“International Forum on Remittances 2007” UN IFAD and IDB MIF October 18, 2007 Washington, DC

1. Empowering E-Globalization at the Base of the Pyramid: Linking New Technologies with Remittances, Microfinance and Beyound Dr. Raúl Hinojosa-Ojeda UCLA NAID Center “International Forum on Remittances 2007” UN IFAD and IDB MIF October 18, 2007 Washington, DC

2. Billion In Motion at the Base of the Pyramid: Rural-Urban Migration Greater than North-South • Remittances as Tip of the BOP Iceberg: From “Dead Cash” Remittances To Empowered e-Transactions • From Global Pyramids to Global Diamonds: Technologies, Micro Finance and Securitization • Measuring Impacts from “OaxaCalifornia” -Legalization: A Strong “Win-Win” -Remittance Empowerment => 10x more -Capacity Problems in Remittance Receiving MFIs

3. The Globalization Challenge

5. “Developing” “Developed”

6. Global Migrant Population Distribution, stock, by Major Region1965-1994, 2002 Projection

7. The Entry Market to Unbanked ServicesGlobal Remittances 2000-2008 (Billions) Developing Nations Source: Banco de Mexico

8. INTERNATIONAL MIGRANT STOCK IS EQUALLY DIVIDED INTO THREE TYPES 53 million North North 62 million 14 million 61 million South South

9. Labour force projection for developed countries with and without migration With migration 100 million Without migration

10. Massive Rural to Urban ShiftDeveloping > Global

11. Global Population 6.4 => 8.1 bn Urban 4.9 bn Rural 3.3 bn Urban w/o Migration Rural to Urban And Internal Migration 1. 5 bn Urban 3.1 bn Rural 3.2 bn 2005 2030

12. Pakistan Remittances by ProvincePercentage of Household Income

13. Pakistan Remittances by ProvinceForeign/Domestic and Urban/Rural (% HH Y)

14. Total Income of Pueblos: Local, National and Transnational

15. Global Base of the Pyramid Market

16. Global Transnationalism

17. The Transnational BOPbetween Developed and Developing Countries

18. N. American Transnationalism

19. …Remittances are only the tip of the Transnational Iceberg 10% Cash Remittance 90% Other Cash Transactions Telecommunication, Insurance, Housing, Health-care, Transportation/Travel, Education/Training • Huge remittance flows link the Global BOP • 10 Trillion in Income, x 1000s Transactions • 10 Trillion in “Dead Capital Assets”

20. Sizing the Global BOP Payments Market • Huge Expenditures -- over 5 trillion per year • Even Bigger total economic contribution –over 10 trillion in Value Added per year • “Dead Assets” of over 10 trillion • Total transactions of the BOP 4 billion people – over 12 trillion transactions a year, undocumented and unleveraged

21. 3. From Vicious to Virtuous Cycles of Transnational Development: From: Cash Remittances, local Asset Inflation & External Dependence => Enabled by Global Dysfunctional Industries To: E-Remittances, Micro-Banking and Productive Projects => A “Clintonian Industrial Revolution”

22. Alternative Scenarios: From Negative to Positive Causality Micro Credit

23. Vicious Cycles = Widening Base of Pyramids Global Stagnation

24. Virtuous Cycles =Formation of Diamonds Shrinking Bottom of the Pyramid

25. Central problem: dysfunctional dis-organization across industries -retail distribution networks -micro-finance -commercial banking -card processing/networks -remittances -mobile telco-operators -mobile OEMs

26. Forging a BOP-Led Convergence of Telco, Banking & Micro-Finance • Revolutionary “Leapfrog” Opportunity • From the “prepaid phone card” to the “prepaid everything card” • Cost busting platform for financial delivery • Anti-Churning VA for pre-paid telecom • Cross leveraging of multi-level marketing networks • Data Mining, Scoring and Securitization Bonanza

27. Money Transfer Cards’ Share of U.S. Global Remittances Takes OffAite Group, 2005

28. World Mobile Phone Subscribers: As Growth Slows, SF Mexico Provides More Value Added Products

29. Mobile Phone Penetration – Latin America

30. Electronic Remittances and Payments Worldwide Agents, Credit Unions, Banks & ATM/POS Branchless Agents, Credit Unions, Banks & ATM/POS United States Worldwide Telephony Telephony Dollar Stored Value Card Peso Stored Value Card Direct Deposit Payroll Direct Deposit Payroll Pre-paid MasterCard Pre-paid MasterCard Other Products & Services Other Products & Services Imagine A Integrated World of Products & Services for the BOP

31. Global Platform for Micro-Finance Affiliated Banks & Credit Unions Global Load Locations Central Processing IP-based System Local Telco Affiliated Banks & Micro Finance Institutions NB Secured Internet Local Telco Pay-Out Locations Worldwide

32. Grameen e-Remittances to Grameen Phone Ladies (3) Worker Sends e-Remittance by Free Phone Call $ $ (1) Worker Takes Cash To Merchant (4) Grameen Phone Lady Unloads Cash From SFCard to Villager By Free Phone Call (2) Merchant Loads Cash to SFCard by Free Phone Call

33. Micro Credit e-delivery and e-payments via Grameen- Card (3) Grameen Member uses Funds for Investment (5) Grameen Automatically Withdraws funds From SFBanCard On Sundays (1) Grameen Delivers Credit to SFBanCard $ $ (2) Member Withdraws Funds via: -Merchant or Phone Lady -GB Branch -POS/ATM (4) Member Load Funds to SFBanCard via: -Merchant or Phone Lady -GB Branch -POS/ATM

34. 12 GRAMAEEN PILIOT EVALUATION: CUT OPERATING COSTS BY 43% 2005, Thousand Taka per Branch • Collection Cost (C)1 • Income L: 100% = 14,294 • -17% • 321 • Expense • 643 • 443 Initial Portfolio (L) 100 • Current • Pilot Non-performing loans (N) • 7 • Distribution Cost (D)1 • -17% • 135 Loan Interest (Il) • 19 • 159 • 317 • 217 Savings Interest (Is) • 9 • Pilot • Current • Opportunity Cost (R)1 Additional Investment Opty • 12 • -20% • 10% operational costs vs. 2% for traditional retail banks Opportunity Cost (R) • 1 • 153 • 123 Collection Cost (C) • 6 • Total Operating Cost1 Distribution Cost (D) • 3 • -17% • 561 Final Portfolio (L + π) 105 • 603 πg = 859 • 960 • 660 5% • Pilot • Current 1 Reflects increased capital expenditures of 70,000 Taka per year

35. Advance to Two-Way Cash Flow and Real-Time Payments (5) Cash Reload To Cards (2) Less Cash to Bank (1) Cash for Phone Minutes (3) More Real Time Transfers (4) Cash Withdrawals

36. Lessons from the “OaxaCalifornia” Communities and Families Project -Legalization: A Strong “Win-Win” -Remittance Empowerment => 10x more -Capacity Problems in Remittance Receiving MFIs

37. Global CGE Impacts of Trade versus Migration Liberalization

38. Alternative Scenarios: NAFTA CGE Static Impacts of Trade versus Migration Liberalization

41. Potential Remittance-Investment Multiplier Effects

42. Alternative Futures

43. OaxaCalifornia Transnationalism California Oaxaca OaxUS Oax/Cal Total Population (millions) 34.48 3.438 1.05 0.6 GDP (billion of 2000 US$) 1,344.0 6.7 29.5 14.5 GDP/per capita (2000 US$) 38,996 1,970 29,500 28,500 Migration Foreign Born 8.8m 900 k 525 k First Generation 12.8m 150 K 75 K Mexican Origin 11.2m Foreign Born 4.1m Remittances (billion US$) 30bn 480m 275m Source: US Census, UN, WB, IMO, IMF, MIF

44. Total Income of Pueblos: Local, National and Transnational

45. Abasolo Santa Ana del Valle San Juan Teitipac Tlacolula deMatamoros San Pablo Macuiltianguis San Mateo Cajonos 1980 Very High High Very High High High High 1990 High High Very High Low Medium High 1995 High High Very High Medium Medium Medium 2000 High High Very High Very High Very High Very High Degree of Marginalization by Municipality: 1980-2000 Source: CONAPO. 2000

46. Potential Remittance-Investment Multiplier Effects

47. Modelos de Multiplicadores(Pesos y cambios porcentuales respecto a la base)

48. Modelos de Multiplicadores(Pesos y cambios porcentuales respecto a la base)

49. Modelos de Multiplicadores(Pesos y cambios porcentuales respecto a la base)

50. Modelos de Multiplicadores(Pesos y cambios porcentuales respecto a la base)