Increasing opportunities for the rural poor: the Financing Facility for Remittances
One of the key findings of the recent World Bank “Leveraging Migration for Africa” report relates to the persistence of strong barriers that prevent African countries from fully grasping the potential benefits of remittances.
A situation which had already been described in IFAD’s “Sending Money Home to Africa” report. The cost of sending remittances to and within Sub-Saharan Africa remains very high, due to the low level of competition in the sector, dominated by the two dominant international money transfer agencies which jointly control 65% of all remittances payout locations, often through exclusivity arrangements. Accessibility issues in rural areas are also crucial.
As highlighted in the IFAD report, “Mexico alone has almost as many payout locations as the entire African continent, despite having only one-tenth of Africa’s population”. The very limited presence of banks in rural areas calls for an increased involvement of other categories of actors, such as post offices, credit cooperatives, microfinance institutions, etc. Technological developments, such as the use of mobile-based transfer technologies, can also contribute to improve accessibility.
Breaking down this type of barriers and increasing economic opportunities for the rural poor is precisely the ambition of the Financing Facility for Remittances (FFR) established in 2006, an almost US$20 million multi-donor Facility administered by IFAD and supported by the European Commission. This global Facility supports projects and activities contributing to three core objectives: promote access to remittances in rural areas, link remittances to rural finance services and products, and develop innovative and productive rural investment opportunities for migrants and community-based organisations. Of the almost 40 projects supported by the Facility, 11 are in Africa, involving a total of 13 countries.
Project Highlight: remittances and postal networks in West Africa
An FFR most successful project is regional in scope, covering Benin, Burkina Faso, Mali, Mauritania, Niger and Senegal. The project aims at extending international and domestic postal financial services, including remittance-related services, to rural areas of French-speaking countries in Western Africa. The project is focused on the extension of the Universal Postal Union (UPU) international electronic remittance service to rural postal offices (almost 80% of post offices in these countries are in rural areas) and on the establishment of a link between remittances and postal account-based services. It also fosters support postal offices to develop partnerships with non-postal financial service providers such as banks and credit unions.
To date, UPU has connected 355 rural post offices throughout the six countries. This has resulted in a drastic reduction in transfer time -from two weeks to a maximum of two days- as well as a reduction in tariffs by 30 to 50% -tariffs are now comprised between 2 and 4%. As a whole, transfer volumes in the 6 participating countries grew by 104% between 2009 and 2010. In addition, the development of these postal services puts pressure on private money transfers operators to decrease their own tariffs. Based on this promising experience, the FFR continues to explore the links between remittances and postal networks and is about to kick-start two new projects based on the use of postal networks in underserved areas of Asia and the Pacific region.
The FFR as an information broker
Aside from state of the art reports such as the 2009 study on African remittance markets, the FFR publishes factsheets on specific issues which synthesis knowledge and present related FFR project experience. In addition to the factsheet of postal networks, recent publications include remittances and financial literacy, remittances and microfinance networks, or remittances and mobile banking. The FFR also created the RemittancesGateway.org portal, a one-stop shop for information on remittances and development from international organisations, the private sector, government institutions and the media.
The FFR is the driving force behind the Global Forum on Remittances, a series of groundbreaking regional and international conferences dedicated to highlighting the impact of remittances in developing economies. These events are devoted to the creation of wide-reaching synergies among government, civil society and the private-sector stakeholders. Following the fora held in 2007, Washington DC, and in 2009, Tunis, the next Global Forum on Remittances will take place in early 2012, focusing on the Asia Pacific region.