Serving Migrants Sustainably: A Case Study of Remittance Services Provided by a Microfinance Institution in India

This short note points out that the focus of the growing attention being given to money transfer services as a potential opportunity for microfinance institutions (MFIs) has been on cross-border remittances. Yet it also points out that in most countries, the number of domestic migrants far outnumber those who migrate abroad, and that the volume of domestic remittances equals if not exceeds that of international remittances.

The note also highlights that internal labour migration has a long history in India, and is probably increasing with differential rates of growth in different states and pocket within states. Domestic migrants also tend to come disproportionately from the poorest income groups and areas as well as disproportionately from areas that banks have not penetrated. The note argues, therefore, that much more action research is needed on how MFIs can viably broaden their portfolio of services by providing remittance services to domestic migrants.

This note discusses the early experience from a pilot project in Gujarat in India. In doing so, it includes a useful summary table which sets out the relative advantages of different modes of remitting money – Banks, Post Office, Private, Hand-Carry and Shramik Sahajog. These are assessed with respect to access, convenience, risk, speed, cost and share.

In the conclusion, the note suggests two requirements to enable MFIs to meet the needs of domestic migrants. Firstly, there should be a critical minimum number of migrants in the place of migration destination from a particular place of origin. The other requirement noted, is that the MFI should be willing to charge a cost recovering service charge, since there is no social justification for subsidising MFI remittances in the absence of the universal service obligations that the post-office assumes.

  • Resource type
  • Author Ghate, P
  • Organisation
  • Year of Publication2006
  • Region
  • LanguageEnglish
  • Number of pages5 pp.
  • EditionFinance for the Poor: A Quarterly Newsletter of the Focal Point for Microfinance

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