Optimising migrants’ remittances

Five avenues to optimise the impact of migrants’ remittances on development (report, 2012)

Five avenues should be explored in order to optimise the impact of migrants’ remittances on development, according to a new joint report by the African Development Bank and France.

Based on the fact that the high costs of remittances to the Maghreb and franc zone are hampering their contribution to developing the beneficiary countries, the report, issued in 2012, suggests a series of suitable financial and regulatory innovations.

The report, titled “Reducing the costs of migrants’ remittances and optimising their impact on development: Financial products and tools for North Africa and the franc zone” recommends “developing and strengthening the supply of bank and non-bank products for migrants and fostering the reduction in remittance costs and co-development”.

The first idea is to scale up the role of money transfer companies solely for urgent remittances in order to reduce informal money transfers and step up competition in the market.

The report also suggests the development of classic linked bank accounts. Linked bank account products and services cover a wide array of tools: remote accounts opened in the country of origin from the country of residence, real estate loans granted in the migrant’s country of residence for a purchase in the country of origin, savings products set up in the country of residence for investment in the country of origin, and savings products (especially building society savings) in the country of origin for non-residents. Developing classic linked bank accounts will therefore serve as a tool to promote access to banking services and financial inclusion in the countries of origin and to mobilise the transferred savings.

The third avenue suggested by the report is the promotion of inclusive linked bank accounts as an instrument to increase integration in the countries of residence and to put the savings of nationals living abroad into local development and their own individual projects.

The report also advocates the increased use of information technology tools in linked bank accounts: mobile banking, e-banking and, more broadly, branchless banking to facilitate remittances and promote access to banking services.

The last option recommended by the report is to encourage migrants to use financial and stock market products as a tool to mobilise the savings and expertise of nationals living abroad to work for development, strengthen the financial systems and economies of the countries of origin, and integrate them more into the global economy.

Led by Epargne Sans Frontière, the report recalls that migrants’ remittances are 2.5 times more important than the official development assistance Maghreb and franc zone countries receive from rich countries. Money sent by migrants is therefore an important source of financing for developing country economies and their recipient populations.

The full report and its executive summary are available online. The study is currently discussed with major money industry players through a series of dedicated workshops. 

The report titled “Reducing the costs of migrants’ remittances and optimising their impact on development: Financial products and tools for North Africa and the franc zone” (2012) addresses a request made by the African Development Bank (AfDB) and France, as part of an initiative involving the Treasury General Directorate, Banque de France, the ministry of Foreign and European Affairs, the ministry of Interior, Overseas, Regions and Immigration and the French Development Agency. It builds on previous work and activities initiated by the AfDB in 2007, with financial support from France.