1. Remittances: characteristics and development perspective Judith van Doorn Social Finance Programme, ILO www.ilo.org/socialfinance vandoorn@ilo.org

2. What’s next…… Remittances and the ILO ILO field studies - characteristics - development issues Suggested future work areas

3. Remittances and the ILO ILO Labour Standards migrant workers have the right to transfer (part of) their earnings and savings through their preferred channel; Migration – Labour Conference 2004 Access to finance - market-conform, and incentives-based - partnerships

4. Remittances and the ILO Activities Platforms Field studies - B’desh, Nepal, Senegal Pilot projects ….. (next step)

5. Characteristics Volume of remittances Bangladesh: $ 1.8 billion Nepal: > $ 1 billion Senegal: $ 300 million Informal transfers are huge…..

6. Characteristics Why are informal transfers so popular? Better exchange rate (hundi – Nepal) Non-financial services No access to banking services No experience with banking (Nepal example)

7. Characteristics Remittances as % of recipients’ income Bangladesh: > 50% Senegal: up to 90%...

8. Characteristics Top 5: Consumption Land Housing School fees Collective investments (food depots, mosques, schools, health centres) (Nepal – India: savings and credit associations) Use of remittances

9. Development Savings Availability of suitable savings products? Trust in formal savings mechanisms? Demands from the (extended) family? Some migrants are saving abroad

10. Access to banking services Bangladesh- Islami Bank Pro-active approach to attract remittances. Staff visited migrants at work place and at home. Developed fine-tuned products (e.g. accounts for migrants’ associations) Development

11. Policies and regulation Nepal Central Bank encourages establishment of private operators. Formalising hundi Senegal Banking law only allows banks and regulated institutions to engage in int’l money transfers. Inhibits the establishment of private operators.

12. Development Policies and regulation Bangladesh Government encourages B’deshi banks to open correspondent relationships with financial institutions abroad. Remittances are tax free

13. Development Remittances are mainly used for consumption. What is their development impact? Study, Bangladesh: multiplier effect: 3.3 on GNP 2.8 on consumption 0.4 on investment Remittances often larger than ODA Remittances to Senegal increased over the last 5 years 7% -> 82% of ODA. ODA decreased during that same period.

14. Development Do remittances create inequalities in the community? No clear answer. Example Nepal

15. Suggested work areas Development actors Link financial institutions (e.g. banks – MFIs) Assist financial insitutions to develop follow-up products Employers Transfer remittances Trade unions / civil society Inform migrants of remittance issues Governments Facilitate / stimulate

16. Remittances: characteristics and development perspective Judith van Doorn Social Finance Programme, ILO www.ilo.org/socialfinance vandoorn@ilo.org