Tuesday, February 13, 2007

Remittances: Sending money back home

In the broadest sense, a remittance is a bank transfer sent from one person to another, typically over a long distance. Placing this definition in context, remittances are a way to supplement family members, and by extension, local economies in impoverished conditions. A main impetus for immigration/migration is economic. The members of a family or community that move into an economicly promising location, are often indebted/obliged/committed to sending money to families back home.

In Krygystan this seemed to work in a variety of ways. People who move to Eastern Europe, would send money to families back home. Also, some of the people we spoke to in Krygystan also sent money to their family members in China.

Another example from here in Seattle is of Mexican immigrants moving to Seattle for economic opportunity (the recent story I heard on NPR about "taco trucks" - those mobile food stands parked in semi-perminant locations around the city and attracting flocks of fans). The woman who spoke to the reporter talked about how the money they made from the business went both to investing in more trucks and saving up to open a permanent/traditional restaurant, but much of it was sent to family back home.

Remittances are highly significant in a diasporic context both for the individuals on both sides of the transations and at a larger scale of the economies that these remittances power.

From this article:
The World Bank estimates that such remittances totaled $257 million in 2005, with informal channel transfers being nearly equal.
Yesterday Mastercard announced a pilot program to help people send money, via a mobile phone to others back home. Mobile phones as a delivery method for remittances is not new, it's been going on in the Phillipines for some time. What is significant about this announcement is it's scale involving a mobile phone conglomerate which can help match local mobile providers with cooperating banks.

Read more here: Banking on Mobile.

To use a US analogy, remittance transfer fees are the pay day loans of bank transactions, sometimes charging as much as 24-50% of the remittnace as a transaction fee. Here's hoping that the focus on mobile technologies will bring some relief to that practice.


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