1 Putting Money in Motion: Costs of Migrant Remittances Microfinance India Summit November 16 th, 2010 Centre for Micro Finance, IFMR Justin Oliver, Executive Director

India has 100 Million Domestic Migrants – who depend on transfers Transferring money over long distances is an essential financial activity Few migrants can do this formally People use several means: –Banks –Postal Money Orders –Couriers: Hawala and Cash carriers –Carrying oneself or sending with a friend

Our Study Methodology 274 migrants and their families along 4 routes –Bihar – Hoskote –Tamil Nadu – Mumbai –Orissa – Surat –West Bengal – Delhi Purposive sampling to ensure wide range of respondents

Migrants want transfers to be as secure and fast as possible – cost is not primary concern

Many migrants would prefer to transfer through banks, but must be constrained from doing so Prefer Use Prefer

Bank transfers are cheap, postal money orders cost twice as much, hawala couriers 50% more Indirect costs Formal fees Indirect costs Formal fees 3.0% 6.0% 4.6% 3.4% 0.3%

But currently, banks are much less convenient than other means Receiver’s Time Sender’s Time Average Time for Transfer

How can we make transfers easier? Rough Estimate: If all transfers cost 3%, Indian migrants would save roughly 1000 crore annually Bank transfers more accessible – government transfers, target migrant origins Increase access to banks –Branches, ATM’s & debit cards –Easier for banks to promote BC model and mobile transfers –More institutions able to process payments quickly and safely (MFI’s, Post offices, other?)

9 Thank you For any questions: Our website: