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Remittances: Statistical Accuracy
and Financial Benefits
Anna Prokhorova, World Bank,
MiRPAL Coordinator for Russia
Almaty, Kazakhstan
October 31 –November 1, 2013
Global and regional outlook of remittances flows
Methodology and sources of data
Cost of remittances
General Principles of International Remittances
Financial literacy factor
Remittances in MiRPAL countries
1. Global and regional trends
in remittances flows
World Bank estimates
Migration and Remittance Flows: Recent
Trends and Outlook, 2013-2016
$550 billion
remittance flows may reach worldwide in 2013
and over $700 billion by 2016.
 $414 billion
remittance flows to developing countries are
expected to reach in 2013 (up 6.3 percent
over 2012), and $540 billion by 2016.
 $ 43 billion
remittance flows estimated for 2013 to the
developing countries of Europe and Central
Asia (ECA) region, thus projected to have
increased by 10.8 percent
Top-10 remittance recipients in the world
Top 10 recipients of remittances.
US$ billion, 2013e
Top 10 recipients of remittances. % of
GDP, 2012
2. Measuring Remittances
Remittances – cross-border person-to-person payments
of relatively low value.
Remittances = “compensation of employees” +
“personal transfers” (Balance of Payment Manual 6th
“Compensation of employees” refers to the income of
border, seasonal, and other short-term workers who
work in an economy where they are not resident, and to
the income of resident workers who are employed by a
nonresident entity.
“Personal transfers” are defined independently of the
source of income of the sending household, the
relationship between the households, and the purpose
for which the transfer is made.
Sources of data
International Transaction Reporting System (ITRS)
Bank reporting
Post offices
Findings of household surveys
Indirect sources (e.g. migration data)
Bilateral data
3. Cost of Remittances
Cost effectiveness
US $16 bln a year
can be saved up if cutting remittances
prices by at least 5 percentage points
5x5 Objective
was endorsed in July 2008, at L’Aquila
summit, by G8 in order “to achieve in
particular the objective of a reduction of
the global average cost of transferring
remittances from 10% to 5% in 5 years”
Global Average Total Cost for sending
USD 200
Distribution of Average Total Costs
(% of corridors)
Total average cost in G8 countries,
Cost by remittance service
provider (RSP)
Post offices
Global average
*Average cost of sending USD 200 or the
local currency equivalent, Q3, 2013
•In about 79% of the countries surveyed,
commercial banks and to a lesser extent
international MTOs are considered the
most relevant RSPs; the role of NBFIs and
mobile phone providers is still very limited.
•RSPs require a license in 66% of the
•Survey results show that cash and current
account transfers are regarded as the most
relevant payment instruments for both
sending and receiving remittances.
•In only 56% of the countries RSPs are
required to disclose all transaction details
before the transaction itself is performed.
4. General Principles for
International Remittances
World Bank/Bank of International
5. Financial literacy factor
Based on World Bank research
The Impact of Financial Literacy
Training for Migrants (2012)
Results of a randomized experiment designed to measure the
impact of providing financial literacy training to migrants in New
Zealand and Australia – countries which had recently launched a
remittance cost comparison website
( for sending money to the Pacific
The case for providing financial literacy training for migrants
needs to rest on other criteria than the financial savings from
cheaper remittances, such as the improvements in their
capabilities from being more informed customers, and the
potential savings from other aspects of financial management,
such as choice of debt levels and instruments.
Experimenting further with adding additional content on
budgeting, saving, and debt management seem fruitful areas for
policy refinement in this area.
No big changes in ultimate outcomes – migrants avoid switching
to more expensive or less transparent remittance channels, but
do not change the amount or frequency of remitting.
Who You Train Matters: Identifying Complementary
Effects of Financial Education on Migrant
Households (2012)
A survey conducted in Indonesia among the migrant
worker and the migrant worker’s household.
The study finds strong and statistically significant
impacts of financial literacy training given to both the
migrant and her family on savings behaviors and
outcomes, in contrast to much of the existing
The study also finds that the same treatment group is
less likely to have taken out a loan in the past six
The training does not change either frequency or the
amount of remittances received, but does change how
household use this money.
They are more likely to keep financial records, and as a
result of these knowledge and behavior changes,
accumulate more savings and rely less on loans.
6. Migration and Remittances
in ECA region
MiRPAL countries
Top 10 remittances recipients in Europe
and Central Asia region (ECA)
Top 10 ECA countries receiving
remittances. US$ billion, 2013e
Top 10 ECA countries receiving
remittances, share of GDP, %,
Cost of sending remittances to MiRPAL countries
It is important to
note that Russia has
a unique
environment where
cross border
remittances are
mostly conducted in
the same currency
and possible
additional cost
associated with a
currency exchange
are not known.
The Russian market
also benefits from
relatively low fees
charged by the
providers when
compared to the
other G8 countries.
Remittance data in MiRPAL countries
Cholpon-Ata, Sept 10-11 2012, eight countries
Methodology: BPM6 (Armenia, Belarus, Russia,
Ukraine in 2012)
Sources of data: ITRS (all), official statistics,
administrative sources (5 countries), household
surveys (TJ, AR,ML), interviews (Russia,
Reasons of data discrepancies: respondents
coverage (local RSPs), different thresholds,
different exchange rates, geographical coverage
Next steps: Kyrgyz Republic remittance module
to be included in household survey, Kazakhstan
and Moldova to introduce BPM6 in 2014
Impact of Remittances: Armenia case
In Armenia remittances contribute to economic growth (Granger causality
test) and the cycle of remittances’ activity coincides with GDP cycle.
Results of econometric analysis showed, that in the short run remittances
have positive impact on economic growth in Armenia. In the long run the
impact is negative.
Moral hazard: households receiving remittances tend not to work.
Regression analysis shows that growth of remittances reduces
employment in Armenia;
Reduction of workforce: because the growth of remittances is mostly due to
migration in previous years, which is the evidence of workforce reduction,
particularly - of high-quality workforce;
Occurrence of Dutch disease: remittances contribute to occurrence of
Dutch disease: increase of the real effective exchange rate reduces
competitiveness and export;
There are investments, but they are not productive: according to the
Survey in Armenia only 12% of households are engaged in business. The
main part of remittances at the peak of economic growth was focused on
housing development;
Risk of creating a trap for economic policy.
Indicators to capture remittances
impact on development
Channels used to transfer money
(transferred through regular channels like
banks, MTOs)
 Use of remittances –
-improving living conditions,
Sources of data – Household surveys
Thank you!
[email protected]