Tuesday, 8 January 2013


The movement of people across international and domestic borders has enormous implications for growth and welfare in both origin and destination locations. According to the United Nations, more than 215 million people live outside their country of birth, and over 700 million migrate within their own country. In the coming decades, demographic forces, globalization, and climate change will increase migration pressures both within and across borders, and this in turn will increase the demand for payments and remittances worldwide. There is a growing consensus that a well-functioning payment and remittance ecosystem plays a critical role in enhancing financial inclusion and poverty reduction. Remittances sent home by migrants to developing countries are three times the size of official development assistance and represent a lifeline for the poor. They were estimated to total $351 billion in 2011, an increase of 8% over the previous year and have now become one of the largest sources of external finance for developing countries.
Despite the global financial crisis and current global economic weakness, remittance flows are expected to continue growing, with global remittances expected to exceed $593 billion by 2014, of which $441 billion will flow to developing countries. Although costs have fallen steadily in recent years, reducing the cost of remittance transfers and payments produces significant benefits not only to the migrants and their families, but also to receiving countries.
Technology can play a pivotal role in offering payments to people who were previously unbanked. Branchless banking and banking partnerships with mobile operators can extend remittance services to millions of people in remote, rural areas. For example, in countries like the Philippines, G-Cash and SMART Money serve the Filipino diaspora by providing remittances over their mobile money platforms. Although the ability to receive or send money doesn’t guarantee financial inclusion, it is an important step in the right direction as it provides a cost-effective infrastructure for providing other financial services. In countries like Kenya, mobile money platforms are being used to design financial products which ride on the rails of this new payments infrastructure, and as a result are having a remarkable impact on financial inclusion.
A recent CGAP study found that a functioning domestic mobile money ecosystem needs to exist for users to see sufficient value in receiving their remittances over mobile. Additionally, further work is needed on the operational and regulatory challenges in offering cross-border remittances as flows continue to rise.
Topic Contact: Sarah Rotman
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