remittances and financial inclusion workshop july 18 2012, sydney carlo corazza

Remittances and Financial Inclusion Workshop

July 18 2012, Sydney

Carlo Corazza

Payment Systems Development Group

Financial Infrastructure Service Line

Financial Inclusion Global Practice

World Bank

The General Principles for International Remittance Services

-

General Overview in the Pacific

Top remittance recipients in 2011

Resilience of remittances across all regions

-20%

0%

20%

40%East Asia and PacificEurope and Central AsiaLatin America and CaribbeanMiddle-East and North Africa

South AsiaSub-Saharan Africa

Percent

Source: Migration and Remittances Unit, World Bank 3

Remittance flows to developing countries$ billion 2010 2011e 2012f 2013f 2014f

Developing countries 330 370 397 428 464 East Asia and Pacific 95 107 115 125 135 Europe and Central Asia 37 41 45 49 55 Latin America and Caribbean 57 62 66 72 77 Middle-East and North Africa 38 40 42 44 47 South Asia 82 97 104 113 122 Sub-Saharan Africa 21 22 24 25 27

Growth rate (%)

Developing countries 7.0% 12.2% 7.3% 7.8% 8.4% East Asia and Pacific 10.6% 12.6% 7.3% 8.0% 8.7%

Europe and Central Asia 0.3% 12.6% 8.8% 10.1% 11.4% Latin America and Caribbean 0.9% 7.7% 7.6% 7.9% 8.2% Middle-East and North Africa 12.4% 6.1% 5.1% 5.3% 5.5%

South Asia 9.5% 18.2% 7.4% 7.9% 8.4% Sub-Saharan Africa 1.9% 8.5% 6.3% 6.8% 7.4%

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Remittance Prices Worldwide - Global Trends

• In the First Quarter 2012 the total global average of sending USD 200 worldwide remained stagnant and decreased only from 9.30% to 9.12% from Q3 2011

• A similar trend was observed for the International Money Transfer Operator (MTO) Index, which includes all the MTOs that are present in over 85 percent of the RPW corridors.

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Global Average and International MTO Index

2008

1Q2009

3Q2009

1Q2010

3Q2010

1Q2011

3Q2011

1Q2012

6%

7%

8%

9%

10%

11%

Austra

lia

Belgium

Brazil

Canad

aChil

e

Costa

Rica

Czech

Rep

.

Domini

can

Rep.

Franc

e

Germ

any

Ghana

Italy

Japa

n

Kenya

Korea

Mala

ysia

Nethe

rland

s

New Z

ealan

d

Norway

Qatar

Russia

Saudi

Arabia

Seneg

al

Singap

ore

South

Afri

caSpa

in

Switzer

land

Tanza

nia UAE UKUSA

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

11.02%

9.20%

13.00%

11.08%

5.54%

3.84%

12.23%12.49%

11.78%11.16%

21.45%

7.88%

15.70%

9.49%

6.73%

5.32%

8.51%

10.34%9.72%

5.11%

2.33%

4.22%

6.54%

4.80%

18.77%

6.62%

14.14%

22.38%

3.98%

7.93%6.91%

Remittance Prices WorldwideRemittance Sending Countries (Q1, 2012)

• Note: high volatility of foreign exchange rates against the US Dollar may result in higher costs

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Global Average Q1, 2012 9.12%

Global Average Q3, 2011 9.30%

Remittance Prices Worldwide Remittance Costs Trend by Region (2008 – Q1 2012)

• SA showed a significant cost increase from Q3 2011 to Q2 2012

• Remittance costs in all regions, except ECA, have come down from 2008

• However, the Global remittance costs still lack a drastic reduction

• Most regions have experienced significant fluctuations of remittance costs

• The recent financial crisis and regional crises appear to have negatively affected remittance costs

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2008 1Q2009 3Q2009 1Q2010 3Q2010 1Q2011 3Q2011 1Q20120%

2%

4%

6%

8%

10%

12%

14%

16%

EAP ECA

ECA (excl Russia) LAC

MENA SA

SSA Global

Samoa

Tonga

Philipp

ines Fiji

Vietna

m

Indo

nesia

China

Vanua

tu

Thaila

nd

Mala

ysia

Solom

on Is

lands

Papua

New

Guin

ea

Kiribat

i0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

Remittances as % of GDP (2010)Average Cost of Remittances (%) _x000d_(Q1, 2012)

Remittances as % of GDP and Remittance Costs in Receiving Countries in the East Asia and Pacific Region

• Remittances costs to Malaysia, Philippines, and Indonesia are the lowest among the EAP countries

• Remittances costs to Pacific Islands tend to be high

• EAP as a whole showed a semi-annual cost reduction of 5.4%

• However, Fiji and Vanuatu showed significant yearly cost reduction (-20.57% and -21.97% respectively)

• Samoa had a semi-annual cost increase of 23.93% while Fiji had a cost decrease of -18.29%

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World Bank – CPSS General Principles for International Remittances Services

GP1: The market for remittances should be transparent and have adequate consumer protection

GP2: Improvements to payment system infrastructure that have the potential to increase the efficiency of remittance services should be encouraged

GP3: Remittance services should be supported by a sound, predictable, non-discriminatory and proportionate legal and regulatory framework

GP4: Competitive market conditions, including appropriate access to domestic payments infrastructures, should be fostered in the remittance service industry

GP5: Remittance services should be supported by appropriate governance and risk management practices

Remittance Service Providers

Public Authorities

Should participate actively in the application of the general principles

Should evaluate what action to take to achieve the public policy objectives through implementation of the general principles

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World Bank – CPSS General Principles for International Remittances Services: Situation in the Pacific

GP1: The market for remittances should be transparent and have adequate consumer protection

- Transparency is still limited for consumers and RSPs are not providing adequate information to migrants

- Authorities have adopted effective initiatives in this area and they have showed their effects in terms of price reduction

- When it comes to financial services and remittances, consumer protection is not yet fully guaranteed across most of the countries


GP2: Improvements to payment system infrastructure that have the potential to increase the efficiency of remittance services

should be encouraged

- Receiving countries lack of supportive payment systems infrastructure that would facilitate smoother processing of the transactions

- Cash is still largely predominant both in sending and receiving countries

- Retail payment systems strategies of authorities and industry, in both receiving and sending countries, have not included remittances as a relevant topic


GP3: Remittance services should be supported by a sound, predictable, non-discriminatory and proportionate legal and

regulatory framework

- Remittances are often regulated through an array of different law and regulations, under the umbrella of various authorities

- Compliance with AML/CFT regulation might represent the most relevant variable of the internal costs of the RSPs

- Authorities should strive to balance the risk posed by the remittances business with the compliance requirements and avoid over-regulation


GP4: Competitive market conditions, including appropriate access to domestic payments infrastructures, should be fostered in the

remittance service industry

- Sending and receiving markets experience different concentration of operators in the market

- Anti-competitive agreement are in place, but the most relevant effects are on the sending side, where the level of concentration is sensibly higher

- There is a tendency to restricting MTOs access to the payment systems infrastructure, which could lead in the long term to relevant problems of further limitation of competition


GP5: Remittance services should be supported by appropriate governance and risk management practices

- In the region there is a general adequate level of compliance with corporate governance principles

- Risk management is in place and there are no indications of major shortfalls in this area

- Constant attention should be dedicated to the risks of fraud and the consequence in terms of consumer protection and reputation of the whole industry

Thank you!

[email protected]

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mailto:[email protected]

remittances and financial inclusion workshop july 18 2012, sydney carlo corazza

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