UMM Worhsop Frankfort - Dominique Villeneuve

04/07/2013

at the Frankfurt School of

Finance & Management

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WELCOME to the 10th

“University Meets Microfinance”

Workshop

Thursday, July 4th 14:30 – 16:00

Introductory Presentation on Remittances

Dominique Villeneuve, PlaNet Finance

Section I – General overview

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Huge and still growing volumes… … but be careful with statistics Some important characteristics

Corridors Providers Migrants expectations Migrants behaviour

Section II – Main issues

Section III – Existing solutions

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Definition

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Remittances are, roughly speaking, defined as the money flows that immigrant workers send home to their relatives.

International migrant stock by origin and destination 1990- 2010 Source United Nations Department of Economic and Social Affairs

International migration is impacting more than 200 million people in the world (1/3 from North to South and 1/3 from South to South)

In milions

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Huge and still growing volumes…

According to the World Bank, officially recorded remittance flows to developing countries reached an estimated $401 billion in 2012, growing by 5.3 percent since 2011. Remittance flows are expected to grow at an annual rate of 8.8 percent on average between 2013-2015 to reach about $515 billion in 2015.

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Huge and still growing volumes…

Total 401 billion US dollars ; source World Bank

Geographical repartition

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… but be careful with statistics

Source Amount

Banque de France 2004 : remittances France – Algeria 283 million euros

Evaluation Ecorys study 1 500 million euros

Statistics World Bank : inbound remittances 2007 2 906 million US $

Statistics Rapport co-développement 2003 remittances

France Algérie 3 150 million euros

Statistics IFAD : inbound remittances 2006 5 399 million US $

Example inbound remittances : Algeria

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Example : outbound remittances Switzerland 2010

Population : source office des migrations

Outbound remittances : source Worldbank

… but be careful with statistics

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A key factors : Corridors

Source : The migrant expectations for remittances in the Euro-Mediterranean area ; Study conducted by PlaNet Finance 2009

Morocco Algeria Tunisia

Turkey

Spain

France

Italy

Egypt

Libya

Albania

Greece

Example : stock of Mediterranean migrants in Southern Europe

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Corridors are key

factors to explain

remittances

dynamics

Stock of migrants,

status of banking

system in origin

countries, etc…vary

from one corridor to

another

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In Europe, there exists a multiplication of corridors

Source : demo.istat.itc Source :INSEE

Total : 4 179 000

Source “International Migration and the United

Kingdom, 2010.” Report of the United Kingdom

SOPEMI

Stocks of migrants repartition

in Europe

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Some important characteristics : providers

Individuals Hawala Cash to Cash Account to Cash Account to Account

Informal

Money Transfer Organizations (MTOs)

Banks

Posts

MFIs

>

> 80 % of formal flows

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Some important characteristics : providers by corridors

Example : Corridors France vs Morocco, Senegal,Mali & Comoros Source : Bank African of Development

Morocco

Senegal

Mali

Comoros

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Some important characteristics : migrants expectations


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Some important characteristics : migrants behaviour


Cost driven Is looking for the less expensive service Very sensitive to fees Women are more sensitive to costs

Convenience driven Is looking for a cheap and easy-to-use service Sensitive to the opening hours

Habit driven Uses always the same service by habit Is very sensitive to the employee that he used to work with Prefers confidence and someone speaking in his language

Community driven Prefers the informal channels Has more confidence on the people he knows Lack of real other choice than informal

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Formal vs informal Prices The last mile What for ?

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Informal vs formal

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Main reasons for informal

• Costs • Existence of a black market for the exchange rate of the currency • No tax records • Weakness of the banking system of the migrants country of origin

Volumes

Surveys of migrants and remittances recipients and other secondary sources suggest that informal remittances flows, which are not included in the IMF estimation, could be equal to or exceed official figures for Sub-Saharan Africa (Page and Plaza 2006; IFAD 2009). Central banks in some African countries, such as Uganda, are making efforts to estimate these informal flows—through, for example, foreign exchange transactions data and remittances beneficiaries surveys—but these efforts appear to be limited to a few countries.

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Informal vs formal

A global trend towards more formal remittances

Example : Mali According BCEAO statistics, formal inbound flows in Mali have been twice as much important for a three-year period from 80 billion in 2005 FCFA to 180 billion in 2008. Meantime, the stock of migrants has just slightly changed. This would signify that informal flows share fell from 73 % in 2005 to 42% in 2008 Source Etude de capitalisation des initiatives et mécanismes en matière de transferts de fonds au Mal 2010 Frédéric Ponsot Bruno Obegi

Benefits from more formal remittances

(1) as bank deposits from remittances increase, banks are able to make more loans (2) remittances receivers who use banks can gain access to other financial products and services (3) banks that provide remittances transfer services are able to “reach out” to unbanked recipients and

those with limited financial intermediation (Aggarwal et al, 2006). Also, in economies where the financial system is underdeveloped, remittances made through official channels can help alleviate credit constraints and promote growth (Giuliano and Ruiz-Arranz, 2006).

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Costs of remittances remain quite high

Trends in Remittances Prices Worldwide

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Commitments towards a decrease of remittances cost face tough resistance

5 x 5 Commitment [#77] “We will work to reduce the average cost of transferring remittances from 10 percent to 5 percent by 2014, contributing to release an additional 15 billion USD per year for recipient families.” G20 Summit Document, November 2008

According to World Bank, progress towards reducing the cost of sending remittances have paused in 2012.

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The last mile

As mentioned previously, proximity with the recipient is the most important factor for migrants to select the remittances channel

Rural areas represent a large part of remittances recipients : in Africa, for instance IFAD estimates that 30 to 40 percent of

remittances are going to underserved rural areas

The most successful solutions will be those able to reach easily « the last mile »

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What for ?

The issue of the use of remittances is a very sensitive question because it handles with private money and no commitment has to be addressed to the migrants for the way their families use their remittances

The use of remittances will depend mostly on : - Generation of migrants (1st, 2nd,…) - Age of migrants - Country of origin, etc

Financial literacy has been pointed out to be crucial to help the migrants and their families for using remittances in the most appropriate way for them. Some remarkable works have been done in this sense by GIZ and ILO

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What for ?

Example : Repartition according to the use of remittances from France in 4 corridors

Family help Housing project

Investments

Source : African Bank of Development

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Suggestions made by AFD- African Bank of Development PlaNet Finance approach

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Suggestions made by AFD- African Bank of Development

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Study made by Epargne sans Frontieres for Agence Française de Développement and African Bank of Development

Four main preconisations

Enhancement of existing offers

Promotion of « bi-bancarization »

Special care for productive investment

Use of new technologies

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Enhancement of existing offers

As the « last mile » is always a tough issue, all the solutions enabling to reach the final recipient closer to his home will enhance the existing solutions

Either with « technological tools » : cards,..

Or by the recruitment of new agents : MFIs

example : The Postepay Gift card issued by Poste Italiane can be used to pay for purchases in Italy and abroad wherever MasterCard® is accepted. The card is issued instantly at the time of purchase and can be loaded with flexible denominations of up to E500.

example : The MFIs have developed very large networks close to their clients. Depending their size and the regulatory aspects of their country they can play an active role. For instance experiment of PAMECAS in Senegal with MTO Money Express for the corridor Italy Senegal which developed innovative financial services for migrants and their families

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Promotion of bi-bancarization

Services of bi-bancarization aim to enable the possibility for money senders to have access to a whole range of financial services in their country of origin

Some examples : same bank Attijariwafa Bank Agreement between Banks Attijariwafa and la Banque Postale

Key question : the existence of bank accounts for non-residents : for instance, there were some problems in Senegal about this issue

Some success stories especially for the corridor between Spain and Ecuador but some limits for the obtention of a credit in the North for a project in the South

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All the steps are crucial

Detection

Set up of the project and training

Assistance for the financement

Orientation – Advice for the entrepreneur

Assistance for the realization of the project

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Migrants Remittances Investment

Local Businesses

Salaries Employment MFIs

MFIs resolve the information and institutional constraints facing migrants by:

Developing and offering a financial product for migrants to invest in

Diversifying the migrants’ money across many borrowers

Providing monitoring services to the migrant-investors

Information & financial services

Monitoring

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Use of new technologies

Channel : mobile phone - examples

Channel : internet - examples

Type Companies Sending

countries Receiving countries

Product type

MTO + Telco Western Union +

Orascom Middle East, Asia,

Europe

Algeria, Tunisia, Pakistan, Egypt,

Bangladesh, Cash to Mobile

Telco Orange Côte d’Ivoire Côte d’Ivoire Mobile to Mobile

Type Companies Sending

countries Receiving countries

Product type

Bank + posts La Banque Postale France 22 countries Account to cash

Bank Barclays UK India Account to account

Source : Remittances - how to shorten the long way home Gera Voorrips ING

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PlaNet Finance approach

A comprehensive approach

Promote cheap and convenient remittances by building adequate partnerships

Foster the creation of new financial products

fitted to the needs of the migrants

and their families

Train migrants and their families on financial literacy

and entrepreneurship

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Remittances Building Linkage for Development of Migrants and their Families through Microfinance Services

Establish 6 partnerships between remittance service providers and microfinance institutions.

Train 700 migrants and their families on financial literacy and entrepreneurship.

Assist MFIs to develop 3 products that help 500 clients per MFI save $100 each, and 250 clients per MFI access credit.

Objective/targets

I. Build partnerships

II. Train migrants and their family members

III. Help MFIs offer migrant-oriented products

Component

5 partnerships between remittance service providers and microfinance institutions.

Train 1598 migrants and their families on financial literacy and entrepreneurship.

• 15 products developed • 2571 clients have saved $67 each on

average (thru May) • 2199 clients borrowed $552 on

average (total $1,300,000) • 1230 clients have life insurance

Achievements

Target group and area: Filipino migrants’ organizations in Spain, Italy, and Dubai; and families in the Philippines of Filipino migrants living in Spain, Italy and Dubai.

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PlaNet Finance – UPU project in Western and Central Africa

Leader Partners Associate

PlaNet Finance Union Postale Universelle

La Poste de Côte d’Ivoire

Campost

La Poste du Mali

SONAPOST

Le Groupe La Poste

Improve the quality of service of International Electronic Money Order by checking the good implementation of procedures

Provide financial literacy to migrant populations and their families in the target countries (sending and receiving)

Extend the access by creating new points of contact in postal branches or with local shopkeepers Develop a new offer of financial services for the partnering Posts fitted to the migrants needs Organize and coordinate regional workshops in order to mutualize the results with neighboring

countries

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http://www.laposte.ml/

Contacts :

Dominique Villeneuve

PlaNet Finance [email protected]

Thanks !

mailto:[email protected]

UMM Worhsop Frankfort - Dominique Villeneuve

Technology

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