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Banking on Migrant Money

A new survey finds that migrant workers sent over $300 billion in remittances home last year. In the case of Latin America, the relatively low cost of cash transfers serves as a major factor in a high rate of remittance flows. A recent Viewpoints Americas proposes incorporating remittances into a larger model of expanding microfinance services.

Migrant workers worldwide sent home over $300 billion in remittances in 2006, according to a new survey.  The figure, more than a third higher than previously estimated, outpaces aid to the developing world by nearly three to one.

Latin America received more than $68 billion in remittances—well over half of what Asian nations received, despite the fact that Asia’s population is more than seven times larger. The study, conducted by the UN International Fund for Agricultural Development and Inter-American Development Bank (IDB), said the low cost of sending cash home serves as one of the major factors in the region’s high rate of remittance flows. Competition between banks and money transfer companies for Latin American migrant cash flows has forced down commissions to as low as five percent since 2000, reports the Financial Times. 

Mexico continues to lead the region in attracting migrant dollars by a wide margin, receiving more than $24.3 billion in 2006, followed by Brazil, which pulled in nearly $7.4 billion. Remittance dollars accounted for almost 3 percent of Mexico’s GDP last year, and India was the only other country worldwide to draw more migrant cash.
However, an August IDB report predicted stagnation in Mexico’s remittance growth rate, with the portion of Mexican migrants in the United States regularly transferring funds home down to 64 percent in the first half of 2007, compared with 71 percent during the same six months last year. Pollster Sergio Bendixen attributes the change to vulnerability felt by migrants in U.S. states with new immigrant populations, where undocumented laborers hold onto cash out of concern that they could be deported. 

A recent issue of Viewpoints Americas proposes a process for incorporating remittances into a larger model to expand microfinance services and broaden financial inclusiveness.

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