Giving Value to Migrants' Savings

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Nov 2011
Mumbai, India, November, 22 2011 - In 2010, the World Bank estimated formal money transfers to developing countries at US$ 325 billion. Given the sums involved, there is a need to identify an appropriate strategy to truly leverage these flows, to improve the standards of living for migrants and their families, as well as for their countries of origin.

In 2010, the World Bank estimated formal money transfers to developing countries at US$ 325 billion.Transfers grew by 23% in 2007 and 16% in 2008, but declined 5.5% in 2009, due to the economic slowdown caused by the crisis in OECD countries, a modest decline compared to the drop in private capital flow.

Remittance flows are more than double development aid from OECD DAC (Development Aid Committee) countries, and account for a significant proportion of the GDP of some countries. Flows increased by 6% in 2010, and 6.2% growth has been forecast for 2011, although a slow economic recovery, volatile exchange rates, and a rise in anti-immigration sentiment in a number of countries are risk factors.

Flows to Africa were estimated at US$ 40 billion since 2009, with approximately 80% used for consumption and 20% for savings and investment.

Given the sums involved, there is a need to identify an appropriate strategy to truly leverage these flows, to improve the standards of living for migrants and their families, as well as for their countries of origin. Microfinance institutions have the potential to play an important role in this strategy, in particular via their branch networks, which could serve as transfer payment offices in rural areas, still a rarity in many parts of Africa. Moreover, transfers could also be combined with financial products designed to encourage saving and investment, thus contributing to local development. 

This paper presents a pilot project carried out in 2009 by ADA (Appui au Développement Autonome), CIF (Confederation of West African Financial Institutions) and CIF member PAMECAS. The project tested a transfer service linked to financial products on the Italy – Senegal corridor. After a short description of the project, we draw on the project evaluation, conducted end-2009, to extract the lessons learned from the pilot. Finally, we assess the project’s future potential and possibilities for replication. 



 

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