Case Study: Integration of Financial Sector Services Dave Grace World Council of Credit Unions October 10, 2003

World Council of Credit Unions International trade association and development organization for the global credit union movement Represent 40,000 credit unions in 80 countries serving 118 million members Implementing 17 long-term credit union development projects around the worldwide

Five years of experience – strategic alliances with two commercial companies Working with credit unions in Guatemala, El Salvador, Honduras, Jamaica and Mexico – 540 primarily rural points of service $10 to send up to $1,500 from the USA to Guatemala, Honduras, Nicaragua and El Salvador - $10 to send up to $1000 to Mexico 190 Credit unions in the US with 850 POS International Remittance Network (IRnet) - Credit Union Response

U.S. Remittance Activities Highest immigration level since 1930s, but immigrants are 4 times more likely to not have access to financial services = less opportunity 68% of Latino immigrants age are unbanked and 73% of this group are sending money home Providing savings facilities to documented and undocumented immigrants in US Sending money at lowest cost in market; disclosing and guaranteeing exchange rates – but challenging

Commonalities in Central America 70% of transfers are for non-members % of the transfer result in new members 65% of transfers go to 25% of the credit unions -- local marketing matters! Average transfer is $450

Commonalities in Central America Requirement to have broad national physical networks with established clearing and settlement systems Individuals are saving 10% of value; through non- financial institutions its estimated that 4% of the remittances are saved 37% of receivers that are already members save some portion of the transfer Service can be profitable

Lessons Learned Listen to the market Need equal interest on both sides of the transaction and strategic partners Difficult to penetrate the origination side of the business in the United State by financial institutions seeking to serve Latinos.

What About ATMs? Does not facilitate account access and savings Can be cost effective, but programs from big US banks to-date have been more costly Availability of networks and transaction limits

Next Steps Continue to advocate for removal of regulatory barriers for credit union participation in remittances – i.e., direct access to central bank clearing/settlement systems Begin with credit unions Nicaragua (with Accion), Ecuador, Dominican Republic, Poland, Philippines Reduce the costs for credit union to credit union transfers