Remittance Market Research Articles

Remittances in India: Facts & Issues

This paper provides a fact sheet of domestic and international remittances at the State level and across household characteristics and discusses the extent of remittance dependency, it’s growth since the 1990’s, the different uses of remittances across States, the possible impact on source region inequality and its importance in enhancing ‘financial inclusion.’ Data from the 49th and 64th round migration related National Sample Surveys, the Reserve Bank of India and the 2001 Census are used for the analysis. Some of the findings are: (a) The domestic remittance market was estimated to be $10 billion in 2007-08, 60% being Inter-State transfers and 80% directed towards rural households (b) Domestic remittances financed over 30% of household consumption expenditure in remittance receiving households that formed nearly 10% of rural India (c) Domestic remittance dependency was high in Bihar, Uttar Pradesh and Rajasthan and has generally grown since the 1990s, most notably in Orissa. (d) The top 25% households received around 50% of domestic remittances suggesting that remittances could be increasing source region inequality (e) 70% of domestic remittances were estimated to be channelled in the informal sector as against 25% in China revealing a huge opportunity for financial institutions to serve migrant workers (f) Kerala, Punjab and Goa accounted for over 40% of international remittance flows and are among the top remittance-dependent economies of the world.

Exploring the interactive effects of remittances, financial development and ICT in Sub-Saharan Africa: an ARDL bounds approach

In this paper, using the ARDL bounds approach and augmented Solow framework, we explore the impacts of capital inflows (remittances, foreign direct investment and overseas development assistance) and financial-technology inclusion viz. remittance on per worker income in Sub-Saharan Africa (SSA) for the periods 1970-2010. The results show that growth in the region is lead by capital productivity. Although information and communications technology (ICT) per se has a negative effect on income, when ICT is associated with financial development and remittances, the effects are positive in both short run and long run. Thus, there is a need for greater financial and technology inclusion - linking remittance industry with financial and ICT services. Overseas development assistance (ODA) shows a negative elasticity while FDI and remittances per se is negative and not statistically significant. SSA's predominantly ruralised economic structure further calls for greater accessibility, affordability and inclusivity of financial and ICT services linked to remittances market, development of critical, infrastructures, key sector reforms, and well managed and assessed ODA and FDI inflows for sustainable pro-growth development.

Remittances in India: Facts and Issues

This paper provides a fact sheet of domestic and international remittances at the State level and across household characteristics and discusses the extent of remittance dependency, it’s growth since the 1990’s, the different uses of remittances across States, the possible impact on source region inequality and its importance in enhancing ‘financial inclusion.’ Data from the 49th and 64th round migration related National Sample Surveys, the Reserve Bank of India and the 2001 Census are used for the analysis. Some of the findings are: (a) The domestic remittance market was estimated to be $10 billion in 2007-08, 60% being Inter-State transfers and 80% directed towards rural households (b) Domestic remittances financed over 30% of household consumption expenditure in remittance receiving households that formed nearly 10% of rural India (c) Domestic remittance dependency was high in Bihar, Uttar Pradesh and Rajasthan and has generally grown since the 1990s, most notably in Orissa. (d) The top 25% households received around 50% of domestic remittances suggesting that remittances could be increasing source region inequality (e) 70% of domestic remittances were estimated to be channeled in the informal sector as against 25% in China revealing a huge opportunity for financial institutions to serve migrant workers (f) Kerala, Punjab and Goa accounted for over 40% of international remittance flows and are among the top remittance-dependent economies of the world.

Microfinance institutions on the remittances market: do money transfer activities generate deposits?

Microfinance institutions (MFIs) are expected to succeed in transforming migrants’ remittances into deposits. Based on an original database including 114 MFIs from Africa, South Asia, Latin America and the Caribbean, and East Asia and the Pacific, this paper empirically examines the occurrence of this expected success. It tests whether MFIs operating on the remittances market capture more deposits than others. The results exhibit a positive and significant effect of the money transfer activity on the amounts of deposits in MFIs.

What Explains the Price of Remittances? An Examination Across 119 Country Corridors

Remittances are a substantial source of external financing for developing countries that influence many aspects of their development. Though research has shown that remittances are both expensive and price sensitive, little is known about what explains their price. Newly gathered data across 119 country pairs or corridors are used to explore the factors associated with the price of remittances. Corridors with larger numbers of migrants and more competition among providers are found to exhibit lower prices for remittances, when average prices across all types of remittance service providers are considered. Corridors with lower barriers to access banking services and broader regulation of remittance service providers also have lower prices. Remittance prices are higher in richer corridors and in corridors with greater bank participation in the remittance market. Few significant differences emerge when results are compared across banks and, separately, across money transfer operators. However, estimations for Western Union, a leading player in the remittances business, suggest that its prices are less sensitive to competition.

Implication des IMF sur le marché des remittances. État des lieux et déterminants

Résumé L’entrée sur le marché des transferts de fonds, les remittances, devrait permettre aux institutions de microfinance (IMF) de réaliser leur double objectif, social et financier, et contribuer à augmenter l’impact économique des remittances dans les pays destinataires. Dans cet article, nous évaluons l’implication des IMF d’Amérique latine et des Caraïbes sur le marché des remittances à partir des données de la base de données du Mix Market, consultée en octobre 2008. Nous essayons ensuite d’identifier les facteurs macroéconomiques qui peuvent avoir une influence sur ce niveau d’implication. Premièrement, nous trouvons que seul un tiers des IMF de notre échantillon est opérationnel sur le marché des remittances. Deuxièmement, nous trouvons que ni le poids relatif des flux de remittances vers les économies des pays destinataires, ni la structure concurrentielle du marché ne semblent avoir une grande influence sur le niveau d’implication des IMF sur le marché des remittances. Le déterminant principal de cette implication semble être le niveau de développement du secteur de la microfinance, exprimé par le pourcentage de la population servie (ou outreach). Cela confirme l’hypothèse selon laquelle les IMF opérant sur le marché des remittances répondent à un besoin de diversification, une fois que les activités traditionnelles (le crédit et l’épargne) sont bien établies et qu’apparaissent de nouveaux besoins de sources de financements et de produits financiers (de la part des clients). Classification JEL – G21, O15, O16, O17.

New delivery channels for remittances: Where do the opportunities lie? How will new technologies change the face of this rapidly expanding market?

This paper explores one of the areas that is attracting the highest level of interest in the remittances and payments market: the potential for new technologies to change the structure of the industry, and the challenges and opportunities that this presents. The paper places the current development in context by explaining just why remittances are important and why they are attracting the interest of a variety of businesses. It progresses to focus on the needs of the consumer and compares those with the needs of businesses that wish to operate in the remittances space. A gap analysis helps to identify where technology can provide solutions. The paper then looks in some detail at three main technology offerings: online, prepaid cards and mobile. It relates current market experience and case studies against the needs of consumers and reaches a number of conclusions around each option. The paper shows that each technology option has a number of key areas that will have to be addressed before their use by consumers becomes widespread. The paper concludes that, despite the widespread attraction of new technologies to address some of the inefficiencies of the remittance market, they do not spell the end of cash-to-cash remittances, and new entrants would do well to try to understand why the existing remittance companies have managed to dominate the market at the expense of banks and other types of providers.

Payment systems in India: Current challenges and opportunities

This paper discusses the challenges and opportunities present in the SEPA project, in reference to a Financial Times sponsored conference on `Payments Transformation'. It suggests a review of the Indian payments markets to pick up possible principles for outlining policies, and shares key developments in the Indian payments markets which has been key to the growth in the Indian remittances market. Possible trends in the Indian market which can drive growth in the remittances market, such as financial inclusion, payment solutions and low-cost access options, are also highlighted. The implications of these trends are taken forward to summarise certain principles in pricing, outsourcing and open architecture which can be studied by the European Payments Council to take advantage of key demographic shifts in the labour markets and create the environment for a new horizon in consumer remittance payments.

Banks, Remittances and Financial Deepening in Receiving Countries: A Model

A remarkable fact of the mushrooming remittances market is the absence of commercial banks as relevant players. Furthermore, remittances have been identified as a potential catalyst for the financial deepening of receiving countries through higher access to banking services by migrants' families. Building upon these features, this paper sets up a two-period financial model of remittances without uncertainty. The formulation acknowledges, on the one hand, the altruism component of remittances sent by migrants to their families and, on the other hand, the dominant position of Money Transfer Operators (MTO's) due to migrants' mistrust to banks, which hinders the access of banks to the market. Altruism compounded with a non-competitive market allows MTO's to set excessively high remittance fees and to attain monopolistic rents. The model shows that banks can challenge this position thanks to their role as providers of remunerated saving and credit, which enables them to overcome the competitive disadvantage derived by migrants' mistrust. Notwithstanding this, the main positive impact of banks' entry is attained through higher competition, not through the provision of financial services. All in all, the entry of banks reduces the fees and increases the level of remittances, allows an optimal consumption smoothing and improves the welfare of migrants and their families, although it also increases the volatility of remittances.