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Making the best of Globalisation: Migrant Worker Remittances and Micro-Finance
In the context of globalisation, evidence suggests that remittance flows are likely to grow with migration. It is estimated that official remittance flows amount to about 73 billion dollars per year, which in some countries exceed foreign aid. Put to a productive use, these remittance flows can have a positive impact on the economy of migrants’ country of origin. To stimulate international debate on the key issues, the ILO’s Social Finance Program held a project planning meeting entitled: Migrant Worker Remittances and Microfinance in the Context of Globalization. This workshop report summarises the main findings from a series of case studies presented, compiles lessons learned from some of the actors already involved in remittance transfers and proposes recommendations for future international follow-up.
There was a general agreement that Microfinance Institutions (MFIs) were well placed to handle transfer payment due to their proximity to remittance-receiving families, their potential to reach out to poor communities, and their likely capacity to produce positive returns on investment. MFIs appear to be well suited to capture and transform remittances as they deal with small-scale transactions where personal relations are important, they extensively involve groups and associations of intermediaries and they integrate the formal and the informal sector practices. Emerging best practices for MFIs include:
- The importance of a clearly defined social mission and a business-like approach to remittance provision
- Maintaining a high number of selling points (to facilitate the growth of transfers)
- Increasing competition
- Offering a wide range of products (to encourage cross-selling)
- Establishing networks and partnerships among MFIs and other organisations in order to benefit from advantages of scale and information
The workshop concluded that the role of governments should be to observe, create an inventive-based regulatory framework and possibly provide matching funds to spur local community development. Most importantly the workshop participants suggested that governments, workers organisations and financial institutions should look to supplying more clear and concise information to migrants on the range of transfer options available.