Not Just Migrants, but Their Families Too

> Posted by Amanda Lotz, Financial Inclusion 2020 Consultant, CFI

Javier moved from Honduras to the United States with his wife and their children in search of better work opportunities and to escape the violence in their community. His parents chose to stay behind. Luisa moved from the Philippines to Canada to pursue more lucrative opportunities as a nurse, hoping to support her family back home. Yousef fled from Syria to Lebanon, as a refugee, to escape civil unrest.

Javier, Luisa, and Yousef – fictitious characters – are only symbolically representative of some of the enormous global migrant population – estimated to total 232 million people in 2013. Certainly not homogenous, their reasons for leaving their home country can vary tremendously and may include economic opportunities, natural disasters, and security or political concerns.

In spite of the complications of migrating, there is an undeniable and increasing opportunity for financial service providers to serve migrants and their families. Today, I will focus primarily on migrants who move for economic and employment opportunities, though we recognize that these issues are more nuanced for migrants like Yousef who have fled their country of origin for the sake of their safety. I will save this smaller subset, 7 percent of all migrants, for another post. Though, I will mention that MasterCard has an innovative partnership with Banque Libano-Française for Syrian refugees in Lebanon, which you can read more about here.

In Financial Inclusion 2020’s consultations with experts who work with migrants, one message rang particularly loud and clear: it’s not just migrants, but their families too. Regardless of their reasons for relocating, many migrants are leaving someone behind in their native country. With linkages back home, and also because 75 percent of the global migrant population is of working age, they are likely to send remittances to friends and family members. In fact, remittances are projected to reach USD $515 billion per year by 2015 according to the World Bank. This is quite significant, especially as evidence suggests that remittances have a strong impact on reducing poverty.

To support remittances for migrants, services providers should maximize migrants’ connections to their native countries. This applies especially for providers in the top 10 migrant receiving countries (United States, Russia, Germany, Saudi Arabia, United Arab Emirates, United Kingdom, France, Canada, Australia, and Spain). In many cases, migrants typically can only send remittances infrequently (often quarterly) due to costs. The recipients, typically family members, often struggle to budget money during the long lapses of time. Additionally, the migrant has little control over how their family uses the money. If they could send smaller amounts at more strategic times, they could better facilitate the use of the remittances by their families. Accordingly, the World Bank is leading an initiative to reduce remittance costs by the end of 2014, which we hope will relieve some of the burden. However, more can be done to engage with migrants and their families.

Beyond remittances, providers should take responsibility for helping migrants and their families transition to other financial services – for example, savings accounts. When it comes to savings, like many other low-income people, migrants often prefer to stow their earnings at home. Introducing financial services can be aided through the use of complimentary financial consultations at the “teachable moment” of the transaction (e.g. cashing out a remittance), as has been successful through Developing Markets’ Associates work in Moldova, Kyrgyzstan, Tajikistan, and Armenia. Taking a holistic approach to the family, evidence suggests that increased savings, budgeting, and financial planning result when both the migrant and another family member are trained.

Another promising example of linking remittances and other financial services comes from the Philippines. The Commission on Filipinos Overseas, in partnership with Land Bank, created the Kiddies Kapatid Savings (KKISs) program for migrant parents and their dependents. When children make a deposit, migrants are encouraged to match the savings.

An innovator that caught my attention is Quippi, which provides fee-free international gift cards targeting remittances sent from the U.S. back to Mexico. These gift cards may be used at stores in Mexico, which enables the migrant to have more control over the recipient’s spending.

In Italy, Banca Monte dei Paschi di Siena offers a special package for migrants, which includes a checking account and remittances/bank transfers at no cost if sent to their country of origin. This is accomplished through special agreements with foreign banks.

At the Center, we are also very interested in on-ramps to financial inclusion, i.e., products and processes that lead to increased use of financial services. In Sri Lanka, Hatton National Bank (HNB) offers a savings-linked remittance product to help migrants and their families increase savings and access credit. By partnering with local and international banks, HNB educates migrants and family members on the value of formal remittances. Requiring that 5 percent of transferred funds be saved, after a designated time period the migrant or a family member is able to take out a loan much greater than the amount in the savings account.

Imagine if some of these models were replicated in other countries! Certainly, there are cases where regulatory issues are a challenge. However, whether you’re a regulator, provider, or support organization, I hope that these examples inspire you to think of what more can be done to reach migrants and their families.

Do you have an innovative model that you’d like to share? Please tell us in a comment below.

Image credit: Romulo Moya Peralta

Have you read?

Walmart Joins the List of Non-Traditional Players Offering Remittances

Facebook to Provide Remittances? The News and the Bigger Picture

Cuba & Remittances: Can the “Money in the Mail” Drive Reform?

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