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Crafting a Money Transfers Strategy: Guidance for Pro-Poor Financial Service Providers

This paper begins by noting that as more data becomes available on cross-border remittances these financial flows are attracting greater attention from the private sector, governments, and development agencies alike. Although not all money transfers are captured in official statistics, formal remittances nevertheless constitute the second largest source of external funding for developing countries, ahead of both capital market flows and official development assistance. Remittances are qualitatively different from other sources of development finance in that they are both relatively stable and counter-cyclical in nature, since migrants tend to remit more during periods of economic downturn in their home countries. Because remittances represent private money sent person-to-person, they benefit the poor directly and as poor people determine they need it – on demand.

Furthermore, the paper suggests that financial service providers that cater to the poor have been drawn to the money transfer market because it offers them the opportunity to fulfil their financial goals as well as their social objectives. As a fee-based product, money transfers can generate revenues and bolster an FSP’s bottom line. From a social perspective, money transfers allow FSPs to deliver an additional service demanded by poor customers, at a cost potentially lower than that of mainstream providers.

This paper explores the operational and strategic considerations involved in launching a money transfer product. The first section begins with an overview of global money transfers, including the overall size and structure of the industry and the differences between its different segments – cross-border and domestic, formal and informal, retail and wholesale. The second section describes the main types of transmission channels used to transfer funds, the types of providers traditionally associated with these channels, partnerships between these providers, and new customer interfaces being used to make money transfers cheaper and more convenient for clients. Finally, the third section explores how a pro-poor FSP might begin to build a money transfers strategy, considering factors such as client preferences, regulation, competition, institutional capacity, financial analysis, and marketing.

  • Resource type
  • Author Isern, J, Deshpande R, and van Doorn, J
  • Organisation
  • Year of Publication2005
  • Region
  • LanguageEnglish
  • Number of pages28 pp.
  • EditionOccasional Paper

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