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Remittances: characteristics and development perspective

Remittances: characteristics and development perspective. Judith van Doorn Social Finance Programme, ILO www.ilo.org/socialfinance vandoorn@ilo.org. What’s next……. Remittances and the ILO ILO field studies - characteristics - development issues

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Remittances: characteristics and development perspective

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  1. Remittances: characteristics and development perspective Judith van DoornSocial Finance Programme, ILO www.ilo.org/socialfinancevandoorn@ilo.org

  2. What’s next…… • Remittances and the ILO • ILO field studies- characteristics- development issues • Suggested future work areas

  3. Remittances and the ILO ILO Labour Standards migrant workers have the right to transfer (part of) their earnings and savingsthrough their preferred channel; Migration – Labour Conference 2004 Access to finance - market-conform, and incentives-based- partnerships

  4. Remittances and the ILO Activities • Platforms • Field studies - B’desh, Nepal, Senegal • Pilot projects ….. (next step)

  5. Volume of remittancesBangladesh: $ 1.8 billionNepal: > $ 1 billion Senegal: $ 300 million Informal transfers are huge….. Characteristics

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

  7. Remittances as % of recipients’ income Bangladesh: > 50% Senegal: up to 90%... Characteristics

  8. Characteristics Use of remittances Top 5: Consumption Land Housing School fees Collective investments (food depots, mosques, schools, health centres)(Nepal – India: savings and credit associations)

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

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

  11. Policies and regulation NepalCentral Bank encourages establishment of private operators. Formalising hundi SenegalBanking law only allows banks and regulated institutions to engage in int’l money transfers. Inhibits the establishment of private operators. Development

  12. Policies and regulation Bangladesh Government encourages B’deshi banks to open correspondent relationships with financial institutions abroad. Remittances are tax free Development

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

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

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

  16. Remittances: characteristics and development perspective Judith van DoornSocial Finance Programme, ILO www.ilo.org/socialfinancevandoorn@ilo.org

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