution that remittances can make to the development of the financial sector in developing countries. NFX has chosen a corridor approach and selected the corridor Netherlands – Morocco. This corridor is of particular interest because: • Moroccan migrants are one of the most important migrant populations in the

Netherlands; • The level of formalisation of the remittance flow in the corridor Netherlands –

Morocco is unclear. There is a study indicating a low level of formality.7 However, the Moroccan economy has been stable for the last few years and the financial sector in Morocco is already relatively well developed and improving.8 This would indicate a high level of formality and/or prospects for increasing the use of formal channels.

1.4 Objective of the study

The objective of this study is to analyse the remittance corridor the Netherlands – Morocco. If there is potential to further increase the use of formal channels, then recommendations should be elaborated to increase the use of these channels. Furthermore, specific recommendations should be geared at strengthening the role of banks in particular. These recommendations should be directed towards Dutch and Moroccan banks, governments and other players in both countries. The objective has been translated into five research questions: 1. What is the size of formal and informal remittance flows from the Netherlands to

Morocco? 2. What are the main distribution channels? 3. What are the major factors that influence the choice between informal and formal

channels? 4. Is there potential to formalise the remittance stream in the corridor the Netherlands –

Morocco? If there is such a potential, draft concrete and practical actions. 5. What is hampering the increase of remittance flows through the bank channel in the

corridor the Netherlands – Morocco? If there are hampering factors, draft concrete and practical actions to address them.

NFX also required that the study should contribute to the body of knowledge on remittances, and should allow for future comparison between corridors.

7 NCDO, 2005. 8 The Terms of Reference mention a percentage of formal channels of 38 percent and an estimated remittance flow of

EUR200-300 million per year in the Netherlands – Morocco corridor.


1.5 Approach and methodology

Methodology The Bilateral Remittances Corridor Analysis (BRCA) Methodology of the World Bank was chosen, as it provides a systematic method of comprehensive data collection and permits future comparison analysis, since it has also been used for other corridor studies.9 The principle of this methodology is simple: it follows the money from sender to receiver, and by doing so addresses all relevant aspects of the corridor. The methodology is based on three stages: • the first mile of the transfer; • the intermediary stage; • the last mile of the transfer. Data collection We have collected information from research on remittances, balance of payments, regulatory frameworks and governance procedures. In addition, we have implemented a customer survey, in particular targeting migrants of Moroccan origin in the Netherlands. This customer survey was conducted by Foquz Etnomarketing, a company specialising in research on ethnic groups.10 This survey provided us with valuable information on Moroccan migrants in the Netherlands, their remittance behaviour and their preferences. The survey results helped us to verify some of the findings of our desk research. But more importantly, it gave us information to answer the question of how the bank channel can be improved. A visit to Morocco was also part of our data-collection phase. We interviewed various relevant government bodies and financial institutions. Unfortunately, despite many attempts, banks in Morocco were not willing to discuss remittances. Therefore, only one bank was interviewed. Additionally, we interviewed key stakeholders in the Dutch banking sector. These interviews were used to verify our findings and our recommendations to improve the use of the bank channel. We also conducted own remittance transactions. These transactions not only led to a better understanding of remittance transfers in themselves – they also provided valuable information on real transaction costs, speed and procedures. Finally, expert reviews provided valuable inputs for our study. We are thankful for the inputs and suggestions of Hein de Haas, a renowned researcher on Morocco (with a focus on migration and remittances) at the University of Oxford, and Hans Boon, an expert in the field of (postal) banking and remittances. 9 World Bank, 2005. 10 www.foquz.nl.


1.6 Outline of this report

Chapters 2, 3, 4 and 5 analyse the remittance corridor according to the BRCA methodology. Chapter 2 presents information on Moroccan migrants and remittances. The first section deals with the population of Moroccan origin. It answers the following questions: • What is the size of the Moroccan migrant population? • Is the population of Moroccan origin growing? • What are the characteristics of the Moroccan migrant population? The second section of Chapter 2 elaborates on remittances. It answers questions such as: • How much money is remitted in the corridor the Netherlands – Morocco? • Are remittances increasing in the corridor? Chapter 3 covers the first mile of the remittance transfer, and includes an overview of the remittance market in the Netherlands and the market regulations. Chapter 4 is dedicated to the intermediary stage and includes an overview of the type of providers of remittance services (both formal and informal), payment systems and the costs and characteristics of the remittance services offered. Also included is a description of the legal, regulatory and supervisory frameworks. Chapter 5 discusses the last mile of the transfer and includes a description of remittance recipients, a rough assessment of the impact of remittances on the macro and local economies, and the policy framework affecting remittances. Chapter 6 analyses the factors hampering further formalising of the remittance flow in the corridor. The first section presents an analytical framework, which is then applied to the corridor Netherlands – Morocco in the second section. This section also represents recommendations, which are summarised in the last section of the chapter. Chapter 7 analyses the possibility of extending the use of the bank channel and presents recommendations.


2 Migrants and remittances

2.1 Introduction

This chapter elaborates on the size and main characteristics of the Moroccan migrant community in the Netherlands and the remittances they generate. Section 2.2 briefly analyses Moroccan migrants in Europe to set the scene. The characteristics of Moroccan migrants in the Netherlands are then described in more detail. Section 2.3 deals with remittances in the corridor the Netherlands – Morocco. Total amounts of remittances and trends are analysed, and indications of future developments given. Finally, in Section 2.4 the main findings are summarised. It is important to note that data on migrants and remittances should always be interpreted with great caution. Definitions of remittances and migrants are not always consistent across countries and recording methods differ. See Annex III for an explanation of definitions used for migrants and remittances, and background information on differences in registration methods for remittances.

2.2 Moroccan migrants

2.2.1 Setting the scene

European context Around 85 percent of the persons migrating from Morocco have settled in Europe.11 Traditionally, most Moroccan migrants live in France, but in recent years Spain and Italy have become the most important new destinations. In 2003, the Netherlands housed the third largest community of Moroccans, after France and Spain. We expect that the Moroccan community in Italy will now have outgrown that in the Netherlands, moving the Netherlands to fourth place in Europe. Migrant communities in the Netherlands As illustrated by Figure 2.1, Moroccans constitute the fourth largest group of non-Western migrants in the Netherlands, after Indonesians, Turks and migrants from Surinam. As can be seen in Figure 2.1, the differences in size between these four groups are small. It is worth pointing out that the Netherlands is the only major EU migrant host country where there is no dominant migrant group.

11 EIB, 2006.


Figure 2.1 Shares of migrants in total migrant population in the Netherlands in 2006

Source: Central Bureau of Statistics (CBS)

2.2.2 Moroccans in the Netherlands

Migration history For many years, the Netherlands have been an important destination for Moroccan migrants. They have arrived in the Netherlands in three ‘waves’. The first wave arrived in the period 1963-1972 to work as guest labourers in industry and in the agricultural sector. The second wave arrived in the period 1973-1989 due to family reunification. Since the mid-1990s, reasons for migrating to the Netherlands have diversified. The importance of family formation and to study in the Netherlands as motivations to migrate have increased, whereas family unification has decreased. Therefore the third group, which arrived in the period 1990-2004, has a more mixed profile. Size of the community The number of Moroccan migrants in the Netherlands is approximately 325,000 (2006).12 In the last ten years, the Moroccan community has grown by approximately 100,000 people. As illustrated in Figure 2.2, this growth has mainly resulted from an increase in the number of second-generation migrants. In 2006, this group represents over 50 percent of the Moroccan population in the Netherlands. It should be noted that these figures do not include the third or fourth generation of Moroccan migrants, who could also be potential remitters. It also does not take into account illegal Moroccan migrants. However, we have no indication that the number of illegal Moroccan migrants is substantial. A very rough estimate would suggest that about 10,000 Moroccan migrants live illegally in the Netherlands, only about 3 percent of the total Moroccan community.13

12 Officially registered by CBS in 2006: 323,329. This number does not take account of possible undocumented immigrants. 13 Based on the estimate that the Netherlands hosts approximately 100.000 illegal immigrants (Khachani, 2004, p. 61) and

that about 10 percent of the total migrant population is Moroccan.

Indonesia 12%

Turkey 12%

DutchAntilles

4%

Other26%

Other EU13%

Morocco10%

Surinam11%

Germany12%


Figure 2.2 Number of first and second-generation Moroccans in the Netherlands from 1996 to 2006

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

1996 1998 2000 2002 2004 2006

yearfirst generation second generation

Mor

roca

n m

igra

nts

Source: CBS

Is the migrant community growing? The Central Bureau of Statistics of the Netherlands expects a continued growth of the Moroccan population in the Netherlands, but the pace of the growth will slow down. The growth is mainly explained by an increase in the second generation of Moroccan migrants. The number of new Moroccan immigrants arriving in the Netherlands has been decreasing in the last few years. In 2001, the Netherlands received about 5,000 new Moroccan migrants. In 2005, the number of newcomers decreased to around 2,000. Figure 2.3 illustrates the projected growth of the Moroccan population up to 2050. Other researchers conclude that migration from Morocco will remain important over the next decades.14

14 Haas H de, 2006.


Figure 2.3 Projections of number of Moroccan migrants (first and second generation) in the Netherlands up to 2050

0

100,000

200,000

300,000

400,000

500,000

600,000

Mor

roca

n M

igra

nts

1980 1990 2000 2010 2020 2030 2040 2050Year

Source: CBS

Is emigration an issue? As illustrated in Figure 2.4, the number of Moroccans emigrating from the Netherlands has been increasing since 2002. This increase is noticeable for both first and second generation migrants. Emigration is mostly back to Morocco – roughly half of Moroccan emigrants return there.15 It is of interest to note that retired migrants have a tendency to stay in the Netherlands. Emigrants from the first generation are predominantly relatively young Moroccan migrants in the 30-50 age group.

15 Based on historical migration data, CBS.


Figure 2.4 Emigration from the Netherlands of Moroccan migrants in the period 1996 to 2005

0

500

1,000

1,500

2,000

2,500

1996 1998 2000 2002 2004

year

First Generation Second generation

Mor

roca

n M

igra

nts

Source: CBS

It must be borne in mind, however, that the numbers of emigrants are quite small in relation to the size of the total Moroccan population in the Netherlands. Furthermore, it is too early to conclude whether the recent increase in emigration is a structural break. It should also be noted that for Moroccans, the return migration rate is among the lowest of all immigrant groups in Europe.16 Where do Moroccan migrants live in the Netherlands? Figure 2.5 gives a breakdown of where Moroccan migrants live in the Netherlands. They live predominantly in the provinces of Noord Holland, Zuid Holland and Utrecht. In Noord Holland, Moroccans are concentrated in the city of Amsterdam. In Zuid Holland, they mainly live in Rotterdam and The Hague (see Figure 2.6). There is not a large difference in location preference between first-generation and second-generation Moroccan migrants. However, in the last few years the second generation seems to have a slight preference for Noord Brabant and Flevoland. The spatial planning bureau recently17 analysed the location preferences of the Moroccan community in the Netherlands up to 2025. They expect a growth of Moroccan migrants in Noord Holland, Zuid Holland and Flevoland. Although most other migrants will move out of the big cities and into smaller towns in these provinces, Moroccan migrants seem to prefer to stay in the big cities.

16 www.migrationinformation.org. 17 Ruimtelijk Planbureau, 2006.


Figure 2.5 Moroccans in the Netherlands per province in 2005

Source: CBS

=10,000 Moroccans

Limburg

Gelderland

Overijssel

Drenthe

Groningen Friesland

Zuid - Holland

Noord - Holland

Noord - Brabant Zeeland

Utrecht

Flevoland


Figure 2.6 Moroccan communities in the Netherlands in 2006 – top ten Dutch municipalities

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

Amsterd

am

Rotterd

am

The Hag

ue

Utrech

t

Gouda

Almer

e

Eindhoven

Tilburg

Leiden

Breda

City

First generation Second generation

Mor

roca

n m

igra

nts

Source: CBS

Region of origin of Moroccan migrants in the Netherlands Unfortunately, official or reliable statistics on the region of origin of Moroccan migrants in the Netherlands are not available. The literature indicates18 that the majority of Dutch Moroccans originate from the northern part of Morocco. However, our analysis suggests that approximately 40 percent of Moroccan migrants come from North Morocco. We have two sources for our analysis: • First, our customer survey included questions on the regional destination of

remittances. Based on the assumption that money is sent to the region of origin, this would give an indication of where Dutch Moroccans originate from;

• Secondly, in 2000 a survey was carried out on Moroccan migrants in European countries and their region of origin. This survey was also carried out in the Netherlands, but on a limited scale.19

Both sources have their limitations. However, when combined, they can give an indication of the most important region of origin. Table 2.1 summarises the main findings of the two sources. It indicates that most Moroccans in the Netherlands originate from Northern Morocco (Rif Mountains) and Grand Casablanca.

18 De Mas, 1991. 19 INSEA, 2000, in which only 66 Dutch Moroccans were interviewed.


Table 2.1 The main areas of origin of Moroccan migrants in the Netherlands

Area Provinces Origin of

Moroccans in the

Netherlands

(INSEA)

Destination of

remittances from

the Netherlands

(FOQUZ)

Eastern Rif Mountains Taza – El Hoceiima – Tarounate 9.5% 16.3%

Western Rif Mountains Oujda – Nador- Berkane –

Taourint – Jerada

17.5% 18.7%

North Western Rif

Mountains

Tanger – Teouan – Chefchaouen 17.4 % 2.8%

Estimate of Moroccans originating from Rif Mountains area Appr. 40%

Grand Casablanca Grand Casablanca –

Mohammedia

11.1% 13.5%

Source: Foquz (2006) and INSEA (2000)

2.2.3 Main facts

To summarise, in this section we have outlined the following main characteristics of Moroccan migrants in the Netherlands: • There are about 325,000 Moroccan migrants in the Netherlands; • The first generation of Moroccans in the Netherlands amounts to 169,000; • The second generation of Moroccans in the Netherlands amounts to 155,000.; • The Moroccan migrant community is expected to grow by 11 percent (approximately

to 360,000) up to 2010; • This growth is mainly due to an increase in the number of second-generation

Moroccans in the Netherlands; • Emigration, mainly back to Morocco, has been increasing in the last few years.

However, the numbers are still limited compared to the size of the migrant community. Furthermore, it is too early to speak of a structural break;

• After 2010, the community will still grow, but at a decreased growth rate; • Moroccan migrants mainly live in Noord Holland, Utrecht and Zuid Holland; • More specifically, they live in the cities of Amsterdam, Utrecht, Rotterdam and the

Hague; • About 40 percent of Moroccan migrants in the Netherlands originate from the

northern part of Morocco (Rif Mountains).

2.3 Remittances

This section describes remittances in the corridor the Netherlands – Morocco. But first, we present some background information on total remittances received by Morocco and where these remittances are sent from.


2.3.1 Setting the scene

Development of received remittances Figure 2.7 illustrates the total remittances received in Morocco from 1982 to 2004 in Dirhams from different countries. In 2004, total remittances amounted to approximately 37 billion Dirham (EUR 3.4 billion). Remittance inflows are of considerable importance to the Moroccan economy as they account for 6-9 percent of GDP in Morocco. As the figure shows, remittances tripled in the period 1982-1990, then they more or less stabilised in the period 1990-2000. In the last five years, however, remittances have doubled again. This sharp increase in remittances over the last five years can partly be explained by an increase in migration to Spain, Italy and the USA. Migration to these countries started to increase in the mid-1990s, and remittances started to take off some years after this increase in migration. Nowadays, Spain and Italy are seen as the ‘new’ migrant countries, whereas France, Belgium and the Netherlands are characterised as the ‘old’ migrant countries. Note also the peak in 2001. This can partly be explained by the introduction of the Euro; Annex IV elaborates further on the occurrence of this peak.

Figure 2.7 Total remittances received in Morocco from 1982 to 2004 (in million Dirhams)

1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004

Year

40,00035,000

30,00025,00020,000

15,000

10,000 5,000 0

In m

illlio

n D

irha

m

Source: Office des Changes, Morocco

Where do remittances come from? The countries of origination are diverse, but as would be expected those housing the largest migrant communities are the most important sources of remittances. Figure 2.8 illustrates recorded remittances from a selection of countries in 1999 and in 2004. It shows that remittance flows have increased from all these countries. France is the most important sending country, but its relative importance has decreased because of migration to Spain, Italy and the USA in the last five years. The relative importance of the Netherlands has also decreased. Up to 1992, the Netherlands was the second most important sending country after France, but it is now is the seventh most important sending country after France, Italy, Spain, the USA, Belgium/Luxemburg and the UK


However, its importance should not be underestimated as the remittance flow from the Netherlands still constitutes about 0.5 percent of Morocco’s GDP. Based on this information, we conclude that the Netherlands has become less important for Morocco as a source of remittances. This can have an affect on the importance that Moroccan banks attach to cooperation with Dutch banks (see Chapter 6).

Figure 2.8 Remittances received in Morocco from selected countries in 1999 and 2004 (in million Dirhams)

Source: Office des Changes, Morocco

2.3.2 Remittances in the corridor the Netherlands – Morocco

An estimate for the corridor In the previous section, total received remittances in Morocco were presented. The Moroccan Office des Changes states that remittances amounted to about 37 billion Dirham (EUR 3.4 billion) in 2004. As will be further elaborated upon below, we estimate that in the corridor the Netherlands – Morocco, about EUR 93 million to EUR 132 million was remitted in 2004. Ambiguous remittances data This estimate represents a ‘best guess’ for the corridor, since actual remittance data are ambiguous. Table 2.2 presents remittance data recorded as received in Morocco (Office

0 5,000 10,000 15,000 20,000

Received Remittances in Morocco (in mln Dirham)

France

Italy

Netherlands

Belgium/Luxemburg

Germany

Spain

UK

USA

Middle East

Neighbours

Other

Country

1999 2004


des Changes) and recorded as sent in the Netherlands (Central Bank of the Netherlands (DNB)). Ideally, the recorded sent remittances should be equal to the recorded received remittances. However, the table makes it clear that the Dutch and Moroccan figures do not coincide. Up to 2000, the Netherlands recorded more remittances sent than Morocco recorded as received. Then in 2001 to 2003 the situation was reversed: Morocco recorded more remittances received than the Netherlands recorded as sent. The picture changed again in 2004: the Netherlands recorded more sent than Morocco recorded as received.

Table 2.2 Recorded remittances in the corridor the Netherlands – Morocco (in million EUR)

1996 1997 1998 1999 2000 2001 2002 2003 2004

Received and recorded in

Morocco

91 80 123 103 163 343 201 187 132

Sent and recorded in the

Netherlands

106 117 124 151 169 180 191 172 182

Source: Office des Changes, Morocco and DNB

This variation in the level of recorded remittances can be explained by the different recording methods in Morocco and the Netherlands. In a nutshell, Morocco registers private bank transfers, post giro transfers and all money exchanges as remittances. The Netherlands uses the growth rates of the total migrant population as a proxy for growth in remittances. After total remittances are calculated, remittances per country are determined using a distribution formula. This distribution formula was constructed in 2002 and is based on the geographical breakdown of cash payments above ± EUR 11,000. Annex III explains the differences in recording remittances in more detail. Is one recording method better than the other? Both the Dutch and the Moroccan recording methods have their disadvantages, and it cannot be concluded that one method is better than the other. We need to take a closer look at both recording methods. If we take the definition of remittances as cross-border person-to-person transactions from sender to receiver as a starting point, the Moroccan data probably includes more than just remittances. This can be explained by the fact that the Office des Changes focuses on the transaction itself. The Office des Changes classifies all cash transfers as remittances, which probably also includes tourist expenditures by Moroccan migrants on holiday in Morocco. These expenditures are not remittances according to the definition stated earlier. We believe that subtracting these expenditures from remittance data can have a dramatic effect on recorded remittances. To illustrate: when Turkey classified money exchange in Turkey (Euro to Lira) as tourist expenditure instead of remittances, recorded remittances decreased from EUR 3.3 billion in 2001 to EUR 646 million in 2004.20 The Dutch data before 2003 probably also took more aspects into account than purely remittances. This can be explained by the fact that DNB only took account of the sender and not the receiver. Therefore, it is not clear if all transactions were person-to-person

20 EIB, 2006.


transactions. All transactions smaller than EUR 11,000, be it payments for services or goods and small investments, were also seen as remittances. Therefore, the Dutch remittance data probably included other money flows than remittances. Since 2003, remittance estimates have been partly based on: • developments in the total migrant community in the Netherlands, to generate a gross

estimate for remittances; • a distribution formula based on the family name of the sender, to create a geographic

breakdown of the gross estimate of remittances. There are several disadvantages to this approach. First, this estimate does not take into account the fact that the growth in the migrant population is mostly second generation migrant growth, and this generation is less liable to remit. Secondly, the figures for 2003 do not take into account the third generation of Moroccan migrants. Although this group is even less liable to remit than the second generation, the number of third generation migrants is growing quickly and could be of importance. Thirdly, this estimate does not take account of the effects that economic development in the host country can have on the size of remittances. Based on these differences in definition, it is remarkable to see that for 2004 DNB recorded more remittances sent to Morocco than Morocco registered as received. What is the best estimate? Both the Dutch and the Moroccan data seem to overestimate remittances. The ‘real’ remittance figure should be lower than the Dutch and Moroccan data suggest. Fortunately, we have two additional sources of estimates for the remittance flow between the Netherlands and Morocco. In a recent parliamentary letter, the total remittance flow (recorded and unrecorded) from the Netherlands to Morocco was estimated at EUR 84 million for 2005.21 This estimate was based on a customer survey. In addition, the customer survey carried out for the underlying study has also generated an estimate of remittances for this corridor. Our survey focussed specifically on the corridor the Netherlands – Morocco and based on a larger sample. Therefore, we prefer to use the results of our survey in stead of the survey conducted in 2005. Based on the findings in our survey on numbers of migrants and size of remittance transfers, we estimate that EUR 97 million was sent to Morocco in 2006. Corrected for inflation, this would have been around EUR 93 million in 2004. Based on the data from the Office des Changes, DNB, the customer survey from 2005 and our own customer survey, we believe that total remittances in 2004 from the Netherlands to Morocco should be estimated in the range of EUR 93 million to EUR 132 million. The estimate of EUR 132 million should be seen as an upper bound, because, as indicated above, the Moroccan seem to overestimates the remittance flow.

21 Tweede Kamer, vergaderjaar 2005-2006, 26234 nr. 56. Numbers are based on the report of NCDO, 2005.


Developments over the last 10 years Despite the differences in recording methods, both sources seem to indicate a similar trend over the last ten years. Figure 2.9 shows the development of recorded remittances in Morocco (in Dirhams and Euros) and in the Netherlands (in Euros).

Figure 2.9 Trends in remittances in the corridor the Netherlands – Morocco

Source: Office des Changes, DNB

The Dutch data seem to indicate a steady, moderate increase in remittances over the last ten years. This trend is the result of the estimation method. After all, DNB estimates remittances with the help of migrant data which grew with a steady pace. The Moroccan data is less clear as to trend. However, if we exclude the 2001-2002 peak in remittances (mainly resulting from an increase in cash remittances – see Annex IV), the Moroccan data also seem to suggest a moderate increase in remittances in the last ten years, although this increase has been more erratic. Unfortunately, the Office des Changes never answered the study team’s repeated question about how it has been able to register the country of origin since 2002, as the origin of cash Euros is difficult (if not impossible) to retrieve in comparison with the former country currencies. Future increase or decrease in remittances? If we simply extrapolate the remittances development from the last ten years, we assume a ‘moderate growth’ hypothesis for the coming years. Although the recent decrease in remittances received from the Netherlands in 2003 and 2004 seems to contradict the ‘moderate growth’ hypothesis, there is no indication yet of a structural break. A possible

0500

1,0001,5002,0002,5003,0003,5004,000

1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004Year

050100150200250300350400

Recorded in Morocco from the Netherlands in DirhamsRecorded in Morocco from the Netherlands in Euros Recorded in Netherlands to Morocco in Euros

In m

illio

n E

uros

In m

illio

n D

irha

ms


explanation for this decrease can be partly linked to the disappointing economic performance of the Netherlands.22 Extrapolation is a second best approach for trend analysis. First best is a more in-depth analysis of the causes underlying the trend. However, a full analysis is beyond the scope of this study. Nonetheless, we can say that the modest growth of the migrant population seems to confirm the moderate growth hypotheses. We have to take into account that this growth is mainly due to an increase of the number of second generation Moroccans. If we want to support the moderate growth hypotheses, we have to analyse remittance behaviour of the second generation and other factors which can explain remittance behaviour (sex, age, education, profession). This analysis is provided for in Chapter 4. For now we can say that the second generation migrants seem to have a similar likelihood of remitting as first generation migrants. Therefore, the growth of the second generation migrant population and its remittance behaviour seems to confirm our growth hypothesis.

2.4 Main facts and findings

The main findings are summarised in Table 2.3.

Table 2.3 Main findings on migrants and remittances

Key characteristics

Migrants

Number of migrants (2006) 325,000

• Number of first-generation Moroccans in NL 169,000

• Number of second-generation Moroccans in NL 155,000

Location of Moroccan migrant population in NL (2005) Noord Holland: 33.1% (mainly Amsterdam)

Utrecht: 16.5%

Zuid Holland: 15.6% (mainly Rotterdam and The

Hague)

Region of origin in Morocco (estimate) Appr. 40% from Rif Mountains area

Migration developments + 11% up to 2010 (mainly second generation). After

2010, a decreasing growth rate

Remittances

Recorded remittances Morocco (Bank-MTO-cash)

(2004)

€ 132 million

Recorded remittances Netherlands (estimate 2004) € 182 million

Estimated remittances Netherlands – Morocco

(NCDO, 2005)

€ 84 million

Estimated remittances Netherlands – Morocco

(ECORYS, 2006)

€ 97 million

Best estimate of remittances in corridor NL – Morocco

(2004)

€ 93 million - € 132 million

Expected development of remittances Moderate growth

22 Haas H de, 2006.


3 First mile

3.1 Introduction

This chapter starts with an overview of the remittance service providers (RSPs) in the Netherlands, followed by a description of the relevant regulatory framework. It concludes with an overview of the main facts and findings.

3.2 How to send money?

Money can be sent from the Netherlands to Morocco in several ways: through formal channels such as banks, post offices or Money Transfer Organisations (MTOs), or through informal channels such as carrying cash when visiting the home country, or by asking friends or family to carry the money. ‘Formal remittances’ are sent through formal channels, meaning that the remittance service provider has obtained a licence from the Central Bank of the Netherlands (DNB). Formal channels are monitored by DNB. ‘Informal remittances’ are sent through informal channels. Note that informal is not synonymous with ‘illegal’. Taking cash as a gift for family or friends when travelling to Morocco is a legal informal way of remitting.

3.3 What are the formal channels in the Netherlands?

The financial sector in the Netherlands is well developed. An account is needed for families to receive family allowance or child support, for workers to receive a salary, for anyone paying tax, for disabled or unemployed people receiving an allowance, and for students receiving a study or child allowance. Therefore, we assume that all Moroccan migrant families in the Netherlands have a bank account. The main remittance service providers in the Netherlands are banks and MTOs.

3.3.1 The banking sector in the Netherlands23

Dutch banks All Dutch banks offer international money transfers to their account holders. Dutch banks are part of international bank agreements and have correspondent banking relationships

23 CBS, Webmagazine, January 2003.


with Morocco. The transfer itself is handled through the electronic wire transfer system SWIFT (Society for Worldwide Interbank Financial Telecommunication), to which all (international operating) banks are connected. To transfer via a bank, the remittance sender must have a current account with the bank in the host country and the recipient an account in the home country. Other than standard money transfer services, none of the banks in the Netherlands offer dedicated remittance services to migrants. However, they differ in their marketing efforts towards migrants. For example, the Rabobank ran a marketing campaign targeting third generation migrants during the Christmas holidays 2005. Rabobank indicated that this group of migrants is a potentially interesting clientele for the bank, as they are having better jobs and are well integrated. During the Rabobank campaign, every existing or new accountholder could transfer money for only EUR 1. After the campaign, on 10 January 2006, the normal costs for a transaction were reduced from EUR 20 to EUR 13.50.24 Compared with other European countries, Dutch customers visit their bank branch the least. One reason for this is the ample availability of alternative distribution channels like ATM machines, internet banking and telephone services. Rabobank, for example, noticed a fall in visits of 280 million in 1980 to five million in 2004 – a decline of 98 percent.25 Over the years, many bank branches have been closed, and as shown in Figure 3.1 the number of inhabitants per branch has risen in almost ten years from 2,500 inhabitants per bank branch in 1997 to about 4,400 inhabitants per branch in 2006, an increase of 75 percent. On the other hand, the numbers of ATM machines and ATM withdrawals have grown rapidly.

24 http://allochtonen.web-log.nl/allochtonen/arbeidsmarkteconomie/index.htm. 25 Minister Zalm, Toespraak Rabobank Noordwest Twente, ‘Het vliegen niet verleerd: over het belang van flexibiliteit’. March

2005.


Figure 3.1 Indicators of the banking sector in the Netherlands

Source: Nederlandse Vereniging van Banken (NVB)

Moroccan banks in the Netherlands Many foreign banks have branches in the Netherlands. At present, however, there are no Moroccan banks offering banking services in the Netherlands. Banque Populaire and Wafa Bank26 used to offer bank products in the Netherlands, but they were closed about a year ago for “reasons concerning the bank licence”.27 The offices of these banks in Amsterdam, Rotterdam and The Hague now only operate as advisory organisations.28

3.3.2 Postbank

The Postbank occupies a special position in the banking sector as it both offers banking services and is an authorised agent of Western Union. Postbank, part of ING Bank, is the only mainstream bank in the Netherlands with such a liaison with a MTO. The main distribution channels for Postbank are mail, the internet and the post office network. Postbank is a member of Eurogiro/Worldgiro. Through alliance agreements and service-level agreements, the members of Eurogiro/Worldgiro aim to offer competitive cross-border payment products.29 Services offered include:

26 After a reorganisation in Morocco, Wafa Bank is now called Attijawafa Bank. 27 Statement, DNB. 28 The banks could not provide further information on the reasons for closure (telephone calls from ECORYS to the branches

in August 2006). 29 www.eurogiro.com.

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

1 2 3 4 0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

Nr of bank branches Inhabitants per branch

1997 2000 2004 2006

Year

Ban

k br

anch

es

Inha

bita

nts p

er b

ranc

h


• business day standard transfer – low-cost money orders in a maximum of five days; • semi-urgent cash payments in a maximum of two days; • urgent cash payments if the recipient needs the money within minutes; • bulk transactions, e.g. pensions. Postbank account holders can use the standard or semi-urgent transfer services by filling out paper or electronic transaction forms. For urgent cash transfers, Eurogiro/Worldgiro members cooperate with Western Union. In the Netherlands, the Postbank offers Western Union services through its daughter company Postkantoren BV. This organisation uses all post offices in the Netherlands and is a joint venture between Postbank and TPG Post. As with all MTO services, neither sender nor recipient needs to have a bank account.

3.3.3 Money Transfer Organisations

The major MTOs in the Netherlands are Western Union and MoneyGram. Currently, Western Union has 650 locations in the Netherlands. The Western Union agent with the largest network is the post office. Other agents of Western Union are Goffinbank, Cash Express, Does and Cadushi Travel. MoneyGram is part of Travelex and has a network of about 50 locations in the Netherlands. Travelex owns the distribution network GWK Travelex, with about 43 locations. Recently, Travelex bought the money transfer network of the German bank Reisebank, including seven offices in the Netherlands operating under the name Cash Express. As indicated in Figure 3.2, since 1998 the number of MTO counters has been declining. A major explanation for this decline is the decrease in the number of post offices over recent years, affecting the Western Union network. In addition, since the adaptation of the law on MTOs (Wgt) in 2002, the number of MTOs operating in the Netherlands has been considerably reduced. The Wgt is further discussed in the next section.


Figure 3.2 Number of MTOs and post office agents 30

Source: Offices of registered MTOs and post offices/agents

3.4 How is the remittance market regulated?

3.4.1 Regulation in the European Union

Intensive processes of harmonisation are underway in the EU, of which the development of a Single European Payment Area (SEPA) is one of the most fundamental. Under SEPA, pan-European payment products, standards, systems and legislation will replace the national systems. A first step towards SEPA was the introduction of the Euro. Payment institutions In December 2005, the European Commission presented Directive 2005/0245 on payment services in the EU internal market. After adoption of this Directive, expected in 2006-07, harmonisation of legislation in the Member States should be completed within 12 months. Of particular importance for providers of remittance services is the recognition of the separate entity ‘payment institution’. Payment institutions are payment service providers such as credit institutions, electronic money institutions or specific entities like post office giro institutions. An authorisation regime will be introduced for these payment institutions for the first time. 30 DNB: http://www.dnb.nl/dnb/bin/doc/Tabel%20MOB%20maart%202005_tcm12-

52326.pdf#search=%22aantal%20bankkantoren%20Nederland%22.

0

500

1,000

1,500

2,000

72%

3,000

1998 1999 2000 2001 2002 2003 2004 0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

Total MTOs and post office agents Inhabitants per branch

Tot

al M

TO

s and

pos

t off

ice

agen

ts


In the draft Directive it is foreseen that authorised payment institutions will be restricted to rendering payment services and will not be allowed to take on deposits. The authorisation in one EU country to operate as a payment institution is valid for the entire EU.31 Transparency of conditions Under the Directive, clear transparency conditions are set. All payment service providers (including payment institutions, credit institutions, electronic money institutions etc.) are obliged to offer all services as transparently as possible. The Directive states that providers should supply information on: • charges and the reference exchange rate applied to payment transactions, prior to the

transaction (including the relevant date for determining such a rate and the way the rate is calculated). The scope is end to end – the party offering the service is obliged to disclose all information, including the costs charged to the recipient and the currency conversion rate used at the recipient’s end;

• identifiers of the transaction – remitter and recipient, transaction amount, amount of commission and charges and applied exchange rate, after executing the transaction.

Consequences for the Netherlands After approval of the Directive, national laws will have to be assessed as to their compliance with the New Legal Framework. The Directive’s conditions regarding transparency will not burden the banks offering remittance services, because in following the Cross-Border Credit Transfers Directive 97/5/EC they already comply with similar regulations regarding transparency. It is expected that most MTOs will welcome the Directive with respect to the legislation of payment institutions, as they will no longer be confronted with the different licensing regimes of individual EU countries. A licence obtained in one EU country will pave the way for the rest of the European Union.

3.4.2 Regulation in the Netherlands

Three laws apply to remittance service providers in the Dutch market: • ‘Wet toezicht kredietwezen’ (Wtk), the Banking Law; • ‘Wet geldtransactiekantoren’ (Wgt), the MTO Law; • ‘Wet Identificatie bij Dienstverlening’ (WID), the Law on Identification. Banking Law (Wtk) The banking sector in the EU has reached a high level of harmonisation. Various EU guidelines provide the conditions for monitoring and licensing banks in the EU. These EU guidelines are reflected in the ‘Wet Toezicht Kredietwezen (Wtk)’ of 1992.32 DNB is responsible for licensing, maintaining the registers, and supervision and inspection.

31 Except when the authorisation is obtained under a derogation clause, for example: low volume, particularly vital for

underprivileged groups, etc. 32 Koninkrijk der Nederlanden, ‘Wet toezicht Kredietwezen’ (WtK), 1992.


As banks offer a wide range of products and services, including savings and credit, an important task of DNB is the supervision of solvency and liquidity. MTO Law (Wgt) Money Transfer Organisations are registered under the law on money transfer offices (Wgt).33 As with the Wtk, DNB is again the licensing and monitoring body. Other than the Wtk, the key focus of the supervision of MTOs is not their financial health but their trustworthiness and integrity.34 Until June 2002, MTOs in the Netherlands operated under special exemption rules under the Banking Law. No separate supervision and monitoring framework existed. The MTO law was introduced in June 2002, and was merely an extension of the Law on Money Exchange Organisations. With the adoption of the MTO Law, the number of services that can be offered was extended, including exchange and money transfer. The evaluation report on the MTO Law indicated that the tightening of the law in 2002 has had more than the foreseen effects. Where the expectation was that the number of MTOs would grow to over 60 after the changes of 2002, instead the number has declined (see Figure 3.3). The evaluators remarked that one of the reasons for this is that the conditions for MTOs in the Netherlands are considerably stricter than in other European countries. 35 For example, funds held by the MTO that are not paid out should not exceed the amount of the bank guarantee. Most MTOs have a bank guarantee of EUR 100,000.

Figure 3.3 Number of registrations in the Wgt register of the Central Bank

0102030

405060

Num

ber

of M

TO

s

1998

1999

2000

2001

2002

2003

2004

2005

2006

*

Year* First quarter

Source: DNB, Statistisch Bulletin Maart 2005, 2006

33 Koninkrijk der Nederlanden, Wet Geldtransactiekantoren (Wgt), 2002. 34 DNB, Statistische berichten, kwartaalbericht, March 2006. 35 EIM, 2006.


Not all the offices registered under the new law offer remittance services. In March 2005, only 16 out of 28 registered were actually offering money transfers.36 The remaining MTOs had a limited services package of exchanging foreign currency and cheques only. It is expected that most MTOs will welcome the new EU Directive with respect to the legislation of payment institutions. They will no longer be confronted with the licensing regime of individual countries in the EU. Hence the strict Dutch MTO law will no longer be a barrier to entering the Dutch market. Identification Law (WID) The Law on Identification, dated 1993, was adapted in 2006. According to the WID, all Dutch financial institutions, including banks and MTOs, are obliged to know and register the identity of their customers.37 The key principle of the law is that anonymous transactions are forbidden, and it will be easier to report suspected transactions. The law does not require identification for each individual transaction – regular clients can be identified once – and nor does the law prescribe the manner of registration. Registration may be done digitally, manually or any other way. Box 3.1: The disadvantage of a Moroccan name

Recently, a Dutch newspaper reported that transfers made by men named Mohammed or Ahmed have

to be checked against a list of the American Office of Foreign Asset Control and therefore may take

even more time than regular transfers.38

3.5 Main findings for the first mile

Banks The financial sector in the Netherlands is well developed. Dutch banks are part of international bank agreements and have correspondent banking relationships with Morocco. International transfers are handled through the electronic wire transfer system SWIFT. None of the banks in the Netherlands offer dedicated remittance services to migrants. The number of bank branches has fallen by 75 percent over the last ten years, and the number of ATM machines has grown rapidly. At present, there are no Moroccan banks offering banking services in the Netherlands. They were closed a year ago for “reasons concerning the bank licence”.39 The Postbank occupies a special position in the banking sector as it both offers banking services and is an authorised agent of Western Union.

36 EIM, 2006. 37 http://www.nob.net/html/nob/WID-MOT/nob_wid.htm, Wet van 16 december 1993, houdende nieuwe bepalingen inzake

identificatie van cliënten bij financiële dienstverlening. 38 Trouw 8 July 2006, ‘The disadvantage of a Moroccan name’. 39 Statement, DNB.


MTOs The major MTOs in the Netherlands are Western Union and MoneyGram. The number of MTO counters has been declining. This decline can be explained by the decrease in the number of post offices over recent years, affecting the Western Union network. EU regulation The European Commission is preparing a new Directive which harmonises the legislation for payment services. This Directive is expected to be implemented in 2006-07. Most MTOs will welcome the Directive as they will no longer be confronted with the different licensing regimes of individual EU countries. Regulation in the Netherlands Three laws apply to remittance service providers in the Dutch market: • ‘Wet Toezicht Kredietwezen’ (Wtk), the Banking Law; • ‘Wet Geldtransactiekantoren’ (Wgt), the MTO Law; • West Identificatie bij Dienstverlening (WID), the Law on Identification. The Banking Law contains conditions for monitoring and licensing banks. The MTO law deals with supervision, financial health, trustworthiness and integrity. The MTO law is considerably stricter than in other European countries. The Law on Identification contains obligations identification and registering of customers.


4 Intermediate stage

4.1 Introduction

In this chapter, the first mile and the last mile meet. The chapter elaborates on the: • characteristics of remitters and what influences their choice of channel; • market shares of the various channels; • costs of transactions. This analysis of the intermediate stage finishes with an overview of the main facts and findings.

4.2 Who is remitting and what influences the choice of channel?

In June 2006, a customer survey was conducted among 441 Moroccan migrants and their descendants. Almost 57 percent of the respondents indicated that they transfer funds to Morocco at least once a year. The following sections present the main findings and conclusions of the customer survey. Detailed tables and analysis are included in Annex V. Who is remitting? Men are substantially more often remitting than women: 68 percent of the men in the survey versus 48 percent of the women. This might partly be related to unmeasured variables such as the degree to which women are ‘banked’ or culturally determined role models. Not surprisingly, the likelihood of remitting for migrants with family in Morocco was twice that of migrants without family. The age of the migrant is influencing remittance behaviour. Migrants in the age group 39-49 were most often remitting; respondents younger than 29 were remitting about 50 percent less often than older people. It is often thought that second-generation Moroccans in the Netherlands are less likely to remit than the first generation. Surprisingly, the customer survey showed that this hypothesis has to be refuted. Second generation migrants had a similar likelihood of remitting as first-generation migrants. The survey suggests a relationship between occupational status and remittance behaviour. The percentage of migrants remitting was: 70 percent of those incapacitated for work, 67 percent of those with a job, 55 percent of retired migrants, 53 percent of the housewives, 52 percent of unemployed migrants and even 15 percent of the students. It is intriguing to see that educational background is the strongest determinant for remitting money. The survey showed that having a higher level of education increased the


odds of remitting four to five times compared with having no or only a primary education. Educational background also influences the occupational status and income of migrants: a higher level of education means a higher chance of a better job and a higher salary. Therefore, the clear relationship of occupational status and likelihood of remitting shown in the survey is not surprising: over 60 percent of migrants with an income of EUR 1,300 and more sent money home. In the income bracket EUR 460-1,300, this figure was around 50 percent. For migrants with an income of less than EUR 460, only 33 percent remitted. Size of household does not seem to influence the likelihood of remitting. What influences the choice of channel? Migrants’ occupational status is highly influential in the choice of the bank channel. Remitters who are active on the labour market, uneployed or students are more likely to remit through banks than retirees, housewives and others. This is probably because working migrants, unemployed migrants and students are most likely to have a bank account. Another factor positively affecting the choice of the bank channel is the fact that the recipient in Morocco has a bank account. The customer survey revealed that 70 percent of all remittance recipients in Morocco had bank accounts, whereas on average 20-25 percent of the total Moroccan population have bank accounts. First generation migrants with a relatively low level of education have a preference for MTOs. When choosing a channel, Moroccan migrants regard low costs, reliability and speed important. Although low costs and reliability are important, they do not significantly influence the choice of the bank channel. Costs are apparently important, but not as decisive as is often suggested by policy-makers. Most striking is the negative effect of speed on the choice of the bank channel. It seems that where speed is important for a remittance transaction, the bank channel is rejected. There is an indication that being born in the Netherlands (the second and subsequent generations) positively influences the choice of the bank channel. This could be related to the assumption that second generation migrants are more financially literate. Women are less inclined to remit through cash. Furthermore, women also seem to have a slight preference for the use of banks, but this correlation is only weakly significant. Most remittances go over the counter, even for 58 percent of the interviewees who indicated that they use the bank most. As almost all MTO transfers are conducted over the counter, in total over 80 percent of remittances are ‘over the counter’ transactions, involving cash handling.


4.3 What are the market shares?

4.3.1 How much is remitted through which channel?

Tables 4.1 and 4.2 present the results from the customer survey. Table 4.1 shows the size and frequency of transactions per formal channel. Table 4.2 gives the size and frequency of transactions through the informal channel. The pattern of usage differed between bank and MTO customers. Remitters using banks mostly remitted funds one to four times per year, whereas MTO users sent money more often. In the informal channels, cash tended to be carried once a year. Remittances were sent in amounts of on average EUR 250 in two to four transactions per year through the formal channels, whereas cash tended to be carried once a year in a higher amount of about EUR 470.

Table 4.1 Size and frequency of transactions per formal channel

Bank (n = 101) Postbank (n = 15) MTO (n = 107)

Number of

transactions per

year

%

Average

amount (€)

per

transaction

% Average

amount (€)

per

transaction

% Average

amount (€)

per

transaction

1 Once 35% 287 13% 75 28% 277

2 2 - 4 times 40% 175 53% 191 31% 125

3 5 - 11 times 8% 99 13% 103 21% 123

4 12 times 15% 93 13% 100 13% 119

5 More than 12 times 3% 37 7% 200 7% 382

Source: Foquz customer survey

Table 4.2 Size and frequency of transactions per informal channel

Cash (n = 77) Mosque (n = 33)

Number of transactions per year % Average amount

(€) per transaction % Average amount (€) per transaction

1 Once 66% 430 36% 169

2 2 - 4 times 25% 164 48% 156

3 5 - 11 times 8% 131 9% 27

4 12 times 1% 100 3% 10

5 More than 12 times 0% 0 3% 250


The average amount remitted per year was EUR 906. This figure is slightly lower than indicated by a previous study. Moré calculated that in 2001, Moroccan migrants sent on average between EUR 1,117 and EUR 1,675 per year to their families in Morocco. 40

40 Moré, 2005, p. 15.


4.3.2 Different estimates of market shares

The customer survey indicated that the market share of the formal channels in the corridor the Netherlands – Morocco is 76 percent and the market share of the informal channels is estimated at 24 percent. Informal channels involve mainly cash carriage by the migrant or by close family and friends when visiting Morocco. These findings are contrary to a recent market survey by NCDO. In the NCDO study, the split between formal and informal channels for the corridor the Netherlands – Morocco was estimated at roughly 40 percent – 60 percent respectively. A comparison of the datasets underlying both studies would be worthwhile, but is beyond the scope of this study. The results found in the customer survey for this study are supported by data from other sources. Table 4.3 presents various estimates for market shares. Based on data from the Office des Changes, we estimate a market share of the formal channels of 72 percent. MoneyGram also estimates that the market share of the formal channels is approximately 70 percent. Furthermore, a mini-survey conducted in Morocco41 in 2005 indicated that 65 percent of recipients obtained their funds through formal channels (49 percent through MTOs; 16 percent through the banks) and 34 percent through cash carry.

Table 4.3 Estimates of market shares (volume of transfers) of remittance service providers in the corridor the Netherlands

– Morocco

Formal remittances Informal remittances

Source Bank MTO Postbank Total Cash Other Total

Office des

Changes42

69% 3% 72% 28% 28%

MTO43 15% 56% 71% 28% 28%

NCDO44 25% 13% * 38% 46% 14% 62%

Customer survey45 24% 47% 5% 76% 16% 8% 24%

Source: Foquz customer survey, NCDO, MoneyGram and Office des Changes, Morocco

Based on the quantitative information presented in Table 4.3, we conclude that formal channels are dominant in the corridor Netherlands – Morocco. This finding is supported by a recent study by Hein de Haas. He argues that because the macroeconomic environment in Morocco is stable, the banking and foreign exchange facilities are well developed and transaction costs (fees and exchange rate costs) for remittances are relatively low, the formal sector is well developed and this has prevented the creation of large informal channels.46 Based on Table 4.3 and the qualitative observations above, we conclude that the best market-share estimate for the formal channels is 71-76 percent and for the informal

41 EIB, 2006. 42 Office des Changes, 2004. 43 MoneyGram shared this information (August 2005). The estimates of the market shares are based on number of transfers.

Please note that the totals do not add up to 100 percent. 44 NCDO, 2005. 45 Customer survey, 2006, see Annex V. 46 Haas H de and Plug R, 2006.


channels 24-28 percent. The formal and informal channels are further analysed in the following sections, based on the findings from the customer survey.

4.3.3 Cash-based remittances

Around 70 percent of remittances turnover are cash based, meaning cash-handling in both Morocco and the Netherlands. The customer survey indicated that approximately 16 percent of total remittances are cash carry, 6 percent are cash-based transfers through mosques, and 47 percent are remitted through MTOs.47 There are very few restrictions to cash carry. The Moroccan Dirham can be freely exchanged into foreign currency in Morocco, and travellers (foreign or ‘Marocains résidant a l’étranger’ (MREs)) are free to import up to EUR 3,000 in foreign currency.48 Figure 4.1 gives the percentages of total received remittances for cash carry, bank transfers and postal transfers from 1998 to 2004. These figures are based on data from the Office des Changes. MTO transfers are included in bank transfers. Postal transfers refer to international money orders which enables customers to send money overseas through post offices. Figure 4.1 illustrates that the share of cash carry has been declining. This declining trend is also apparent when the absolute levels of cash carry are analysed. In addition, the share of banks and MTOs has increased substantially. The formal channels seem to have partly taken up the market share of cash carry. Unfortunately, the data does not differentiate bank and MTO transfers. Therefore, we cannot conclude whether banks or MTOs have taken over this market share. However, the number of MTO branches in Morocco has increased substantially.49 Therefore, we have reason to believe that mainly MTOs have partly taken up the market share of cash carry, leaving the cash-based share of remittances fairly constant.

47 See also Annex V. 48 On departure, travellers can change Dirhams back into foreign currency on presentation of the receipt. Without a receipt

only EUR 1,000 can be taken out of the country. 49 Lacroix, 2003.


Figure 4.1 Percentages of postal, bank (including MTOs) 50 and cash transfers in Morocco in the period 1998-2004

0% 20% 40% 60% 80% 100%share

1998

1999

2000

2001

2002

2003

2004Y

ear

Cash Bank Postal

Source: Office des Changes

4.3.4 Market shares for the formal channels

Figure 4.2 presents the market shares of banks and MTOs in the total formal remittance market. MTOs have a market share of 62 percent, whereas banks have a market share of 38 percent.

Figure 4.2 Market shares of the formal channels

Source: Foquz customer Survey

50 See Annex III.

MTO 62%

Bank 38%


Among the MTOs, Western Union is used the most (over 80 percent), followed by MoneyGram (GWK Travelex). Among the banks, ABN Amro is used the most often, followed by Fortis Bank and Rabobank. Although the Postbank was mentioned most frequently, this is because it offers some direct money transfer services (e.g. Western Union). Remittances through the bank channel are mostly made via written or electronic transfer. Very few interviewees had sent a bank pass to the recipient for the direct withdrawal of money from an ATM in Morocco. In many host and recipient countries, banks and post offices act as an agent for MTOs as well as offering their own banking services. In the Netherlands, none of the mainstream banks has such an agent agreement with an MTO.51 The Postbank, however, as well as providing its Eurogiro transfer products, also offers Western Union services. The Postbank is not presented as a separate category; Postbank activities are included under banks, while Western Union services are included under MTOs.

4.3.5 Market shares for the informal channels

With a market share of 24-28 percent, the scale of the informal channels is relatively small compared with the 50 percent often estimated for other corridors.52 The small share of the informal channels may be a result of the relatively well-developed financial sector in Morocco, the stable macroeconomic environment, and the relatively small number of illegal Moroccan migrants in the Netherlands. In Spain, for example, the large number of illegal Moroccan migrants is a reason for the large market share of the informal channels.53 Figure 4.3 shows the market shares of cash carry and cash-to-cash transactions through mosques. Cash carry is the dominant informal channel. Other informal channels such as phone houses and travel agencies are scarcely used.

51 The only bank showing up in the statistics offering MTO services is Goffin Bank, but their number of branches is negligible. 52 EIB, 2006. 53 EIB, 2006.


Figure 4.3 Market shares of channels in the informal sector

Source: Foquz customer Survey

4.4 Costs, speed, transparency and requirements of transfers

To obtain an indication of the real costs of remittances, the speed of transaction and administrative requirements, we transferred money though different providers. These transactions can only be used as an example and cannot be used to draw general conclusions. We conducted six transfers of EUR 250 from the Netherlands to Morocco. All transfers through banks (ABN Amro, Rabobank, Postbank) were OURS, implying that all costs are paid by the sender. One bank transfer was made at the counter, the others through the internet. The MoneyGram and Western Union transfers were made at the counter. Unfortunately one month after the Rabobank transaction was carried out, the money was not received in Morocco. It is unclear what caused this delay. While drafting the report, an investigation has been started to trace the money. Annex II explains the transfers in more detail. Costs Figure 4.4 presents the results of the transactions. Total costs varied between EUR 7.50 (Postbank) and EUR 39.60 (ABN Amro, urgent counter transfer). The costs for an expedited money transfer at the counter were high compared with transferring money through the internet. All the bank transfers were transferred to one Moroccan Bank, BMCE Bank. This bank does not charge any exchange rate cost, as the exchange rate used by the bank is the same as that of the Moroccan Central Bank. However, the exchange rate costs for MTO transactions were high, because they apply an exchange rate lower than the Central Bank rate. These high exchange rate costs amounted to almost 50 percent of the total transfer costs for MTOs.

Cash

Mosque 27%

Other 1%

72%


Figure 4.4 Real costs of remittance transactions of EUR 250 in Euros

0 5 10 15 20 25 30 35 40

ABN Amro: (internet)

ABN Amro: urgent at counter

Postbank (internet) Worldgiro)

GWK (MoneyGram)

Western Union

Fee cost sending bank Fee cost recipient bank Exchange rate costs

Ban

k

Cost in Euros

16,10

39,6

23,95

21,14

7,50

Source: own transactions

Speed Table 4.4 indicates the speed of the various transfers. The date when the funds were deposited in the account of the recipient was taken as the receiving date for the banks. Both MTOs (MoneyGram and Western Union) transferred the money directly. After the identification number was given to the receiver, the money was collected. We expected to find more variation in the length of transfer time among the bank transfers carried out. Unfortunately, the bank statements of the Moroccan bank BMCE did not supply information about the exact moment when the money was transferred into the account. They only indicated that the amounts were in the account on 5 September, six days after the transfer took place. This makes it difficult to analyse the transfer time precisely. When performing the urgent money transfer at the ABN Amro counter, it was indicated that the money would probably arrive within about two days.

Table 4.4 Transfer time for transactions

Provider Transfer time

ABN Amro: internet Under 6 days

ABN Amro: urgent at counter Expected 2 days

Rabobank (internet) ?

Postbank (internet) Worldgiro) Under 6 days

GWK (MoneyGram) Direct

Western Union Direct


Transparency The information we received from the Dutch banks for our transactions was insufficient. The banks we used for the transfers did not provide information on the fees charged by the correspondent bank or the amount in local currency that the recipient would receive (exchange rate costs). Total fee costs were only clear after the transfer, when the fee costs for the local bank and the foreign bank appeared on the bank slip. No information was included on the exchange rate applied. The MTOs we used were transparent on fee costs and speed prior to transaction, but only provided exchange rate costs when the transaction took place. The sender was informed of the amount in local currency that the receiver would collect while the transaction took place. Identification requirements All banks requested information on the name and bank account number of the sender, the IBAN number (International Bank Account Number) of the recipient bank and the name of the recipient. The Postbank (internet) and the ABN-Amro counter service requested more information. They also requested the address of the bank (street, city, country) and the address of the recipient (street, city, country). The MTO transactions requested information on the sender (name, address, telephone number) and the name of the recipient and the city and country, and in the case of MoneyGram also the address of the recipient. All the providers required identification either through the pincode/internet code or identification papers such as passport or driving licence of the sender.

4.5 Main findings for the intermediate stage

Who are remitting? • Men are substantially more likely to remit than women; • Migrants in the age group 39-49 are the most likely to remit; • Second-generation migrants have a similar likelihood of remitting as first-generation

migrants; • Migrants with a job, those incapacitated for work and retired migrants remit more

often than housewives, unemployed migrants and students. Channel choice Factors influencing the choice for the formal channel are as follows: • Occupational status – remitters who are working, unemployed or students are more

likely to remit through the banks than retirees, housewives and others; • Preferred frequency and speed of remittances – remitters using banks remit one to

four times per year, whereas migrants using MTOs send money more often. When speed of transaction is important, MTOs are used;

• First or second generation migrants – second (and subsequent) generations seem to have a higher tendency to use the bank channel, whereas the first generation seems to favour MTOs.


Market shares We estimated that the formal channels have a market share of 71-76 percent and the informal channels about 24-28 percent. Within the formal remittances market, MTOs have a market share of 62 percent, while banks have a market share of 38 percent. Among the banks, ABN AMRO is used most often, followed by Fortis Bank and Rabobank. Among the MTOs, Western Union is used the most (over 80 percent), followed by MoneyGram (GWK Travelex). Cash carry is the dominant informal channel. Other informal channels such as phone houses and travel agencies are scarcely used. Cash-based remittances Around 70 percent of all remittances are cash based, meaning cash-handling in both Morocco and the Netherlands. In the last few years, cash carry has been declining, though MTOs have in part taken up this market share, leaving the cash-based share of remittances fairly constant. Costs, speed and requirements of transfers Information about costs, speed and requirements for transfers are not available for all providers. Therefore, we conducted our own transactions. Based on these transactions we concluded the following: • Total costs varied between EUR 7.50 (Postbank) and EUR 39.60 (ABN Amro, urgent

counter transfer) for a transfer of EUR 250. • The BMCE bank used the same exchange rate as the Moroccan Central Bank, while

the exchange rate costs for MTOs we used amounted to almost 50 percent of the total transfer costs.

• MTO transfers were direct, whereas bank transfers took two to six days. • MTOs were transparent on fee costs and speed prior to the transaction, but only

provided exchange rate costs when the transaction took place. • Most banks could not provide information about the fees charged by the

correspondent bank or exchange rate costs prior to the transaction. • All providers required some form of identification.


5 Last mile

5.1 Introduction

The last mile is the focus of this chapter. Section 5.2 sets the scene and analyses the importance of remittances from the Netherlands. Section 5.3 presents an overview of the use of remittances and a geographic breakdown of the destination of remittances in Morocco. Section 5.4 explains what the Moroccan Government does to support Moroccans overseas. The chapter finishes with an overview of the main facts and findings on the last mile.

5.2 Setting the scene

In recent years, macroeconomic and financial conditions in Morocco have remained stable while GDP has been growing slightly.54 Remittance flows are of considerable importance to the economy as a source of foreign exchange receipts. For example, foreign exchange receipts from remittances surpass those from important economic sectors such as the phosphate and tourism industries. Importance of ‘Dutch’ remittances for Morocco In recent years, remittance inflows have ranged between 6 percent and 9 percent of GDP.55 Each year, remittance inflow peaks during the holiday season in July and August and during religious holidays. As indicated in Chapter 2, the importance of remittances from the Netherlands to the total remittance inflow of EUR 3.4 billion into Morocco is small, only 4-5 percent. Yet remittances originating from the Netherlands still account for 0.2 to 0.5 percent of GDP.

5.3 What are remittances used for and where are they sent to?

What are remittances used for? Studies carried out in Morocco over the past 35 years show that money is predominantly used to sustain the household, build a house or improve an existing one.56 The customer survey showed that remittances are used for various purposes (see Figure 5.1), but the most important reasons for sending money are for food (23 percent), healthcare (16 percent) and housing (15 percent). Other reasons for sending money are: purchase of

54 IMF, 2005. 55 Office des Changes, Balance des Paiements, multiple years 56 See Khachani (2004) for a review of the surveys in Morocco.


luxury goods (4 percent), business purposes (3 percent), marriage and haj (3 percent), and visas and emigration (3 percent). The majority of recipients have other sources of income, but nearly 30 percent of the senders stated that their recipients are completely dependent on the remittances they send.

Figure 5.1 Percentages of interviewees who mentioned a specific purpose as the most important reason for sending

remittances

Health16%

Other23%

Rent 15%

debts8%

Education6%

House investment

8%

Food23%


No correlation between purpose and channel could be derived from the customer survey. For example, respondents who mentioned that they are sending money through the mosque did so for the same reasons as most other migrants: food, healthcare or housing related. Investments In addition to person-to-person transfers, Moroccan migrants sometimes also invest in Morocco. Investments are outside the scope of this study, but since the target group for the study includes bankers, we include a few words on investments. A survey by INSEA (Institut National de Statistique et d’Economie Appliqué) showed that Moroccan residents abroad are increasingly investing in their home country, especially in real estate (84 percent of all investments), agriculture (7.5 percent) and in sectors such as tourism, industry and retail.57 Another more recent study confirmed these findings and noticed the growing interest of more highly educated residents abroad in investing in stocks listed on the Moroccan stock exchange and in information and communications technology.58 The inclination to invest in their home country is an illustration of the attachment of migrants to Morocco.

57 INSEA, 2000, pp. 196-197. 58 Khachani, 2005, p. 14.


Regional destination of remittances Figure 5.2 shows the main regional destinations of remittances originating from the Netherlands. The most important destination regions are the Rif area and Great Casablanca. These percentages coincide with the available information on the origin of Moroccans in the Netherlands, with the exception of the Tangier area. About 17.4 percent of migrants come from this region, while remittances to this area comprise only 2.8 percent.

Figure 5.2 Destination of remittances in Morocco


Deposits In Morocco, overseas Moroccan nationals are called ‘Marocains résidant a l’étranger’ (MREs). MREs do not just remit funds to family and friends, they also send money to their own bank accounts in Morocco. Sending money to own bank accounts in Morocco is also seen as remitting. In 2003, MREs held over one million deposit accounts in Moroccan banks, amounting to 77 billion Dirham. As illustrated in Table 5.1, MRE deposits are of considerable importance for Moroccan banks. In 2003, the percentage of MRE deposits amounted to 57 percent of total bank deposits. We have no data on the

Western Rif Western Rif

Great Casablanca

North Western Rif

Western Rif

13.5% 2.8%

16.5%

18.7%


number of bank deposits held by Moroccan migrants in the Netherlands. However, it seems prudent to assume that some proportion of bank deposits is held by MREs living in the Netherlands.

Table 5.1 Moroccan bank deposits of MREs in billion Dirham (including checking accounts, current accounts and savings)

Year Total deposits eight

largest banks

Deposits belonging to

MREs

Percentage of MRE

deposits

2003 133 77 57%

2004 151 83 55%

2005 143 88 61%

Source: Bank Al Maghrib

5.4 What are the formal channels in Morocco?

Since the beginning of the 1990s, a reform process for the financial sector in Morocco has been ongoing, with the aim of establishing a modern, market-oriented financial sector. Morocco now has one of the most modern and well-developed financial systems in North Africa. However, in spite of this success, markets continue to play only a limited role and government ownership of financial institutions remains widespread.59 Cash is the prevailing payment method in Morocco. The share of notes and coins as a proportion of transactions is slowly declining, from 30.4 percent in 2002 to 29.8 percent in 2003 and 28.8 percent in 2004.60 Cheques are the most widely used means of non-cash transfer, but electronic transfers are gaining popularity. Furthermore, the proportion of residents with bank accounts amounts to only 15-25 percent, compared with 40 percent in Tunisia and close to 100 percent in developed countries. In 2003, there was approximately one bank branch per 15,000 residents. Table 5.2 compares the Dutch financial sector with that of Morocco on three indicators.

Table 5.2 Quick comparison of the Moroccan financial sector and that of the Netherlands (2003) on three selected

indicators

Morocco Netherlands

Bank notes as % of narrow

money61

65% 7.5%

Coverage of bank accounts 20-25% 95-100%

Residents per bank branch 15,000 4,300

Source: BIS and other sources

59 IMF, 2005. 60 Bank Al-Maghrib (Central Bank of Morocco), 2005. 61 www.bis.org Committee on payment and settlement systems: Payment and settlement systems in selected countries, 2003.


5.4.1 The banking sector in Morocco

The geographical coverage of banks is low. Half of banking activities are conducted in urban areas, of which 30 percent is concentrated in the Casablanca area, followed by Nador. Table 5.3 provides an indication of the number of bank branches in the most important regions of origin of Moroccan migrants in the Netherlands. Banks seem to be underrepresented in these regions, especially when compared with the number of MTO branches (see Table 5.4 in the next section).

Table 5.3 Number of bank branches in the regions where MREs in the Netherlands originate from

Number of bank branches:

Western Rif 56

Eastern Rif 67

North Western Rif 113

Grand Casablanca 822

Source: http://www.infobel.com/teldir/result.asp?url=http://www.menara.ma/pj/index.asp

The rapid growth of the number of ATMs seems to have halted at 1,800 in 2005 (see Figure 5.3). There is one ATM per 17,000 inhabitants, fewer than one ATM per bank branch.

Figure 5.3 Number of ATMs in Morocco

0

500

1,000

1,500

2,000

1999 2000 2001 2002 2003 2004 2005

year

Source: Bank Al-Maghrib (Central Bank of Morocco)

The banking sector consists of 16 banks, many of which are still state owned. The state controls the largest commercial banks (Groupe Banques Populaires), four specialised banks and the Caisse de Depôts et Gestions (institutional savings). In addition, there are several specialised financial institutions focusing on particular sectors such as agriculture or tourism. Moroccan banks depend strongly on deposits, which finance about 66 percent of their assets; an important part of these deposits come from migrants. Two main banks deal with migrants and remittances: Banque Populaire and Bank Al Amal.

http://www.infobel.com/teldir/result.asp?url=http://www.menara.ma/pj/index.asp


Banque Populaire (BP) Banque Populaire has a dominant position in the Moroccan market in terms of deposits (28 percent market share in 2003), most of which are generated by MREs. Since 2002, BP has been involved in a process of privatisation. The Groupe Banques Populaires (also known as Crédit Populaire du Maroc) has a stronghold in France and offers joint deposit accounts, enabling the wiring of funds for Moroccans living abroad. Deposit accounts can be held in Dirhams and foreign currency. Automatic payments to telecom and electricity companies can be made through these accounts. The Groupe Banques Populaires channels approximately 60 percent of the total remittances sent to Morocco, most of which originate from France. The bank is majority state owned and has an extensive network of branches in Morocco and agents in several European countries, but no operational branches in the Netherlands. In many countries, BP branches offer dedicated accounts for Moroccans, for example: joint checking accounts (no costs), wire money to an account (fee 0.01 percent), or wire money to a person (fee 90 Dirhams, regardless of amount wired). The banks offer accounts in Dirhams, in convertible Dirhams from which funds can be withdrawn in Dirhams or in another currency, or in foreign currency. Furthermore, BP hosts MoneyGram services and does not charge any commission over and above that charged by MoneyGram. Bank Al Amal Bank Al Amal was established in 1989 and specialises in financing migrants’ investment projects.62 The foreign branch offices of these banks are situated in France. In Spain they operate through partners.

5.4.2 The post office

Barid-Al Maghrib (BAM) is the postal operator in Morocco. It is 100 percent state owned and operates under an extensive postal monopoly. BAM also offers cash-based postal money orders itself, and offers remittance services through agreements with Western Union and Euro giro/World giro. BAM does not have a bank licence from the Central Bank of Morocco. The postal network comprises 1,596 offices, fairly evenly spread throughout the country, including rural communities. The postal network is better distributed than that of the banks, especially in rural areas. Of the 1,889 bank branches in Morocco, 862 are in the four main cities (Casablanca, Fez, Rabat and Tangier) and a further 300 in medium-sized cities. BAM has 1,100 post offices outside these main and medium-sized cities, and has a better rural outreach than the banking sector. With 600,000 postal giro accounts and 1.7 million postal savings accounts, it is estimated that BAM reaches about 10 percent of the adult population. Most of these are not rural or poor, but are public servants, teachers, hospital workers, soldiers and pensioners. 62 Collyer, 2004


5.4.3 Money Transfer Organisations

Through its cooperation with Banque Populaire and Banque Credit du Maroc, MoneyGram has an extensive network of agents in Morocco – around 1,315 offices. Western Union has about 700 offices. The most important partner in the Western Union network in Morocco is the post office. Table 5.4 provides an indication of the number of MTO branches in the most important regions of origin of Moroccan migrants in the Netherlands. MTOs are well represented in the regions where Moroccan migrants originate from, with almost 700 offices.

Table 5.4 Number of MoneyGram and Western Union branches in the regions where MREs in the Netherlands originate

from

Number of MoneyGram and Western Union

branches:

Western Rif 154

Eastern Rif 81

North Western Rif 150

Grand Casablanca 309

Source: www.moneygram.com and www.westernunion.com

5.5 Support to Moroccan migrants

The Moroccan Government has established two foundations to manage the relationship with MREs: the Hassan II Foundation and the King Mohammed V Foundation. The Hassan II Foundation supports residents abroad who are interested in investing in the home country. The Foundation has six departments: education, cultural exchange, sports and youth; social assistance; communication; legal studies and assistance; cooperation and partnership; and economic promotion.63 The Foundation is also conducting studies to document migration trends, i.e. the ‘Observatory on the Moroccan Community Living Abroad’.64 The Hassan II Foundation is partly financed by banks which offer remittance services, as they donate a small part of their profits. The King Mohammed V Foundation has as its objectives economic and social development and solidarity. They use resources liberated through privatization. The foundation has put at the disposal of Moroccan expatriates suffering from sensory, mental or motor disability a social and medical assistance scheme which facilitates their return to and departure from Morocco. 65 MREs also enjoy the advantage of certain financial transactions being exempt from taxes. For these transactions they have the same privileges as foreigners. On the other hand,

63 Brand, 2002. 64 Federico Caffè Centre, 2004. 65 http://www.mincom.gov.ma/news/2000/1906to2406/mis/mis.htm.

http://www.moneygram.com/

http://www.westernunion.com/


MREs are treated as locals when it comes to investments in, for example, real estate, where restrictions apply to foreigners. Furthermore, since the 1980s MREs have also been represented in the Moroccan Parliament.

5.6 Main findings for the last mile

Over recent years, remittance inflows have ranged between 6 percent and 9 percent of GDP. Remittances originating from the Netherlands account for 0.2 to 0.5 percent of GDP. The customer survey showed that remittances are mostly sent for food (23 percent), healthcare (16 percent) and housing (15 percent). The most important destination regions for remittances from the Netherlands are the Rif area and Great Casablanca.

Banks Since the beginning of the 1990s, a reform process for the financial sector has been ongoing. Despite these reforms, cash is the prevailing payment method in Morocco. However, the importance of cash transactions is slowly declining. The geographical coverage of banks is low. The banking sector consists of 16 banks, of which many are still state owned. Banque Populaire is the market leader, with a 28 percent market share for deposits and approximately 60 percent for remittances. Post office Barid-Al Maghrib is the postal operator in Morocco. Post offices are evenly spread throughout the country, including in rural communities. MTOs MoneyGram has the most extensive network of agents in Morocco, mainly through its cooperation with Banque Populaire and Banque Credit du Maroc. Western Union is the second biggest MTO. The post office is the most important partner in the Western Union network. Support to Moroccan migrants The Moroccan Government has established two foundations to manage the relationship with MREs, of which the Hassan II Foundation supports residents abroad who are interested in investing in Morocco. Furthermore, MREs enjoy tax exemptions for certain financial transactions.


6 Factors hampering remittances through formal channels

6.1 Introduction

This chapter focuses on the following questions: • Is there potential to further formalise the remittance stream in the corridor the

Netherlands – Morocco? • If there is such a potential, what can banks, governments and other key stakeholders

do to further increase the use of formal channels? Section 6.2 lists a number of factors that may hamper the use of formal channels. Section 6.3 examines whether these hampering factors apply to the corridor Netherlands – Morocco, and presents recommendations on how to overcome these obstacles. Section 6.4 assesses the potential of these recommendations to further formalise the remittance flow, and provides a summary of all recommendations.

6.2 What is hampering the use of formal channels?

Factors hampering the use of formal systems – and thus stimulating the use of informal systems –can be distinguished in two ways: those related to migrant status, and those related to inefficient formal systems. Illegal migrant status hampers the use of formal channels. Illegal remitters have no choice but to use informal channels, as they lack (proper) identity papers needed to open a bank or remit through MTOs. Though MTOs also accept a Moroccan passport, illegal persons are not inclined to use formal channels which require some form of registration.66 In the Netherlands, the number of illegal Moroccan migrants is small. Therefore, there does not seem to be a large base for informal remittance channels in the corridor. The other group of factors hampering the flow of remittances through the formal sector relates to inefficient formal systems. Examples are: • underdeveloped banking networks in the recipient country; • high costs involved in using formal remittance channels; • poor knowledge of alternative products because of weak marketing by the formal

institutions; • illiteracy or financial illiteracy among clients;

66 EIB, 2006.


• lack of confidence in official transfer systems; • unfavourable exchange rate through official channels; • familiarity with informal systems and proximity. These factors are discussed in more detail in the next section.

6.3 Inefficiency of formal systems

The Bank for International Settlements (BIS) and the World Bank recently published General Principles for international remittance services.67 The principles were drafted to help to analyse aspects of payments systems; to provide general principles to assist countries to improve the market for remittance transfers; and to help governments to achieve public policy objectives of having a safe and efficient international remittance service, which requires the market for the services to be contestable, transparent, accessible and sound. In this section, the principles are used as a checklist to assess the level of efficiency of the formal channel in the corridor Netherlands – Morocco and to identify the factors hampering efficiency. The General Principles are as follows: • Transparency and customer protection – the market for remittance services should

be transparent and offer adequate customer protection; • Payment system infrastructure – improvements to payment system infrastructure

that have the potential to increase the efficiency of remittance services should be encouraged;

• Legal and regulatory framework – remittance services should be supported by a sound, predictable, non-discriminatory and proportionate legal and regulatory framework in relevant jurisdictions;

• Market structure and competition – competitive market conditions, including appropriate access to domestic payment infrastructures, should be fostered in the remittance industry;

• Governance and risk management – remittance services should be supported by appropriate governance and risk management practices.

The following sub-sections discuss each of the principles in turn, analyse to what extent the formal channels fulfil the principle, and provide recommendations.

6.3.1 Transparency and customer protection

General Principle 1: The market for remittance services should be transparent and offer adequate customer protection In the corridor Netherlands – Morocco, information on remittance products is limited. The website www.stuurgeldnaarhuis.nl was launched to increase transparency in the

67 World Bank and BIS, 2006 and www.bis.org.

http://www.stuurgeldnnaarhuis.nl/


overall remittances market. However, this website has not been updated for a while and information on exchange rates and speed of transactions is missing.68 One reason for these gaps is the lack of information supplied by remittance service providers. Based on the transactions we conducted and our previous study,69 we come to the conclusion that the formal remittances market is not transparent. Product information can only be obtained through actual use of the different transfer services. MTOs are transparent regarding fee costs and speed of transfer before the transaction, but only provide exchange rate costs when the transaction takes place. The bank channel seems even less transparent. With the exception of Postbank, Dutch banks do not provide information on total fee costs prior to the transaction. Furthermore, the banks do not provide exchange rate information and only give an estimate of the transfer time. Fees charged by the correspondent bank are only presented after the transaction. Furthermore, the banks could only provide rough estimates of the length of time taken for remittances, arguing that the speed depends on the bank in Morocco. Customer protection is dealt with in Chapter 7. Recommendation I: Improve transparency in the remittance market Overall market transparency could be improved, for example by improving the website www.stuurgeldnaarhuis.nl. At present, the information provided on this website is limited and incomplete. We recommend further development and the inclusion of full information on remittance services: • The costs of remittance services per provider should include all costs, that is, fees on

both sending and receiving sides and exchange rates; • The costs should be related to information on speed; • Information should be given on customer protection per type of provider. This website could also further develop into a valuable source of information on remittances for migrants who do not have access to the internet. For example, information for a specific corridor could be printed out and distributed in places where migrants gather.

6.3.2 Payment system infrastructure

General Principle 2: Improvements to payment system infrastructure that have the potential to increase the efficiency of remittance services should be encouraged The MTOs have an efficient payment system, offering real-time transactions. Furthermore, they have set up an efficient network of counters (agencies) at both ends, especially in the areas where migrants live in the Netherlands and come from in Morocco. In the Netherlands there is an efficient payment infrastructure at their disposal, with a high percentage of non-cash transactions. After many years of reforms, the financial

68 The website does not clearly state that information is not up to date. 69 EIB, 2006.



system and infrastructure in Morocco is among the most modern and liberal in the Mediterranean region. However, 70 percent of payments are still cash-based and only 20-25 percent of Moroccans have a bank account. The Moroccan and Dutch bank systems are linked through the correspondent banking system, which is not as efficient (regarding speed) for cross-border payments. There is no cooperation beyond the correspondent relationship between Dutch and Moroccan banks that could stimulate further development of remittance services. The customer survey indicated that Moroccan migrants and their descendants prefer physical access points and cash transactions (see also Chapter 7). However, the number of access points (for both the banks and MTOs) in the Netherlands has decreased rapidly in the last ten years. In Morocco, it seems that there are a fair number of physical access points of banks and MTOs in the regions from where Moroccan migrants to the Netherlands originate. Furthermore, in both the Netherlands and Morocco, the post office network is exclusively used by Western Union. In Morocco in particular, where in comparison to the banks the post office has a good network in rural areas, this exclusivity may hamper the efficiency of the market. Recommendation II: Use retailers for offering remittances services Banks and MTOs could seek cooperation with supermarket chains or other retail chains in order to enlarge their networks to accommodate remitters who prefer counter transactions. For retailers, handling cash is their daily business and some of them have extended networks in place. See also Chapter 7 for more information on this. Recommendation III: Open up existing networks for multiple remittance providers The dynamics in the remittance market in both the Netherlands and Morocco would greatly increase if more suppliers could have easier access to the remittance market (see also Recommendation V). One option to consider could be to open up the post office system to other remittance service providers (other MTOs and banks). Investigating this possibility is recommended, because the post office network has a semi-public role. Furthermore, it could also be of economic interest to post offices. Opening up the post office network, with its capillary system in every country, would encourage remittance service providers to compete on services, rather than on number and location of access points.70

6.3.3 Legal and regulatory framework

General Principle 3: Remittance services should be supported by a sound, predictable, non-discriminatory and proportionate legal and regulatory framework in relevant jurisdictions In the Netherlands, the different types of remittance providers (banks and MTOs) are regulated by two laws. While the bank law focuses on stability of the financial sector, the focus point of the MTO law is on integrity. The compliance conditions for banks and

70 For example, in Russia CONTACT money transfer payments (in cooperation with Russlavbank) simply scans the ID

document. If the remitter is already registered, a form with all relevant information is automatically generated.


MTOs may therefore differ. This difference is fair, as for banks remittances are part of a whole package of banking services subject to compliance, whereas for MTOs remittances are their core product. A consequence may be different compliance costs for the various types of remittance service providers. A further analysis of these costs is beyond the scope of this study.71 The Dutch MTO law is criticised for its stringent conditions, considering the relatively small risks to financial stability. The MTO law is among the most stringent in the EU, and the conditions seem to be disproportionate considering the risks.72 Recommendation IV: Adaptation of MTO law The Ministry of Finance could consider adapting the current MTO law in anticipation of the Directive harmonising the legislation of payment institutions within the EU. The current MTO law is considered to be a barrier for market entrance. In particular, the capital adequacy condition is often mentioned as a barrier by foreign MTOs who would like to enter the Dutch market.

6.3.4 Market structure and competition

General Principle 4: Competitive market conditions, including appropriate access to domestic payment infrastructures, should be fostered in the remittance industry. We observed two inefficiencies in the Dutch financial market which seem to negatively influence market structure and competition: • barriers to market entry; • lack of cooperation between Dutch banks, Moroccan banks and MTOs. Barriers to market entry No new players have entered the remittance market in the Netherlands recently. On the contrary, the number of MTO outlets has decreased (mainly because of a decrease in the number of post offices), and Moroccan banks which were active in the Netherlands have left the market. Is the Dutch remittance market unattractive for suppliers of financial services? Short interviews and information from banks in Morocco, the closed Moroccan banks in the Netherlands73 and from an MTO in the UK indicated that the Dutch market is not unattractive. On the contrary, the Moroccan banks, in particular Banque Populaire, are eager to open up (again) and so is an English MTO. The problems these organisations have appear to be related to Dutch legislation and the Central Bank of the Netherlands (DNB). According to DNB, the Moroccan banks in the Netherlands had to suspend offering financial services because they did not have a banking licence. The English MTO does not seem to be able to resolve legal issues caused by the Dutch law on MTOs.

71 We have not studied the legal framework in Morocco. 72 EIM, 2006. 73 The branches of Moroccan banks in the Netherlands cannot offer bank services to the public, but they are still staffed.


As both organisations have strong positions in other EU countries, their absence from the Dutch market gives rise to the question: “Is the Dutch law on banks and on MTOs stricter than similar laws in other EU countries, and is this hampering the dynamics of the remittance market?” Although not having analysed this question in great detail (as it was beyond the scope of the study), we tend to think that the answer may be “yes”. This tentative conclusion is somewhat supported by a recent evaluation of the MTO law, which mentions that certain conditions are among the most stringent in the EU. The absence of Moroccan banks is especially unfortunate, as these banks have made it their business to offer attractive (remittance) services to migrants. For comparison, the majority of remittances in the corridor Germany – Turkey flow through the bank channel, mainly the Turkish banks in Germany. The large flow of remittances has enabled Turkish banks to develop remittance-backed securities.74 As a consequence of the further development of the Single European Payment Area and adoption of the New Legal Framework, in the near future banks and MTOs will be allowed to offer their services in all EU countries once they have acquired a licence in one EU country. For example, when the New Legal Framework is adopted, Banque Populaire will be able to offer its services from its headquarters in France and branches in the Netherlands. Lack of cooperation between Dutch banks, Moroccan banks and MTOs None of the Dutch banks cooperate with Moroccan banks. Stakeholders in the Dutch banking sector state that the compliance burden is hampering such cooperation. Furthermore, there also seems to be little cooperation between MTOs and Dutch banks, whereas in other countries this collaboration are much more common. There are indications that compliance considerations are hampering cooperation and the further development of the remittance market, especially when it comes to developing new products (see also Chapter 7). Recommendation V: Mitigating barriers to entry for foreign financial organisations Anticipating this future change as a result of EU legislation, the Ministry of Finance together with DNB could investigate the possibilities, within the framework of the current law, of mitigating the barriers to entry for organisations eager to enter the Dutch remittance market. Recommendation VI: Analyse compliance issues hampering cooperation We recommend that the Dutch banks, in cooperation with DNB and MTOs, investigate compliance issues. In this study we have not elaborated on the nature of these compliance issues. We have reason to believe that these issues relate to different legislation and supervision of this legislation by DNB. Therefore we suggest that the Dutch banks and MTOs, together with DNB and the Ministry of Finance, investigate compliance issues.

74 EIB, 2006.


Recommendation VII: Netherlands Competition Authority investigates Dutch transfer market We support the Dutch Ministry of Finance request to the Netherlands Competition Authority (NMA) for investigating the level of competition in the remittances market.

6.3.5 Governance and risk management

General Principle 5: Remittance services should be supported by appropriate governance and risk management practices The legal framework and adequate monitoring in both sending and receiving country should assure appropriate governance and risk management practices. We have no indication that there are hampering factors. In addition, the customer survey did not reveal issues concerning the reliability of remittance service providers. Therefore, no specific inefficiencies related to governance and risk management were identified. We would like to comment that the expected weakening of the MTO law may change the risk profile in the MTO market (more providers, but higher risks).

6.4 Potential to further formalise remittance streams?

Table 6.1 gives a list of the recommended activities that could be undertaken to make the remittance market more efficient. To further formalise remittances, the remittance flow through informal channels should be (re)directed to formal channels. In this corridor we see little room in the short term for the formal channels to attract remittances from the informal ones, for the following reasons: • Compared with other corridors, the more than 70 percent formal remittance flow is

rather high; • Cash carriage, the main informal remittance stream, is persistent because as long as

migrants visit their home country, they will take cash with them; • Effects of reforms to make the remittance market more efficient can only materialise

in the medium term. It can be expected that in the medium term, with the further development of the giro payment systems in Morocco, the attractiveness of cash carriage may decrease. Furthermore, it is most likely that migrants will in the future be more inclined to use banks, because educational level, income, and financial literacy are on the rise among Moroccan migrants. This will probably lead to an increased market share of the formal channels (see also Chapter 7). In the meantime, we recommend activities and reforms to improve the attractiveness of the formal channels. For example, MTOs and banks could offer additional products, lower the costs of transactions, increase the transparency of products, and increase their marketing efforts. It should be noted that the potential to further formalise remittances is relatively small, and that these measures are more likely to spark a shift of market shares within the formal channels than between the informal and formal channels.


Table 6.1 Summary list of recommendations to improve the formal remittance market

Recommendations

Transparency

I IntEnt to further develop, in close cooperation with migrant organisations and with the support of the Dutch

Government, the website www.stuurgeldnaarhuis.nl by including information on:

• all costs (fee costs of sending + receiving and exchange costs);

• speed;

• customer protection.

Payment system infrastructure

II If banks and MTOs are considering providing financial services through cooperation with supermarkets and

other retail chains, they could also consider offering remittances through these channels

III The Ministry of Economic Affairs and the post office to investigate if opening up the post office network to

multiple remittance service providers would be an option and beneficial for the remittance market

Legal and regulatory framework

IV The Ministry of Finance could consider adapting the current MTO law in anticipation of EU Directive

2005/00245

Market structure and competition

V Anticipating this future change as a result of EU legislation, the Ministry of Finance together with DNB could

investigate the possibilities, within the framework of the current law, of mitigating the barriers to entry for

organisations eager to enter the Dutch remittance market

VI Dutch banks, in cooperation with the Ministry of Finance and DNB, to investigate what issues related to

compliance are hampering cooperation with MTOs and Moroccan banks and product innovation

VII We support the Dutch Ministry of Finance request to the Netherlands Competition Authority (NMA) for

investigating the level of competition in the remittances market



7 Increasing remittances through the bank channel

7.1 Introduction

This chapter discusses the final research question of this study: is it possible to increase the share of remittances transferred through the bank channel? Specifically, we address the factors hampering the increase of remittance flows through the bank channel and elaborate concrete, practical actions to address these factors. The discussion below is based on interviews with Dutch and Moroccan banks, supplemented with information from the consumer survey and desk research.

7.1.1 Background and rationale

Developmental impact of remittances through the bank channel From a developmental point of view, remittances transferred through the bank channel have a potentially higher multiplier effect than cash-based MTO transfers. Remittances through banks are more likely to stay within the domestic banking system (i.e. deposited in bank accounts), thus increasing the asset base of banks. This allows them to increase their on-lending activities and/or provide cross-selling opportunities for other retail banks and insurance products. In addition, a large flow of remittances through the bank channel offers the opportunity to securitize future remittance flows by developing capital market instruments such as, for example, remittance-backed bonds. These instruments will help to mobilise additional (domestic and foreign) savings for further on lending in Morocco.

7.2 Factors hampering increased use of the bank channel

What is the reason for the large share of cash-based transactions in this remittance corridor? Or, rephrased from the viewpoint of the banking sector, what is hampering remittances through the bank channel? We have identified the following hampering factors, which are each discussed in turn below: • preference for cash; • preference for counter transactions; • lack of adequate products offered by banks; • lack of transparency; • absence of a commercially interesting business case.


7.2.1 Preference for cash

The cash economy in Morocco partly explains remitters’ preference for cash transactions. The customer survey showed that remittances are mainly used for services which in Morocco have to be paid for in cash and immediately, such as food, healthcare and rent. On the other hand, we found that a disproportionate number of recipients of remittances have a bank account: 70 percent of remittance recipients versus 20-25 percent bank account holders in general in Morocco. Notwithstanding this fact, remittances are mainly cash-to-cash, and we observe that the preference for cash is hampering remittances through the bank channel. With the further development of the financial sector in Morocco, supported through a reform programme of several international financial institutions, it is to be expected that in the longer term the number of cashless giro payments will increase and cash payments will decrease.75 If in the future a majority of transactions can be conducted using a credit or debit card, the demand for remittances in the form of cash might well diminish. Recommendation A: Develop Dutch support for payment systems in Morocco The Netherlands has one of the most efficient payment systems worldwide. Interpay (the provider of the payment system technology) could consider actively supporting the further development of a broad-based, accessible, cashless payment system in Morocco. Developing a ‘gateway’ between the Dutch and Moroccan Interpay (eliminating inefficiencies in the corresponding bank process) is also an option to be considered. Interpay has developed a Pre-paid Transfercard. Instead of sending cash money or use a postal order, the sender can transfer money into a central account. The receiver, in another country, can pick up the money with a Prepaid Transfercard. Currently this card is used on limited scale in the Netherlands, but not yet for remittances/foreign transfers. Recommendation B: Develop an account-to-cash product Without waiting for the development of wider use of the giro system in Morocco, Dutch banks could start offering an account-to-cash product in cooperation with banks or MTOs in Morocco. In such a service, migrants send funds from their bank account to the account number of an MTO or bank in Morocco, or a specific pre-paid card number. The recipient in Morocco does not need an account, but can pick up the funds in cash after proper identification. However, to make such a product a success, it is important that it should be clearly priced (end-to-end) and that the recipient obtains accurate information on speed (see also Chapter 7, section 4).

7.2.2 Preference for counter transactions

The preference for counter transactions is probably related to the basic need for trust and the confidence that remitters have in tangible (face to face) transactions. MTOs have responded to this need. They have set up an efficient network of counters (agencies) at

75 It should be noted, however, that the activities of the World Bank usually focus on the ‘upstream’ part of the payments

system, like Real-time Gross-Settlement (RTGS) and inter-bank clearing.


both ends of the corridor, especially in the areas where migrants live in the Netherlands and come from in Morocco. Dutch banks have a policy of promoting cashless payments and Straight Through Processing (STP) in the giro system; consequently, they discourage cash transactions and in particular small-sized cash transactions. As a result, over the last decade a great number of bank branches have been closed down. Also, though less importantly, the remaining bank branches have unattractive opening hours in comparison to MTO agencies (branches are usually closed after 17.00 on weekdays and many are closed the entire weekend). Nevertheless, banks can play an important role in further developing giro transactions. Banks offering possibilities for transferring money through a counter transaction may over time result in purchase of multiple banking services. Recommendation C: Use retailers for offering remittance services To accommodate the current group of remitters who like to use counter services, Dutch banks could seek to cooperate with supermarket chains or other retail chains (see also Recommendation II in Chapter 6). Retailers are set up for intense cash-handling, though (not yet) for the task of identification. Banks, insurance companies and retail chains themselves are currently experimenting with the distribution of financial products. An example is the ‘In stores’ service of Rabobank, among others, in the Plus supermarket. If other financial services are going to be provided through cooperation with retail chains, why not offer the possibility of transferring remittances through these channels?

7.2.3 Lack of adequate products offered by banks

The customer survey indicated that many remitters have conducted remittances through both the MTO channel and the bank channel (see Chapter 4). In particular, migrants with a higher level of education and women are more inclined to use banks for remittance transfers. Furthermore, second (or later) generation migrants are also more inclined to use the bank channel than first-generation migrants, who still have a clear preference for MTOs. In the Netherlands, almost all migrants have a bank account, and in Morocco 70 percent of recipients. Seemingly, at both ends of the corridor a considerable proportion of migrants and recipients could potentially conduct remittances through the bank. Yet still the bank channel is not the most frequently used. Why is this? Probably more important than the lack of counters, as discussed above, is the lack of adequate remittance products. This lack of adequate products can be explained by a number of factors: 1. absence of competition by Moroccan banks in the Dutch market; 2. barriers in the correspondent banking system; 3. lack of cooperation between Dutch and Moroccan banks. Absence of Moroccan banks In Chapter 6 we analysed the barriers to market entry to the Dutch remittance market. The absence of Moroccan banks in the Netherlands is especially unfortunate, as these banks have made it their business to offer attractive (remittance) services to migrants.


Barriers in the correspondent banking system The lack of adequate remittance products also lies in the cross-border payment system. Financial cross-border transactions are conducted using the correspondent banking system based on the SWIFT transactions standards. A SWIFT money transfer is split up into a number of individual transactions ensuring that via agents (correspondents) in the network the money arrives at its destination. Other than for example Western Union or MoneyGram, banks do not control the chain using the correspondent banking system from end to end. In addition, with Directive 2560, EU Commissioner Bolkestein forced banks in the Euro zone to reduce the costs for international payments to the level of costs for domestic payments. Morocco is not part of the Euro zone and so does not benefit from the Bolkestein Directive. For customers, it must be hard to understand why the costs of a EUR 250 bank transfer from the Netherlands to, for example, Gibraltar in Spain are almost nil while the costs for the same transfer to Tangier in Morocco (only a few kilometres further) can range between EUR 7.50 and EUR 40. Linking Moroccan banks to the Euro clearing house could make the costs charged by Dutch banks similar to those for payments within the Euro zone. Lack of cooperation between Dutch and Moroccan banks It seems that Dutch banks are not cooperating effectively with Moroccan banks. This is an important reason why the development of innovative end-to-end products in the corridor Netherlands – Morocco is stagnating. Many new payment mechanisms in the Dutch payments market cannot be used for remittances. Payment orders through the internet and (mobile) telephones or call centres have become common practice in the Netherlands and abroad, but there are no options for making money transfers to Morocco: • I-Deal, the internet payments instrument of Dutch banks, can only be used for

payments to (other) Dutch banks; • It is possible to make a variety of payment orders by telephone, but not for payments

to Morocco; • M-banking (m-payments) is not developing, even though most Moroccans (both

senders and receivers) have a mobile phone, and technological solutions have been developed for cost-efficient payments;

• For some reason, unlike in the United States for instance, in the Netherlands it is not possible to transfer money online via Western Union or MoneyGram to a designated place and person using your bank account or credit card.

Recommendation D: Re-open Moroccan banks in the Netherlands We recommend that the Ministry of Finance should supervise and stimulate the re-opening of Moroccan banks in the Netherlands, in close cooperation with DNB. First, Moroccan banks are more likely to offer faster and more transparent products. Secondly, they would increase competition and probably positively influence market dynamics and new product development. Moroccan banks are eager to (re)enter the Dutch market. We do not know exactly why the Moroccan banks lost their banking permit, because DNB is not allowed to make this information public. However, these Moroccan banks have branches in other EU countries such as France and Spain.


Recommendation E: Investigate barriers to close cooperation between Dutch and Moroccan banks The negative aspects of the correspondent banking system can also be overcome by establishing close cooperation with banks in Morocco. This would stimulate the development of innovative end-to-end products using the internet and (mobile) telephones. However, stakeholders in the Dutch banking sector indicated that compliance costs are a barrier for close cooperation. Therefore we recommend that the Dutch banks, together with the Ministry of Finance and DNB, investigate the reasons why there is little effective cooperation between Dutch and Moroccan banks and potentially address these issues. Recommendation F: Link Moroccan banks to the European clearing system We recommend that the Dutch Government should assess if it is politically feasible to put extension of the Euro clearing system to Morocco on the agenda in Brussels. Linking Moroccan banks to the Euro clearing system would stimulate development of the financial sector in Morocco, because transfer fees would be equal to those within the Euro zone. This approach could be used for more countries with strong migration ties with EU countries. It could be seen as a new tool in the European Neighbourhood and Partnership policy.

7.2.4 Lack of transparency

Lack of transparency in the costs and speed of remittances, caused by the correspondent banking system, is hampering the flow of remittances through banks. Contrary to MTOs, the correspondent banking system does not allow banks to give their clients the information needed to establish trust in the product: • Sending banks cannot provide precise information on the total cost of the transfer,

only on the costs of the first mile; • Sending banks can only make ‘best guesses’ about the speed of the transfer; usually

they indicate a range; • Sending banks cannot provide information on the exchange rate that will be used in

the recipient country. For information on costs (fees and exchange rates) and the speed of the transaction, the sending bank is dependent on the information provided and the fees charged by the correspondent banks in the chain (see Chapter 4). The customer survey showed that remitters regard speed as especially important. However, ‘speed’ does not necessarily just mean a ‘fast service’; it may also indicate the need for a clear indication of the length of time of the transfer. In this respect, the remittance services of banks do not fulfil a clear need of remitters. Apparently, MTOs have identified this important characteristic of a remittance service: ‘speed’ is part of their success. Another aspect of transparency is customer protection. It seems that most banks have less straightforward customer protection than MTOs. Western Union and MoneyGram seem to have clear guidelines on customer protection. Both MTOs have complaints departments. When our MTO transfer failed, we promptly received a letter explaining


what went wrong and what we should do. Our experience with banks when we conducted money transfers (to Morocco and other countries for the EIB study) was less positive. We received no notification when the transfer could not be made. After we heard from the receiver that the transaction had failed, we contacted the bank. It was unclear whom to address concerning the failed transaction and how to get the money refunded. Furthermore, responsibility for the transfer is unclear. Is the bank used by the sender responsible for the transfer, or is it the correspondent bank in Morocco? Recommendation G: Improving transparency in the bank channel To overcome these transparency issues, banks should establish a clear overview of their remittance services, indicating price and speed. Transparency on price can be established through a closer relationship with banks in Morocco and agreement on fee prices. A practical solution for the pricing issue might be that banks set a price for the correspondent part of the transfer prior to the transfer transaction, irrespective of the real costs charged afterwards by the correspondent partner. With regard to speed, we do not have enough insight into the correspondent banking system to be able to judge whether correspondent banks can make clear agreements on the speed of delivery. If it is possible to make such agreements, we recommend banks to do so. Recommendation H: Repeat obligation to offer transparency on costs Dutch banks are obliged to present all costs (fees, exchange rates) of cross-border transfers. Although cost transparency has improved, we hold the view that further improvements are necessary. To stimulate recommendation G, we recommend that the Dutch Government should remind Dutch banks of their obligation to offer full transparency on transfer costs. Recommendation I: Clarify and improve protection for bank customers We recommend that banks clarify their responsibility and improve customer protection for cross-border transactions. Self-regulation would be the preferable instrument. If the bank sector is reluctant to improve customer protection, the Government should intervene.

7.2.5 Absence of a commercially beneficial business case

Dutch banks are not developing specific products for migrants, and nor do they regard migrants as a specific target group. The Rabobank, a cooperative bank, is an exception. Currently, this bank is actively researching the possibilities for bank services targeting migrants and their descendants. The driving factor is the bank’s philosophy that its customer base should be a reflection of society; as a consequence, around 10 percent of its client base should be non-Western migrants. It seems that Rabobank is using remittance products to attract new clients. However, no migrant products have yet been introduced, other than a marketing campaign targeting migrants during the holiday season and offering cheap money transfers (through the correspondent banking system). But the philosophy of Rabobank is promising. As indicated above, the most important reason to encourage the flow of remittances through the bank channel is to increase the total amount deposited in banks in Morocco


and thereby (ultimately) increase the developmental impact of remittances. However, this is a benefit for the banking sector in Morocco and not for banks in the Netherlands. The commercial benefits for Dutch banks to (further) develop and introduce remittance products are not that obvious. There seem to be two main reasons for the potential lack of commercial benefits: (1) Though the Netherlands is home to a large group of non-Western immigrants, each

group in itself may be too small to justify the development of a dedicated product. A specific product for a group of 325,000 Moroccan migrants remitting around EUR 93-132 million per year may not be commercially viable, even though the Moroccan community and the total volume of remittances in the corridor Netherlands – Morocco will grow slightly over the coming years;

(2) The banks interviewed often indicated that the heavy compliance conditions associated with remittance products were an additional discouragement.

Rather than developing remittance products for a single migrant group, the whole population of non-Western migrants – 1.7 million people, altogether remitting EUR 670 million per year – could be targeted. However, the corridor studies on remittances clearly show that each corridor has specific issues, which cannot be resolved with general products. Recommendation J: Explore commercial obstacles for developing remittance products We recommend that the Department of Development Cooperation of the Ministry of Foreign Affairs (DGIS) explore with the banks and MTOs the possibilities for overcoming the commercial obstacles to developing remittance products. The MTOs should explicitly be included in such a discussion. Further, the Dutch Government could stipulate that new products, if developed, will be described and advertised through the most relevant existing websites, thereby stimulating dynamism in the market.

7.3 Is there potential to increase use of the bank channel?

In Table 7.1 we present a summary list of the recommendations made in this chapter to improve use of the bank channel. It is the challenge of the banking sector to turn cash transactions into giro flows in order to maximise the developmental impact of remittances. The following developments may make this even more challenging: • In the near future, competitive rivalry will increase because we expect that more

MTOs will enter the Dutch market. This will probably lead to downward price pressure;

• Morocco is still a cash-based society. Although the development of the financial sector is favourable, it will take some time before an efficient payment system (more giro payments) is in place.

However, other developments will make the challenge easier: • It is most likely that migrants will in the future be more inclined to use banks,

because educational level, income, and financial literacy are on the rise among Moroccan migrants;


• Our own transactions seem to indicated that the banks do not have disadvantageous price setting compared to MTOs. If the banks were capable of improving their transparency, especially on speed, then the bank transfer product could easily increase its market share;

• The Dutch Government can be a partner in efforts to increase use of the bank channel, because of the developmental impact of a better-developed financial sector in Morocco.

Chapter 2 presented a simple trend analysis, indicating a moderate growth of the remittance flow. The expected increase of the migrant populations seems to support this trend. In Chapter 4 we saw that the second generation migrants have a similar likelihood of remitting as the first generation migrants. Furthermore, occupational status is a factor which strongly influences the likelihood to remit. Now that the Dutch economy seems to recuperate, the position of Moroccan migrants in the labour market might improve, thus positively influencing the tendency to remit. Therefore, we expect remittances to Morocco will growth moderately the next years. We are not in a position to judge the banks’ commercial interest in developing remittance products. However, if the banks are interested in the remittance market, we can clearly see quick wins for improving use of the bank channel.


Table 7.1 Summary list of recommendations to improve use of the bank channel

Recommendations

Preference for cash

A Interpay could consider actively supporting the further development of a giro system in Morocco. Developing

a ‘gateway’ between the Dutch and Moroccan Interpay (eliminating inefficiencies in the correspondent bank

process) is also an option to be considered

B Without waiting for the development of the giro system in Morocco, banks could start offering an account-to

cash product, for instance in cooperation with banks or MTOs in Morocco

Preference for counter transactions

C If Dutch banks are considering providing financial services through cooperation with supermarkets and other

retail chains, they could also consider offering remittances through these channels

Lack of adequate products offered by banks

D The Ministry of Finance to supervise and stimulate the (re)opening of Moroccan banks in the Netherlands in

close cooperation with DNB

E To stimulate the development of innovative end-to-end products, investigate the reasons why there is little

effective cooperation between Dutch and Moroccan banks, and potentially address these issues

F The Dutch Government to assess if it is politically feasible to put extension of the Euro clearing system to

Morocco on the agenda in Brussels

Lack of transparency

G Banks to improve transparent information on the (full) costs and speed of bank transactions

H The Dutch Government to remind Dutch banks of their obligation to offer full cost transparency on cross-

border transfers

I Banks should clarify transfer responsibility and improve customer protection (through self-regulation)

Absence of commercially beneficial business case

J DGIS may want to explore with the banks and MTOs the possibilities of overcoming the commercial

obstacles to developing remittance products. Further, the Dutch Government could stipulate that new

products, if developed, will be described and advertised through the most relevant existing websites, thereby

stimulating dynamism in the market


Annex I References

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Interpay (2005), ‘Prepaid Services: Unlimited Electronic Payment Possibilities’. http://www.interpay.nl/Services_nieuw/Prepaid_Services/ Khachani, M. (2004), ‘Les Marocains d’Ailleurs: La question migratoire à l’épreuve du Partnariat Euro-Marocain’. Koninkrijk der Nederlanden (1992), ‘Wet toezicht kredietwezen’ (WtK). 23 December 1992. Koninkrijk der Nederlanden (2002), ‘Wet inzake geldtransactiekantoren’ (Wgt). 27 June 2002 Lacroix, T. (2003), Espace transnational et territoire: les reseaux marocains du developpement, Phd thesis, University of Pontiers. McKinsey&Company (2006), ‘Betalingsverkeer in Nederland: een onderzoek naar de opbrengsten en kosten voor het bankwezen’. Eindrapport 10 July 2006. Ministerie van Financiën, The Netherlands (2005), ‘Evaluatie Wet inzake de Geldtransactiekantoren’. Misra, M. (2005), ‘Leveraging Technology for Remittances’. Presentation at the Joint Conference on Remittances in the Philippines. Mohogu, M. (2000), ‘Calculated Chaos or Cooperation? Informal Financial Markets in Kinshasa’. Mohogu, M. (2006), ‘African Remittance Markets in the Netherlands’. Study commissioned by Cordaid. MoneyExpress (2006), ‘Money Express, L’Afrique a son transfert d’argent’. Presentation groupe Chaka. MoneyGram International (2004), ‘Annual Report 2004’. MoneyGram International (2005), ‘Annual Report 2005’. Moré, (2005), ‘Emigrant’s Remittances in Spain: An Opportunity for Action Abroad’. Working Paper, Real Instituto Alcano, January 2005. NCDO (2005), ‘Goed geld overmaken: Geld overmaken naar het buitenland: mogelijkheden en perceptie van allochtone consumenten’. Report by Consumentenbond for NCDO and IntEnt, Oct. 2005. Nederlandse Vereniging van Banken (NVB) (2006), Factsheet over toegankelijkheid bankkantoren, http://www.nvb.nl/scrivo/asset.php?id=24526#search=%22aantal%20bankkantoren%22

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Zalm, (2005, March), Minister, Toespraak Rabobank Noordwest Twente, ‘Het vliegen niet verleerd: over het belang van flexibiliteit’.


Annex II Real money transfers

Introduction In addition to gathering information on the basis of internet-sources and interviews, the expert team felt the necessity to gain some first-hand experience with overseas bank transfers. For this matter, the team carried out monetary transactions from the Netherlands to Morocco through a variety of channels on 30 August 2006. These transactions can only be used as an example and cannot be used to draw general conclusions. Selection of transfers Based on the consumer survey carried out, beforehand a selection of channels and types of transfers was made. In total six transfers were carried out, both by banks and through MTO’s. The bank transfers were all sent to the same bank account with the BMCE Bank in Morocco. Banks We transferred money through Postbank, ABN Amro and Rabobank, the latter as they focuses on the migrants as one of their target groups. Even though the survey showed that the most common way to transfer money is through counter transactions, we nevertheless carried out both counter- and internet transfers, to make a comparison possible. In the case of internet transfers, most interviewees indicated that they send money as ‘OURS’ (all cost for sender). Accordingly, we chose to make all transactions as ‘OURS’ as well. MTO’s Concerning the transfers through the MTO, the most used company by customers selected is Western Union. In addition to Western Union, we have selected MoneyGram to channel money to Morocco. Results On the 30th of August, all the transactions were carried out. All transactions at the counters took place about the same time. An overview of all the transactions and some procedural information can be found below. Generally, the actual time to process the transaction is almost similar for internet- and ‘counter’ transfers. Internet transfer have some advantages such as time saving, through the avoidance of queues, and 24 hours availability, as there is no limitation due to opening hours.


Table II.01 Type of transactions and procedural experiences

Company and type of

transaction:

Procedural experiences

ABN Amro

Internet

Details of the transfer had to be specified at the internet page “international payments”.

After one day, it was indicated that the transfer was processed. A few days later, the cost

of the receiving bank were indicated and deducted from the sender’s account. Total

transfer procedure took about five minutes.

ABN Amro

Counter

A considerable amount of time was needed to carry out the transfer. First of all, the

sender was standing in the wrong queue as it was not clearly indicated at which desk the

transfer had to be made, secondly the queue was quite long (three people had still to be

served). As some other bank employee was serving another client at the same counter,

the sender didn’t experience much privacy. Unfortunately only part of the costs could be

indicated (counter cost, transfer cost, cost for fast transfer). The banking costs of the

recipient bank were deducted after some days. However, no information about the cost of

the recipient bank could be given at the counter. In total (including waiting) the transfer

took about 25 minutes.

Postbank

Internet

After logging in at the internet site, much information was requested and had to be

specified. The transaction took place in the evening. The transfer was processed the next

day. Total transfer procedure took about seven minutes.

Postbank/Western

Union

Counter

The sender had to wait for a very long time to be served, as it was very busy at that

moment. The appropriate form was asked for at the counter and could be filled in

beforehand. The procedure itself took five minutes, the total process including waiting

about 30 minutes.

GWK/MoneyGram

Counter

More information had to be given to the person behind the counter in comparison to

Western Union. No forms had to be filled in. After the information was put into the data

base, the sender was asked to check the information printed out on a form and sign if

he/she agreed. As there was no queue, the whole process went smooth and in total took

about five minutes.

Rabobank

Internet

After filling in the standard internet banking security procedures of Rabobank, the transfer

could take place. The requested information was typed in and processed. As this was

done in the evening, only the next day the information was processed. The total

procedure took about seven minutes.

The following table (II.2) lists the information that needs to be provided for by the sender in order to make a transfer, and the information displayed on the slip or bank statement, received afterwards.


Table II 02 Type of transactions and information requested and displayed

Company and type of

transaction:

Information requested Information on slip

ABN Amro

Internet

Name of receiver, bank account number,

amount and IBAN number, identification

through internet banking code.

Name of receiver, cost, amount

transferred

ABN Amro

Counter

Name of recipient, bank account number,

name of bank, city, country, IBAN number,

amount. Identification through pin pass and

identification paper (e.g. driving license).

Name of receiver, cost (split up in

different categories), amount transferred

Postbank

Internet

Name of the recipient, bank account, name of

the bank, IBAN number, address of the bank,

address of the recipient, country, amount.

Identification through internet banking code.

Name of recipient, cost, amount

Postbank/Western

Union

Counter

Form had to be filled in with information of

sender (name, address, telephone number),

name of recipient, country. Identification

through identification paper (e.g. driving

license).

Name of recipient, country, amount, cost,

exchange rate, amount in local currency

to be picked up by recipient, name of the

sender

GWK/MoneyGram

Counter

Information such as name of recipient, city

and country had to be given, next to

information of the sender (name, address,

telephone number). . Identification through

identification paper (e.g. driving license).

Name of recipient, country, amount, cost,

exchange rate, amount in local currency

to be picked up by recipient, name of the

sender

Rabobank

Internet

Name of receiver, bank account number,

amount and IBAN number. Identification

through internet banking code.

Name of receiver, cost, amount

transferred

Both the slips of MoneyGram and Western Union give much more details about the transfer than the bank statements of the banks. When money is transferred through the bank channel it is beforehand not clear how much money the recipient will receive. In Table II.3 an overview is given of the costs by both the recipient and the sender.


Table II.03 Real costs to transfer of EUR 250

Channel Total

received

(MAD)

Fee Costs sender (Euro) Costs

recipient

(Euro)

Exchange

rate costs

(MAD)

(difference

CB76 and

bank)

Total costs

(Euro)

Transfer

cost

Cost

recipient

bank

ABN Amro:

(internet)

2,756.49 5.50 10.60 - 0 16.10

ABN Amro:

urgent at

counter

2,756.49 29.0077 10.60 - 0 39.60

Rabobank

(internet)

?78 13.5079 ? ? ?

Postbank

(internet)

Worldgiro)

2,756.49 5.50 2.00 - 0 7.50

GWK

(MoneyGram)

2,625.43 11 - 143.48

(=€ 12.95)

23.95

Western

Union

2,667.64 12 - 101.27

(=€ 9.14)

21.14

The costs for an expedite money transfer at the counter are high compared to transferring money through internet. The Moroccan Bank, BMCE Bank, does not charge any exchange rate cost, as the exchange rate used by the bank is the same as that of the Moroccan Central Bank. Although the costs to send money by MoneyGram are slightly lower than those of Western Union, the total costs are higher due to the different exchange rate used, see also table II.4. Unfortunately, one month after the transactions took place, the money transferred from the account by Rabobank has not arrived. At the moment it is still unclear what has caused this delay. While drafting the report, an investigation has been started to trace the money.

76 As currency exchange rate of the Central Bank is taken: 1 EUR = MAD 11.0756303142 of 30 August 2006,

http://www.xe.com/ict/. 77 EUR 10 transfer cost, EUR 9 for urgency and fast delivery and EUR 10 bank counter cost. 78 Unfortunately the amount transferred through the Rabobank has not arrived in the account, currently it is unclear what

happened. 79 EUR 6 (fixed amount, World base, SP OUR) + 7.50 (5 promille of amount with minimum of 7.50).


Table II.04 Exchange rate cost used by MTO’s

Channel Exchange rate of

MTO (1 € = MAD)

Exchange rate

Central Bank

Cost of Exchange

rate difference (€)

Difference on

amount of € 250

GWK (MoneyGram) 10.501715 11.0756303142 12.95 5.2%

Western Union 10.6705618 11.0756303142 9.14 3.6%

The internet side www.stuurgeldnaarhuis.nl seeks to provide an indication of the expected costs for transferring money to Morocco. Unfortunately the provided information is not up-to-date.80 As this initiative is still in its pilot phase, the calculated costs on this site cannot be used to compare with our results. Another interesting aspect to investigate is the amount of time it takes to transfer the money. Both MTO’s, MoneyGram and Western Union transfer the money directly. After the identification number is given to the receiver, the money can be picked up. It was expected to find more differences between transfer times among the bank transfers carried out. Unfortunately, the bank statements of the Moroccan bank BMCE did not supply information about the exact moment the money was transferred into the banking account. The statements only indicated that the amounts were into the account on the 5th of September, six days after the transfer took place. This makes it difficult to analyse the transfer time precisely. When transferring the money at the counter of ABN Amro as urgently, it was indicated then that the money would probably arrive within about two days.

Table II.05 Transfer time

Transfer time

ABN Amro: (internet) Less than 6 days

ABN Amro: urgent at counter Expected 2 days

Rabobank (internet) ?

Postbank (internet) Worldgiro) Less than 6 days

GWK (MoneyGram) Direct

Western Union Direct

Conclusions By carrying out transfers of money ourselves, additional information could be collected about the different channels. Not only differences were found between the bank and MTO channels, also the type of transfer made a difference. Transferring money at the counter of the ABN Amro Bank was very expensive and total cost were about 16 percent81 of the amount transferred. At the other hand, the cost of transferring money through the Postbank internet site were much lower with EUR 7.50 (3 percent of the amount transferred).

80 In is not clearly indicated on the website that the information is not up to date. 81 EUR 39.60 divided by EUR 250.



Although the interviewees of the consumer survey stated that reliable and fast delivery of the money were considered of greater importance than the costs, in reality the interviewees are well aware of the “cheapest” ways of transferring money, as mainly Postbank and Western Union are used to transfer money (see Annex V). The cheapest way to transfer money was through internet by the Postbank. Also the internet transfers through Rabobank and ABN Amro were in total cheaper than the transfers through the MTO’s. Only the transfer through the counter was much more expensive.


Annex III Definitions of migrants and remittances

Migrants This research uses the CBS database for migrant data. CBS uses the following definitions: • Migrant: a person who is born abroad or has at least one parent who is born abroad; • First generation migrant: a person who is born abroad and has at least one parent

who is born abroad; • Second generation migrant: a person who is born in the host country and has at

least one parent who belongs to the first generation. The definition does not take account of the nationality of the migrant. Migrants may have the nationality of the home country, the host country or they may have a dual citizenship. The Moroccan government considers everyone born out of Moroccan nationals as a Moroccan citizen regardless whether born in Morocco or abroad. Moroccan born abroad automatically also have the Moroccan nationality. As the migrants do not have the option to renounce their Moroccan nationality, all generations have either the Moroccan nationality or a dual citizenship. The Moroccan government registers al Moroccan migrants with a Moroccan nationality, regardless whether they are first, second or third generation, as migrants. The dual citizenship is a cause of growing deviations in the Dutch and Moroccan statistics. Where in the Dutch statistics 3rd and 4th generations Moroccans will no longer be registered as migrants, in the Moroccan statistics they still will be registered as Marocains résidants à l’étranger (MRE). Remittances In international literature different definitions for workers’ remittances are used and countries differ in how they register remittances82. Workers’ remittances can include workers’ remittances per se as defined by the IMF Balance of Payments Manual (i.e. current transfers by migrants who are employed in new economies and considered

82 During the G8 Summit in December 2004 the importance of remittances was recognised by the Finance Ministers and a

working group was established with the task of solving the problems concerning remittances data quality and consistency of data collection. The working group is led by the World Bank and collaborates with IMF, the European Central Bank, the International Bank for Development, the OECD, United Nations and representatives from top remittance sending and receiving countries. Results are expected by December 2006.


residents there), but can also be understood as including compensation of short-term migrant workers and transfers resulting from migration back to the home country. For the purpose of this study, we define ”workers’ remittances” as the financial transfers of migrants’ to related persons or into personal (bank) accounts from the migration destination (host country) to the place of origin (home country). Despite the IMF definition, the figures are still difficult to interpreter as countries register Workers’ remittances in various ways. For example where some countries include giro flows through the financial sector only, others also register and include goods import and cash carries. There are two main categories of transfer channels used for sending remittances: Formal channels and informal channels. • Formal channels are Banks, post offices, Money Transfer offices (MTOs); • Informal channels are cash carry (migrant him/herself, or friends and family),

commodity carry and unofficial Money transfer offices (call shops, travel agencies etc).

The following table shows the relationship between formal - informal and registered – unregistered for a number of countries.

Table III.0.1 Registration of formal and informal remittances in MPC and selected EU countries83

Formal channels Informal channels Countries

Banks MTO Post

office

Goods Cash

carry

Unoff. MTO

Spain, France, Jordan,

Egypt, Lebanon

Syria

Germany

?? Italy

Turkey

Tunisia

Algeria84

?? Morocco

Netherlands before 2003

?? Netherlands after 2003

Source: EIB (2006)

Registered

Estimated

?? Unclear

83 EIB, 2006. 84 Cash carry includes only cash declared at airports.


Definition and recording of remittances in Morocco In Morocco information on remittances is compiled by the Office des Changes of the Ministry of Finance. Workers remittances are registered under the heading ‘private current transfers’ in the Balance of payments. The Office des Changes records all bank transfers and remittances received through the post office. Furthermore, all cash currency exchange by private persons in Morocco (foreign currency to Dirham) is considered as remittances and recorded. Unfortunately, Office des Changes did not answer our question whether MTO transfers are recorded. We expect that these transfers are registered, because Western Union use the Moroccan post office network and MoneyGram use the Banque Populaire network. Definition and recording of remittances in the Netherlands In the Netherlands the Dutch Central Bank (DNB) is responsible for the data collection. DNB has conducted two different methods of remittances recording. Up to 2003 the DNB partially estimated remittances flows based on the cross-border transfers as reported by Banks and GWK. MTO transfers were not included in the DNB statistics. Banks and GWK had to report the total transfer value, number of transactions and each individual transaction higher than approximately EUR 11,000 with a full geographical breakdown. For all payments up to EUR 11,000 only information on the total value and the number of transactions was available. Of these payments up to EUR 11,000 no information was available on the destination country and the reason of the payment. The geographical breakdown was made with the help of a formula based on the geographical breakdown of remittances above EUR 11,000 and on the family name of the resident sender. After 2003 the estimation method changed. The Central Bank now obtains remittance data from the Central Bureau of Statistics (CBS). CBS provides total remittances data based on the migrant population growth (first and second generation). CBS used the DNB remittance data of 2002 as the base year and increases remittances with the percentage growth of the migrant population. CBS makes a geographic break down in: EU-EMU, EU-non EMU and other countries. In Addition, DNB uses the distribution formula of the pre-2003 method to break down the data to specific countries.


Annex IV Remittances peak in 2001

Morocco recorded a large peak of remittances received in 2001. This peak is also visible in the remittance received from the Netherlands. (see Figure 2.9 in Chapter 2). If we look at the recorded remittances more closely, we see that the peak is caused by an extreme increase in cash transfer (See Table 2.3 in Chapter 2). The extreme peak in 2001 can possibly be explained by the introduction of the Euro. Apparently, the Euro led to a sharp rise of cash exchange of Dutch Guilders to Dirham in 2001 in Morocco. This could partly be explained that Moroccans in Morocco were already having large reserves in Guilders. Furthermore, Monthly data suggests that the peak of remittances was in July/August. So apparently money was brought into the country by visiting migrants. There can be more reasons why Moroccan migrants started to exchange cash Guilders for cash Dirham’s: • lack of trust in the Euro among Moroccan migrants in the Netherlands; • september 11, already discussions in making transactions more strict. Could have led

to an increase in anticipation of additional regulation; • presumably partial effect of money laundering. This exchange of Guilders to Dirham’s was probably already taking place in 2000, because cash transfer was already on a higher level then. This peak in 2001 was also visible from remittances sent from Italy and Germany. For other countries such as Belgium/Luxemburg and Spain this peak was less distinct (see figure below). Both Italy and the Netherlands have the largest increase in remittances in 2001. Both countries also experience a strong decrease after 2001. The increase in 2001 could have been advanced remittances of 2002. This could explain the strong drop. However, remittances from Italy started to grow again, whereas the Netherlands experienced a further decline. The major difference between these two countries is that Italy received new migrants from Morocco with stronger ties to the homeland and thus a higher potential to remit. The Netherlands did not receive many new migrants.


Table IV.01 Remittances sent from selected EU countries to Morocco (in thousands of Euros)

-

100,000

200,000

300,000

400,000

500,000

600,000

1998 1999 2000 2001 2002 2003 2004

Italy

Netherlands

Belgium&LuxemburgGermany

Spain

UK

Switzerland

Denmark


Annex V Results of customer survey

Introduction Within the period 6 July - 1 August 2006, the company Foquz Ethnomarketing has carried out a customer survey. Aim of the survey was to get a better understanding of the senders, their reason for sending remittances and the recipient’s spending of the money. A total of 441 interviews have taken place. Difficulty was that the interviews had to be carried out during the holiday period as many Moroccans already left for holidays. Interviews were only carried out with Moroccan persons above the age of 18 years, living in the Netherlands. Most interviews (81 percent) were carried out on the street.

Table V 01 Place were the interviews took place

Number %

Outside/street 357 81.0%

At respondent at home 25 5.7%

Organisation 7 1.6%

School 4 0.9%

(Tea) restaurant 38 8.6%

Mosque 10 2.3%

Total 441 100.0%

Source: Foquz consumer survey

The interviews were for 52.6 percent carried out in the four large cities (Amsterdam, Rotterdam, The Hague and Utrecht), while the other half was carried out all over the Netherlands in middle-sized cities.

Table V 02 Number of interviewees indicating whether they send money home

Number %

Do not send Money home 190 43.1%

Do send Money home 251 56.9%

Total 441 100.0%


Compared to other recent customer surveys carried out on the subject of Remittances, it was decided to include in this survey also the Moroccans who do not send money to Morocco, since it might be interesting to find about their reasons for not transferring money. About 43.1 percent (190 interviewees) responded that they do not send money, while 56.9 percent answered that they do send money to Morocco. On basis of these results the following confidence intervals are applicable:


• The group sending Money to Morocco: (N=251): between ±1.2 percent and ±6.2 percent;

• The group sending no Money to Morocco: (N-190): between ±1.4 percent and ±7.1 percent.

An overview of the main results of the customer survey is presented in this annex. First, some information will be given about the interviewees in the paragraph ‘Sample’. In the paragraph ‘Results’ the outcomes of the survey are given. In the last paragraph ‘Analysis and Conclusions’ multiple regression analysis between the outcomes are made. Sample Of the interviewed group, 51 percent was in the age group of 18 to 34 years old, the other 49 percent was in the age group of 35 years and older. 58.3 percent was male and 41.7 percent female. About half of the group of respondents was born outside the Netherlands. Most of them (92 percent) lived for 10 years or longer in the Netherlands. 49 percent lived in a household of 3-4 people. 69.7 percent has directly related family members living in Morocco. The highest finished education is mainly MBO (28.8 percent), but also other levels of education are well represented.

Table V 03 Highest finished education

Number %

WO 18 4.1%

HBO 53 12.0%

VWO/HAVO 65 14.7%

MBO 127 28.8%

LBO/VMBO/MAVO 71 16.1%

Primary education/No education 87 19.7%

Don’t know/no answer 20 4.5%

Total 441 100.0%

Source: Foquz consumer survey Most of the interviewees are working (53.7 percent) and earned an average net income between EUR 1,301 and EUR 2,500 per month. If the sample of the interviewees are compared with the total Moroccan migration group in the Netherlands, the composition of the groups have many similarities.


Table V 04 Comparison between the sample and the percentage of Moroccan migrants

Sample of customer survey

(%)

Real percentage of

Moroccan migrants in NL

(%)

Age 18 to 34 years 51% 51.4%85

Age 35 years and older 49% 48.6%

Male 58.3% 52%

Female 41.7% 48%

Born outside NL 50% 52%

Number of people employed, above 18 years 53.7% 64%

Living in the four large cities (Amsterdam,

Rotterdam, The Hague and Utrecht)

52.6% 47%86

Source: Foquz consumer survey and CBS

Results The following answers are given by the group of persons (about 251 persons) who do send money to Morocco. Workers remittances are mainly send to family (51.5 percent) and to a lesser extent to friends (18.6 percent).

Table V 05 Persons/organisations in Morocco to where Money is transferred to

N=441 Number %

Family 227 51.5%

Friends 82 18.6%

Religious organisations 61 13.8%

Other NGO’s 70 15.9%

Business purpose 45 10.2%

Other 5 1.1%


The areas were the money is sent to are particularly Casablanca (13.5 percent), Taza-El Hoceima and in the Taounate region (16.3 percent). The remittances are primarily used for daily expenses, e.g. food (23.1 percent) and health care (16.3 percent).

85 The total number of Moroccans amounts to 199,483 people of which 102,578 people are in the age group 18 to 34 years. 86 The total number of Moroccans amounts to 323,239 of which 151,730 lives in the large cities at 1 January 2006, source

CBS.


Table V 06 What is remittances mostly used for

N=251 Number %

Food 58 23.1%

Clothing 14 5.6%

Health care 41 16.3%

Payment of debts 19 7.6%

Rent 37 14.7%

Electronics and luxury products 9 3.6%

Education cost 16 6.4%

Building or buying a house 20 8.0%

Set up of a company 8 3.2%

Marriage and/or pilgrimage (hajj) 7 2.8%

Visa and emigration cost 7 2.8%

Other 6 2.4%

Do not know/do not want to tell 12 4.8%


In about 66 percent of the cases, the sender of the money decides how the money is transferred. For him/her, it is important that the channel is reliable (39 percent) and fast (25 percent). To a lesser extent (19.5 percent) the costs are important.

Table V 07 Most important factor to send money

N=251 Number %

Low cost 49 19.5%

Fast delivery 62 24.9%

Reliability 98 39.0%

Location to transfer the Money is near my home 6 2.4%

The receiver in Morocco lives near the counter to pick up the money 17 6.8%

In possession of an account at this bank 6 2.4%

Other 13 5.0%


Most recipients (70 percent) have a bank account and remittances are not their only source of income (69 percent). On the question which way money was transferred last year (more answers possible), transfer of money through banks (46.7 percent) and MTOs (43.5 percent) were the main channels used, while carrying it yourself is the main informal way to transfer the money (31.8 percent), see also table V08.


Table V 08 Way to transfer money to Morocco during the last 12 months

Number %

Bank (N=244) 114 46.7%

Money transfer (N=248) 108 43.5%

Call shop, travel agency or other shop (N=242) 7 2.9%

Carry money myself or carried by friends (N=242) 77 31.8%

Bank card or credit card given to others (N=242) 4 1.7%

Mosque (N=242) 34 14.0%

Other way (N=242) 2 0.8%


Mainly the money is transferred through the different channels only once or two to four times a year, see also table V0.9. The average amount transferred by banks and MTO is about EUR 250, while cash carried themselves amounts to about EUR 477. Yearly, in average, about EUR 906 is transferred to Morocco.

Table V 09 Number of times Money is transferred during a year


On basis of the answers mentioned in table V0.9 the following analysis could be made:

Once a year 2 to 4 times

a year

5 to 11

times a year

12 times a

year

More than

12 times a

year

Past 12

month

not/never

Bank (N=244) 15.2% 19.7% 4.1% 6.1% 1.6% 53.3%

Money transfer

(N=248)

12.1% 13.7% 9.3% 5.6% 2.8% 56.5%

Call shop, other

shop (N=242)

1.7% 0.8% 0.4% 0.0% 0.0% 97.1%

Carry cash

ourselves or family

(N=242)

21.1% 7.9% 2.5% 0.4% 0.0% 68.2%

Give bankcard to

others (N=242)

1.2% 0.4% 0.0% 0.0% 0.0% 98.3%

Mosque (N=242) 5.4% 6.6% 1.2% 0.4% 0.4% 86.0%

Other (N=242) 0.8% 0.0% 0.0% 0.0% 0.0% 99.2%

The remittance corridor the Netherlands – Morocco

112

Table V 010 Number of times Money is transferred during a year

Bank MTO Call shop Cash Bank Card Mosque

n/year number Aver.

Amount per

transaction

number Aver.

Amount per

transaction

number Aver.

Amount per

transaction

number Aver.

Amount per

transaction

number Aver.

Amount per

transaction

Number Aver.

Amount per

transaction

Once 37 275 30 276 4 68 51 428 3 833 12 168

2-4 times 48 176 33 123 2 30 19 162 1 0 16 154

5-11 times 10 97 23 121 1

0

6 130 0 0 3 25

12 times 15 107 14 118 0 0 1 100 0 0 1 10

More than

12 times

4 75 7 379 0 0 0 0 0 0 1 250

Turnover of

Channel

Market

Share (%)

Turnover of

Channel

Market

Share (%)

Turnover of

Channel

Market

Share (%)

Turnover of

Channel

Market

Share (%)

Turnover of

Channel

Market

Share (%)

Turnover of

Channel

Market

Share (%)

67,795 29 110,368 47 450 0 38,471 16 2,500 1 14,625 6



On basis of this analysis, the share of each of the channels can be expressed as part of the total turnover of remittances. Around 70 percent of remittances turnover are cash-based, entailing cash handling in both Morocco and the Netherlands. The customer survey indicated that about 47 percent is remitted through MTOs (involving cash transfers on both sides), 16 percent is cash carried by individuals and 6 percent is cash-based transfers through mosques. Given the advanced level of development of the Dutch financial system and the relatively high level of development of the financial sector in Morocco, it is striking to see such a high percentage of cash-based remittances. About 109 of the interviewees indicated that they mostly use the bank channel to transfer remittances. Of this group of people the following answers were given: The most popular bank for remittances is the Postbank followed by the ABN Amro. Banque Populaire du Maroc and Postbank scored highest on the question “satisfied about the cost to be paid”. Most satisfied are the users of Rabobank about the fast transfer of the money. Banque Populaire du Maroc, SNS bank and ABN Amro scored best when it concerns the procedures to follow in order to transfer the money.

Banque Populaire du Maroc

It is remarkable that still some of the interviewees answer that they make use of the transfer services of

Banque Populaire du Maroc as they currently do not offer their services in the Netherlands anymore

(since about one year). Possibly this group used their services till date.

Still most money is transferred through the counter of the bank (57.8 percent), see also table V0.10. Almost in all cases (87.2 percent) all costs (OURS) are paid by the sender.

Table V 0101 Types to transfer Money through the banking channel

N=109 Number %

Counter 63 57.8%

Telephonic transfer 9 8.3%

Internet 15 13.8%

Form 17 15.6%

Do not know/do not want to say 5 4.6%

Total 109 100.0%


Of the total group of persons sending money to Morocco, 93 of the interviewees indicated that they mostly use MTO’s to transfer remittances. Of this group of people the following answers were given: The main MTO channel used by the interviewees of this survey is Western Union. Although GWK (MoneyGram) scored better concerning the cost of the transfer, Western Union scored high concerning the fast delivery of the transfer. A large number is (very) satisfied about the reliability of Western Union. The interviewees are also very satisfied about the procedure in place at Western Union. The sender informs the receiver by telephone that the money is transferred (91.4 percent). Users of MTO services were asked about the difference in costs for transferring money by an MTO and a bank. Most people (48.9 percent) assumed that the costs are equal, 30.4 percent thinks the costs are lower at the MTO.


Table V 0112 Cost of MTO compared to cost to transfer money through the bank

N=92 Number %

Lower 28 30.4%

Equal 45 48.9%

Higher 19 20.7%

Total 92 100.0%

Source: Foquz consumer survey Another issue in the customer survey dealt with is the estimated amount of time to transfer the money through the channel. The majority (about 61 percent) believes that an MTO delivers faster. However, 37 percent of the respondents think that the money is transferred within the same amount of time.

Table V 0123 Time to transfer money through MTO compared to the bank

N=92 Number %

Faster 56 60.9%

Equal 34 37.0%

Slower 2 2.2%

Total 92 100.0%


On the question whether the procedures of transferring money through an MTO are comparable to those of the bank, most interviewees regarded the procedures as easier (42 percent) or equal (53 percent).

Table V 0134 Transfer procedure of money compared between MTO and bank

N=92 Number %

Easier 39 42.4%

Equal 49 53.3%

More complex 4 4.3%

Total 92 100.0%


Summarizing, the interviewees think that the money transferred through MTOs is faster delivered (61 percent) and have the same (53 percent) or easier (43 percent) procedures. About 65.6 percent regard the money transfer through the MTO as equally reliable, about 28 percent assumes that it is more reliable through MTOs. The identification procedures are expected to be the same (64.5 percent) between a bank and MTO. About 122 interviewees indicated that they use (also) other channels to transfer money. Other channels used are cash carried by friends and family, bank card or credit card given to others, sending money through the mosque, NGO’s, call shops or by post/courier. About 190 interviewees indicated that they do not send money to Morocco. Reason for this is because:


• Sender does not possess any money to send (28.7 percent); • Someone else from the household sends money (40 percent); • The recipients in Morocco do not need money (17.4 percent); • Do not know (10.5 percent). Analysis and conclusions87 The objective of this additional and tentative data analysis is to gain more insight into the determinants of remittance behaviour of the surveyed individuals. The analysis has been split into two parts: An analysis of the factors determining the propensity of respondents to remit money to Morocco was carried out. Within the group of remitters, an analysis of the determinants of remittance behaviour was conducted, both with regard to (a) the inclination to remit money and (b) the preferred remittance channels. The following paragraphs contain a summary of the results, The following conclusions can be drawn from the analysis: • There is no clear association between being born in the Netherlands and the

inclination to remit. Based on the answers of the customer survey, this seems to refute the hypothesis that 2nd generation migrants would be less inclined to remit.

Table V 0145 Cross tabulation between born in the Netherlands and remittances

BORNNED * REMIT Crosstabulation

52 59 11146.8% 53.2% 100.0%

139 191 33042.1% 57.9% 100.0%

191 250 44143.3% 56.7% 100.0%

Count% within BORNNEDCount% within BORNNEDCount% within BORNNED

.00

1.00

BORNNED

Total

.00 1.00REMIT

Total

Explanation: 0=no, 1=yes • Unsurprisingly, having direct family members in Morocco is positively associated to

the remitting money: The inclination to remit is double among persons with direct family member in Morocco.

87 We are thankful for the contribution of Hein de Haas for analysing the outcomes of the survey and drawing conclusions.


Table V 0156 Cross tabulation close family living in Morocco and remittances

FAMMAROC * REMIT Crosstabulation

89 44 13366.9% 33.1% 100.0%

102 206 30833.1% 66.9% 100.0%

191 250 44143.3% 56.7% 100.0%

Count% within FAMMAROCCount% within FAMMAROCCount% within FAMMAROC

.00

1.00

FAMMAROC

Total

.00 1.00REMIT

Total

Explanation: 0=no, 1=yes

• More intriguing is the result that occupational status and income do not seem to have

a significant effect on the odds of remitting. A vocational or higher educational background seems to be a positive factor in the inclination to remit money as compared to the “HAVO/VWO” category. Other variables that are positively associated to sending remittances are age, sex and education.

Table V 0167 Cross tabulation for Education and remittances

EDU * REMIT Crosstabulation

37 50 8742.5% 57.5% 100.0%

27 44 7138.0% 62.0% 100.0%

52 75 12740.9% 59.1% 100.0%

39 26 6560.0% 40.0% 100.0%

20 33 5337.7% 62.3% 100.0%

6 12 1833.3% 66.7% 100.0%

181 240 42143.0% 57.0% 100.0%

Count% within EDUCount% within EDUCount% within EDUCount% within EDUCount% within EDUCount% within EDUCount% within EDU

no education orprimary education

LBO/VMBO/MAVO

MBO

HAVO/VWO

HBO

WO

EDU

Total

.00 1.00REMIT

Total

Explanation: 0=no, 1=yes

• Unsurprisingly, there is a very strong and significantly positive effect on using the

bank channel if the recipient in Morocco has a bank account.88 • More intriguing are the significant results for occupational status. Using

housewives/men as reference category, remitting students as well as unemployed, disabled (‘arbeidsongeschikte’) and working respondents are more likely to remit

88 Although this variable is likely to be endogenous.


through banks. This is likely to be related to the fact that these categories are more likely to have (access to) bank accounts (a variable which was not included in this survey) than housewives/men.

Table V 0178 The use of the channels for the different groups (logistic regression)

Dependent variable

Explanatory variables:

Estimated odds ratio

Bank

MTO Cash

(Constant)

Background

Age .980 1.115 .992

SQ Age 1.000 .999 1.000

Sex 2.128* .745 .408**

Born in the Netherlands 2.433* .388** .576

Family in Morocco 1.034 .931 .674

Has family in Morocco other

sources of income

.917 .899 1.084

Has family in Morocco a

banking account

5.083*** .638 .285***

Education

No education or primary

education

reference reference reference

LBO/VMBO/MAVO .992 .441 1.667

MBO 2.843 .684 1.275

HAVO/VWO 1.116 .645 2.376

HBO 1.679 .410 1.227

WO 3.571 .159 1.382

Occupation

Housewife/man or other reference reference reference

Student or enrolled at school 10.743** .240 .483

Retirement or pre-retirement 4.104 .904 .061

Unemployed 10.670** .512 .183

Unable to work 5.635* .604 .521

Working 3.738* .556 .225**

Income

< € 460 reference reference reference

€ 460-850 .592 .182 1.841

€ 850-1300 2.358 .243 4.374

€ 1300-1750 2.591 .739 12.278*

€ 1750-2500 1.530 .784 3.837


€ 2500-3500 3.433 .299 6.101

> € 3500 2.372 .102** 2.490

Most important issues

Low costs 1.553 4.485*** .554

Speed .236** 8.347*** .716

Reliability .839 3.592** .435

χ2 5.102 8.821 2.831

N 192 196 190

Note *** significant at 1 percent, ** significant at 5 percent, * significant at 10 percent.

• The analysis the determinants of the odds of remitting money among remitting people

(through estimating a logistic regression model, see table V 0.17) through MTOs showed that age, having family living in Morocco and education have no clear effect on the odds of choosing for the specific channel of MTOs. It was more intriguing to find that born in the Netherlands has a negative effect on the choice for MTOs. This is possibly related to the likelihood that second generation ‘migrants’ are financially more literate89. Although educated people seem to remit less often through MTOs, the effects are insignificant. Surprisingly, there is no significant effect between the ‘recipient having a bank account in Morocco’ variable on MTO use, while its effect on the Bank channels is strongly positive. Low cost, reliability and particularly speed have a very positive effect on the choice for the MTO channel. This seems to indicate that the MTOs have filled a specific niche in the market, responding to a need for ‘fast money’ transfers, but which is not significantly affected by the fact whether recipients have a bank account.

• Among the remitting respondents, women, people born in the Netherlands and non-

housemen/wives clearly prefer remitting through banks instead of through MTOs or cash. They seem to adopt a more ‘Dutch’ preference for regular banking services.

• Educated respondents and those living in households with a substantial income seem

to prefer remitting through banks, cash (mostly men) and not through MTOs. • MTOs seem favourite among the first generation, relatively low educated inactive

(not working or retired) men living in low income households.

89 This seems to be confirmed by the positive effect of BORNNED on bank transfers, but this effect is non-significant.

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