Family remittances are now Latin America's largest source of external
capital. They represent more than 15 percent of the national income of
Honduras, Jamaica, and El Salvador and make up nearly 4 percent of the
national income of Mexico. In many countries, the more than $60 billion
of annual remittances are making a huge dent in rural and urban poverty;
in some, they are narrowing the rich-poor income divide.
The report explores ways to help families and their countries get more
out of remittances. It gives renewed attention to mechanisms for
reducing the cost of remittance transfers, but particularly emphasizes
increasing financial access for remittance senders and recipients and
encouraging governments to create productive opportunities for the use
of remittances while respecting the private and voluntary nature of the
transfers.
The most critical recommendation of the report is that policy and
advocacy efforts by all institutions should focus on encouraging
remittance senders and recipients to use bank accounts. Banks and other
financial institutions can help reduce the cost of money transfers
because they are able to move money across international boundaries more
cheaply than money transfer operators (MTOs) or couriers. Perhaps even
more important, banks offer a range of other relevant products-including
interest bearing savings accounts and loans-that help migrants and their
families become economic citizens and promote economic development in
their home countries.
Other key recommendations in the report include the following:
* MTOs should be encouraged or required to provide accurate,
up-to-date information on their costs and methods of operation. Such
transparency in pricing and services would allow remittance senders and
recipients to compare MTOs and select the company that best meets their
needs. In addition, greater transparency in pricing and services could
lead to greater competition resulting in lower costs and better
services.
* Cooperation between banks and MTOs should be promoted. Banks
offer a wider range of services than MTOs and greater geographical
coverage in both the United States and abroad. MTOs tend to be seen as
trustworthy by senders and recipients, and they offer experience with
remittances and better knowledge of sender and recipient communities.
Such collaboration could result in more remittance senders and
recipients using banks.
* Governments and international organizations should invest much
more in research on remittances and their impact. It is time to generate
the information and analysis necessary to understand remittance flows,
how much they contribute to development, and what policies can make them
more valuable both to senders and recipients and their communities and
families.
* Governments should not intervene in remittance flows by imposing
taxes or burdensome regulations. Remittances are voluntary transfers
between individuals and their families. Governments seeking to tax
remittances or intervene in their use will provoke remitters to stop
sending money or turn to transfer channels outside official control.
Regardless of their volume and importance, these decentralized flows are
inappropriate for direct government intervention.
The Dialogue's Task Force on Remittances includes prominent political
and business leaders; financial, technical, and legal experts; and
representatives of sending and recipient communities. The Inter-American
Dialogue is the leading U.S. center for policy analysis and exchange on
Western Hemisphere affairs. The Inter-American Development Bank and the
Annie E. Casey Foundation generously provided the support to make this
project possible.
Download report
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Tel: (202) 822-9002 Fax: (202) 822-9553 www.thedialogue.org
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