Session I – Enhancing financial inclusion and resilience of remittance families
Discussants:
Marina Manke, Head, Labour Mobility and Human Development, IOM
Nikki Kettles, Executive Manager of Programmes, FinMark Trust
Marie Chantal Uwitonze, Founder and President, African Diaspora Network in Europe (ADNE)
Alina Cebotariov, Director, Nonbank Credit Department, National Commission for Financial Markets (NCFM), Republic of Moldova
Moderator and discussant:Pedro de Vasconcelos, Manager, Financing Facility for Remittances, IFAD
SUMMARY
Track I focused on the needs of remittance families, in terms of financial capacity and capabilities, and identified good practices to mitigate the short-term impact of the current crisis. The speakers emphasized examples of linkages between remittances and financial inclusion, and the role of multisector stakeholders to scale up good practices.
Migrants and families were impacted by the effects of COVID-19, which led to disruptions to economic ties, trade relationships, abrupt interruption of their mobility and lockdowns. Not only family members back home, but also migrants themselves, need support.
The large majority of diaspora members and migrants work in sectors where jobs cannot be done remotely (construction, hospitality, health care, tourism, food, agribusiness, transport, domestic care, among others). Particularly informal migrants are excluded from benefits and adequate social protection.[2]
Due to travel restrictions imposed by the pandemic, many temporary and circular migrants who had lost their jobs could not return to their home countries, to the detriment of families back home. Many could not move to cities to transfer money, a disadvantage coupled with low connectivity to access mobile money services.
Mobility was highlighted as an essential right for individuals and communities, and very important to people’s well-being. Many migrants suffer from isolation, with serious consequences rarely spoken of. Repatriation is also an issue, and several Western African governments have raised funds to allow affected migrants to go back. A number of countries experienced an important influx of returnees. For example, the Philippines saw the return of around 100,000 Overseas Filipino Workers (OFWs) in 2020.
Remittances
It is unclear to what extent governments have considered remittances as essential services during the past 12 months. The first measure of the RCTF’s Blueprint for Action is to ensure that remittances be declared as such in all countries and avoid similar market disruptive events during future potential lockdowns.
As a consequence of restrictions in mobility and closure of remittance transfer locations, remittances sent through formal digital channels greatly increased in the second semester of 2020, indicating a trend from informal to formal transfer methods. Moving forward, this trend could be a positive push in reducing risks and vulnerabilities that informal remittance transfers often entail.
Although at a slower growth rate, this trend is also noticeable in countries with higher rates of irregular migrant workers as the circumstances affected informal channels and a shift to digital means of sending was observed.
In some remittance corridors trends have reversed, with communities in countries of origin sending money to help family members abroad cover basic needs, including return tickets, particularly for informal and/or unemployed migrants.
Takeaways: challenges and opportunities
Financial inclusion and education towards financial democracy, coupled with technological know-how, must be tailored to capture the creativity of migrant and diaspora youth (particularly in rural areas) since they know best what is needed. Technological innovations can sidetrack problems of connectivity, lack of access to financial products, or any other issues resulting from the crisis. Indeed, remittance transfer costs are often the priority area within concerted initiatives at different levels (national/regional/global). However, focus should be shifted to consider not only costs, but also how remittances can have greater impact to spur financial inclusion.
Accessing financial products and connectivity. Remittances allow migrant families to access formal financial services. However, a constant dialogue between service providers and regulators is often lacking, hampering opportunities for migrants and their families to be “digitized” and moved into the formal financial sector. The right actors also need to be involved in, and enabled, to provide remittance services, particularly in rural areas, as is the case of credit unions in the Republic of Moldova.[3]
These aspects need to be tailored to each country’s reality. For example, in a number of African countries, people use mobile banking more than other traditional financial services. A tailored approach is needed to determine the best tool for specific receiving and sending communities.
Overcoming regulatory constraints. Key changes in the remittances market are linked to the regulatory framework, both in host and home countries. This is where diaspora cannot act but can voice concerns,[4] through all possible channels. To mitigate such constraints, some regulatory changes can be gradually introduced, for example:
Less stringent, risk-based know-your-customer (KYC) processes[5] for low-value remittances and low-value bank accounts are needed, such as non-face-to-face on-boarding. This is to avoid barriers to the use of formal services, which are frequently presented by stringent KYC processes, and to prevent further de-risking measures by service providers in risk-based environments.[6]
Guidelines for the payment of interest on mobile money wallets, introduced by some central banks within the Southern African Development Community (SADC) region, with South Africa being the first implementer to support financial “liberation”.
Improving efficiency of financial markets, transparency and market competition, enabling customers to select appropriate channels. While a lot of tools remain to be implemented in this field to support both the industry and remittance customers (migrants and their families), several tools have already been introduced by international stakeholders such as the World Bank’s Remittance Prices Worldwide, IFAD’s RemitScope market intelligence portal, and IOM’s MigApp
Specific data, analysis and surveys are lacking in many countries. Advocating for rigorous methods to collect and analyze data would allow industry stakeholders to understand the needs of migrants and families, and regulators to shape policies accordingly. Having reliable data is of utmost importance in rural areas, where communities are more vulnerable, and where almost 50 per cent of remittances are received.[7]
Partnerships are key to implementing successful initiatives, building on specific knowledge, expertise and lessons learned, and to filling information gaps.
Humanitarian support. The priority of response-to-crisis initiatives vs. sustainable initiatives needs to be addressed. Humanitarian aid is needed, and it is typically not sustainable or recoverable in cash amounts, but helps restore resilience, in this case, among remittance families.
“Remittances are the Trojan horse into formal financial services.”
All migrants in South Africa are economic migrants. The volume of remittances from South Africa to the region has increased, as new senders entered the formal market. However, at the bottom end, around 60,000 people who send little amounts dropped off.
Governments in the Southern African Development Community (SADC) supported citizens with social safety net measures, but they did not include migrants. FinMark Trust put together a programme of government grants that supported over 7,000 migrant workers’ families with US$15 per month for up to six months. These relatively inexpensive programmes can make a difference for thousands of migrants and family members back home in the short term.
The Migration and Development Integrated Postal Project is a project implemented by IOM and the Universal Postal Union (UPU) in Burundi.
iDiaspora – connect, learn, contribute. Engaging diaspora, sharing knowledge and building community. Developed by IOM, iDiaspora is a digital platform where global diasporas exchange key information and good practices to mainstream migration through development. As of November 2020, iDiaspora has brought 510 actors from 109 countries who have been able to share their best practices and stories on how to better integrate diaspora’s initiatives to enhance development in both their home and host communities.
[1] N.B.: Informal migration issues are not part of the RCTF discussions. Although human mobility was highlighted as essential to societies and to communities, such specific matters and government response to regularize irregular migrant workers are beyond the scope of the RCTF.
