FAIR VALUE REMITTANCES: LINKING MIGRANT REMITTANCES WITH MFIS

Sending remittances across countries demand careful attention to ensure transfers arrive properly and can be quickly paid to the intended beneficiaries.

In late 2008, Sinapi Aba Trust decided to

introduce remittance product to add up to the

pool of financial service products it has in

order to achieve financial sustainability

through increased profitability.

PARTNERS

Western Union through EcobankMoney SystemMoney Gram through Merchant BankRoyaale MoneyVigo through Merban BankCash4Africa

PERFORMANCE FOR THE YEAR 2010

So far this year Sinapi has been able to

pay out to beneficiaries an amount of

$12M.

What Are The Key Success Factors?

Every institution that enters the remittance

market agrees that operating a Remittance

service puts to the test the institutional

capacity of the MFI in terms of its

management, staffing, systems and marketing.

MFI CAPABILITY

Overall financial and operational performance

(stable, growing, shrinking). The institution

must be well managed and governed, with

stable, profitable and transparent operations

for existing financial services.

MFI CAPABILITY

Available human resources, and their

knowledge of remittance operations.

Remittance operations require a significant

investment in skilled human capital. There is

the need to leverage the specialized staff to

provide specialized service for the clients.

MFI CAPABILITY

Capacity to manage the increased cash

flow from money transfers. Capacity of

management to handle cash

management challenges. Making cash

available on a consistent basis.

MFI CAPABILITY

Resilience of the MFI’s systems and

overall capacity for growth in

transactions and number of clients.

Capacity for managing transfers

effectively (number of transactions,

volume of clients to serve, value of

payments to distribute).

MFI CAPABILITY

Data security. The MFI must protect its

data and the security of payment

instructions, because this can attract

both internal and external fraud.

MFI CAPABILITY

Communication system and internet

connectivity in all branch offices. These help to

manage the volume of transfers, ensuring

speedy delivery, guaranteeing transaction

security and interface with other partners, and

generate reports.

MARKET SITUATION

To succeed in remittance operation the

institution needs to have country wide

coverage. Presently Sinapi Aba Trust has

45 branches.

MARKET SITUATION

SAT has more than 90,000 clientele

base of which more than 70% are in

rural areas

MARKET SITUATION

Continuous targeted marketing is the

key to attracting new clients. Although

some marketing on the receiving side is

necessary and effective, marketing

appears to have the most impact on the

sending side, near the point of sale.

MARKET SITUATION

Also remittance provides hard-to-reach

clients of MFI a quality product at a

lower cost.

MARKET SITUATION

Provision of Remittance services

attract new clients and open

opportunities to cross-sell other

microfinance products.

Generate income (and ultimately

profits) from a fee-based product.

MARKET SITUATION

With increasing competition among

remittance providers, the quality of

service that is offered is all the more

important and sets MFI apart from the

competition.

MARKET SITUATION

Identification and penetration of an

appropriate market niche. To identify an

appropriate market niche, CGAP

recommends that the MFI conduct a

thorough market study to assess the

potential value of the remittance product.

REGULATION

While the opportunities of entering the

remittance market may be numerous and

extremely enticing, microfinance institutions

should be aware of the regulatory

framework prevailing in the country.

REGULATION

Governments in both sender countries

and recipient countries seek to regulate

and control illicit money transfers, money

laundering and the financing of terrorism.

REGULATION

Regulations will determine whether the MFI

will have: (1) to have a license in order to

enter the market (2) direct access to foreign

exchange (3) the legal right to become an

agent or sub-agent of a money transfer

company among other things.

REGULATION

In Ghana remittances are offered by

financial institutions like the banks, non-

bank financial institutions like the savings

and loans companies and financial NGOs’

like the Microfinance Institutions.

REGULATION

There is no specific enactment to regulate the Remittance operations.

However there is Anti-Money Laundering

Law (Act 749) which regulates control of

illicit money transfers, money laundering

and the financing of terrorism

REGULATION

And also the Foreign Exchange Law (Act 723) which regulates exchange of foreign currency, for international payment transactions and foreign exchange transfers.

REGULATION

What it means is that in Ghana

remittance operations can be

conducted as long as you comply

with the above provisions.

CHALLENGES

The main challenges that MFIs who enter the remittance market face arise from the following;

Due diligence on customers Software to the run the remittance

business in terms of reporting on timeReconciliation should be regular

CHALLENGES

Cash handling challenges

Operational risk of fraud

Communication and internet connectivity challenges

Slow in reimbursement

Bio data capturing problems

Delays in clearing transfers in the sender’s country

which irritates clients.