Bringing fees down: remittances
Remittances have a strong impact on transient poverty (vs. chronic one). They help receivers to fill those daily cash gaps: repair that wall, buy a fan or cement the house floor. Sometimes the money earnt by Indians abroad and sent home through a variety of formal and informal channels make big dreams come true too: send your brother to university or pay for your dad's diabetes treatment.
Some in the development community are adopting a new motto: 'migration not aid', migration remittances , differently to donors' money, go from household to household, it could be one of the most effective ways to reduce poverty, so, why not making those wires easier and cheaper?
IFMR Trust, the place I am working for this summer, will find an answer soon and I am part of the team who is supposed to do so! India is the world's largest remittance country. The money that Non-Resident Indians send home is on the rise. We are currently evaluating how to offer a remittance product to the KGFS clients (rural remote banking system). Some first steps have been taken:
A survey was conducted among 30% of current clients to assess the demand for such a product and the origin of the remittances. From our CEO colleagues (Anupama) we have heard that some villages in Tamil Nadu are mostly female populated, with almost all of their husbands working abroad. We wanted to know more and talk to clients. Some of the results from our survey below.
- Number of respondents with relatives sending remittances: 35%
- Main countries of origin: Singapore, Dubai
- Wire service provider: Western Union
The survey told us a lot from those questions omitted: Not surprisingly, respondents did not answer to some questions and most certainly lied in some answers. After all, most of us like others to respect our financial privacy, right? When we asked to our clients for the commission charged for the wire, the total amount received and the frequency, confusion and inconsistencies ruled.
The next step was to talk to some of the remittance services' providers. Thanjavur has seen an acute mushrooming of Western Union (WU) offices during the last years (only stopped by RBI last year ). Today there are between 25-35 Western Union offices in this town. From our interviews it follows that there is some discretion on the charges/commission fees. A recent article I found in the Times informs that an Indian wiring $1000 from NYC to India pays around $40, the same wire from New Jersey would cost him/her $79.
According to the WU agents in Thanjavur, people come from as far as 75km. to get their relatives' money. That can take really long. It took me 6 and a half hours to do 160km. yesterday (Pondicherry-Thanjavur). This is going to be KGFS strong advantage: while others stay in town and wait for the customers, KGFS settles down shop close to them.
There is a lot of work to be done in this area. Talk to experts, to those who have already tried a remittance product (Adhikar), map the process, understand the regulatory constraints, and most importantly, make sure that the objective is met: to make internal and international wires to rural remote India cheaper and faster.
Regulatory barriers seems to be a main concern. As the boss of IFMR Trust told me the other day, in India the Regulatory Body has the strange ability of detecting all business ideas that could work and making sure that they won't. Will we find the way to legally circumvent all blocks put along the way?
Some in the development community are adopting a new motto: 'migration not aid', migration remittances , differently to donors' money, go from household to household, it could be one of the most effective ways to reduce poverty, so, why not making those wires easier and cheaper?
IFMR Trust, the place I am working for this summer, will find an answer soon and I am part of the team who is supposed to do so! India is the world's largest remittance country. The money that Non-Resident Indians send home is on the rise. We are currently evaluating how to offer a remittance product to the KGFS clients (rural remote banking system). Some first steps have been taken:
A survey was conducted among 30% of current clients to assess the demand for such a product and the origin of the remittances. From our CEO colleagues (Anupama) we have heard that some villages in Tamil Nadu are mostly female populated, with almost all of their husbands working abroad. We wanted to know more and talk to clients. Some of the results from our survey below.
- Number of respondents with relatives sending remittances: 35%
- Main countries of origin: Singapore, Dubai
- Wire service provider: Western Union
The survey told us a lot from those questions omitted: Not surprisingly, respondents did not answer to some questions and most certainly lied in some answers. After all, most of us like others to respect our financial privacy, right? When we asked to our clients for the commission charged for the wire, the total amount received and the frequency, confusion and inconsistencies ruled.
The next step was to talk to some of the remittance services' providers. Thanjavur has seen an acute mushrooming of Western Union (WU) offices during the last years (only stopped by RBI last year ). Today there are between 25-35 Western Union offices in this town. From our interviews it follows that there is some discretion on the charges/commission fees. A recent article I found in the Times informs that an Indian wiring $1000 from NYC to India pays around $40, the same wire from New Jersey would cost him/her $79.
According to the WU agents in Thanjavur, people come from as far as 75km. to get their relatives' money. That can take really long. It took me 6 and a half hours to do 160km. yesterday (Pondicherry-Thanjavur). This is going to be KGFS strong advantage: while others stay in town and wait for the customers, KGFS settles down shop close to them.
There is a lot of work to be done in this area. Talk to experts, to those who have already tried a remittance product (Adhikar), map the process, understand the regulatory constraints, and most importantly, make sure that the objective is met: to make internal and international wires to rural remote India cheaper and faster.
Regulatory barriers seems to be a main concern. As the boss of IFMR Trust told me the other day, in India the Regulatory Body has the strange ability of detecting all business ideas that could work and making sure that they won't. Will we find the way to legally circumvent all blocks put along the way?
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