Realizing post2015 aspirations for migrants and migration 1617 October 2014 REDUCING MIGRATION COSTS MANUEL OROZCO INTERAMERICAN DIALOGUE Despite that technology social values and material resources have increasingly spread out across nations foreign labor mobility continues ID: 499936
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Slide1
Technical Working Level Meeting
Realizing post-2015 aspirations for migrants and migration
(16-17 October 2014)
REDUCING MIGRATION COSTS
MANUEL OROZCO
INTER-AMERICAN DIALOGUESlide2
Despite
that technology, social values and material resources have increasingly spread out across nations, foreign labor mobility continues to face inequities unique to its condition. Development, a condition that brings opportunities of prosperity for all, continues to lack in the context of international labor migration. This reality is even more significant given the fact that there are intersecting spaces where migration connects with development, either during departure, at the time of migration or upon return.Take the migration process, immigrants and families participate in a value chain that has important implications for development because they promote prosperity through market expansion, access, or asset building (through remittances). Slide3
Engagement
Immigrant economic
activity
Host country
IntermediationHome country Activity associated to …Family remittancesThe decision to remit a share of the workers’ incomethe work of remittance service providers Effect of remittances on family household economicsEntrepreneurship the decision to create or maintain a minority owned businessthe enabling environment to form a businessCreating a micro or small enterprise by an immigrant or family member in homelandInvestmentThe effort to allocate capital for a particular investment or business venturethe investment environment Allocating capital for a particular asset or venture in the hometownPhilanthropyRaise funds to donate to the hometownTransfer and donation implementation mechanismsFunds received and projects implementedConsumptionConsume home country goods or services related to the homelandSupply chain of products and servicesProduction chain of home country goodsKnowledge transferInformation and skills acquired as development toolsInstitutions forming skills in the knowledge economyMethods to share information, knowledge and skills that enhance local and national developmentSlide4
But such process does not occur evenly and without substantive economies of scale. There are market and policy failures inherent to an
inequitable treatment of migrant labor. To that effect is important to identify solutions that integrate market and policy strategies into migration livelihood as a matter of ensuring equity among migrants and families. These problems deal with poor regulations, competition, among other issues, but there is now a wide range of lessons on solutions that can be brought to scale.The experience of remittances as it intersects with development is one important caseSlide5
Policy IssueImmigrant
economic
activity
Policy problem interpretation(what to make out of the issue)Policy approach (how to address the issue)Policy initiatives (what has been done so far)ImpactRemittances marketplaceRegulatory environment: barriers to entry, foreign currency deposits; AML, and other rulesBarriers to entryRegulatory or policy reform Laws on exclusivity, regulations allowing non-banking to perform transfers; RSP operating costs drop; Financial access increasesType of intermediaries: licensed-unlicensedStrong informal networks Lower operating costsIntroduce easier licensing; Small businesses are formalized or disappearMarket intermediation: competition on the payoutUncompetitive markets with expensive transactionsIncreased competitionBring new players, streamline technologies; Cost of remitting drops 3% in 3 yearsRemittances and Financial inclusion issues
Savings capability, money management and financial access
At least half of recipients hold (an average of US$600) savings but do so informally
Financial inclusion: financial advising; products;
Accessible technologies
Financial education;
Product designed;
Front end electronic instruments
Savings mobilization among 20% through education;
Banking services to remittance recipients: scope (loans, payments, savings) and depth (geographic dispersion)
Two thirds of recipients do not hold bank accounts or own other financial products
Financial access: increase presence of banking institutions; target population
Market new products;
Confidence building
Increased bank account ownership or new products among recipients by commercial banks, credit unions, MFIs, postal offices;
Entrepreneurship and Investment
Migrant and Family Entrepreneurship Initiatives
Barriers to entry
Financial access through credit;
Business advice
Value chain integration; Business partnerships
Formalization of businesses with up to 10 new jobs; increased revenues
Migrant capital investment (ventures, bonds, etc.)
Barriers to entry
Access to partners, investment funds, and other vehicles
Matching small investment programs; Bonds
Limited to few investments and capital raised
Other economic activities
Migrant and Diaspora Philanthropy
Disconnected with development goals
Partnerships; Technical assistance to improve project design
Matching programs
Improved local development impact from no more than 20 projects with limited scope
Migrant home country goods consumption
Business and distribution networks are limited
Value chain integration; Technical advice; partnership promotion
Technical assistance to improve quality; Assistance to access to wider markets
Increase output and distribution by 20% among those benefitingSlide6
Remittances
are instrumental to financial access in a number of ways:Because the cash transfer is typically relying on a financial institution, people are accessing the system;The flow of money increases disposable income which in turns increases savings;The management of income improves decision making in ways that facilitates financial access (people have needs);The instrumental role of remittances can thus be leveraged to further financial inclusion in at least four ways:Expanding payment networks through a wide range financial institutions or instrumentsEnsuring payment networks are cost efficient;Ensuring that remittance recipients are able to mobilize the savings they accrue into accessible, open and regulated institutions;Enabling tools that motivate (pull) recipients to access and use a range of financial products needed to increase assets
.
The instrumental role of remittances in relationship to finances and financial inclusionSlide7
Although many people who receive remittances are able to save, a small share do so in the financial system. There is a substantial wealth that is in the informal economy;
Savings and financial education as strategy of financial inclusion
Amount received in remittances
RegionCountryPeople who save (%)Formally saving (%)Do not saveSave(US$)Amount of savingsCaucasusGeorgia487.3400033001500Azerbaijan802350546276150Armenia4717.2351741862468
Moldova
72
19
2167
5179
1478
Central Asia
Tajikistan
33
32.3
1747
2299
498
Kyrgyzstan
38
14.3
1744
2244
1636
Uzbekistan
42
31
2295
2300
980
Africa
Morocco
66
21.3
850
1200
1749
Senegal
53
3.1
2600
1800
206
Latin America and Caribbean
Guatemala
69
40
3036
4107
900
Jamaica
79
65
2192
3899
1455
Mexico
59
11.9
2431
3190
650
Nicaragua
43
17.4
2735
3509
500
Paraguay
63
18.8
963
1363
250Slide8
Through Dialogue programs, over 200,000 people in 13 countries worldwide have received financial education that promotes budgeting, saving, and the informed use of financial products.
From April through November 2013, the Dialogue carried out a Financial Literacy Project in Mexico. The project, which was implemented in partnership with La Asociación Mexicana de Uniones de Crédito del Sector Social (AMUCSS), provided financial counseling to over 9,000 people in five Mexican states, encouraging money management, formal savings, and the informed usage of financial products and services. Approximately
25% of people who received the financial counseling went on to acquire a financial product, and 40% said they plan on using the new savings methods they have learned
.
The project attracted over MX$4,628,760 (US$352,807) in deposits. Participants also purchased over MX$94,079 (US$7,170) in insurance and MX$9,951,372 (US$ 758,500) in credit. Financial advising among recipients in Mexico: a strategy on economies of scale through financial inclusionNumber of New TransactionsNew checking accountsNew savings accountsSavings account deposits or reactivationsNew CDsNew Children’s AccountsNew LoansNew Insurance Policies339176611342025861226755% of Total23%3%12%1%3%36%22%New Financial Activities among Clients (Numbers and Percentages), 2013Slide9
Individual
financial counseling to migrants and remittance recipients Partnerships with local banks, credit unions or MFIs. Use of pedagogical tool on money management;Strategy that forms, informs and transform;Data tracking method to profile financial behavior;This approach has
proven successful in promoting financial empowerment and inclusion among participants.
The
partnership with local financial institutions facilitates saving in the formal financial system, which offers important benefits for individuals and societies alike. The Dialogue model promotes savings mobilization by transforming transactional clients, such as migrants and remittance recipients, into bank account deposit holders. The model