Post on 27-Dec-2015
FAIR VALUE REMITTANCES: LINKING MIGRANT REMITTANCES WITH MFIS
Sending remittances across countries demand careful attention to ensure transfers arrive properly and can be quickly paid to the intended beneficiaries.
In late 2008, Sinapi Aba Trust decided to
introduce remittance product to add up to the
pool of financial service products it has in
order to achieve financial sustainability
through increased profitability.
PARTNERS
Western Union through EcobankMoney SystemMoney Gram through Merchant BankRoyaale MoneyVigo through Merban BankCash4Africa
PERFORMANCE FOR THE YEAR 2010
So far this year Sinapi has been able to
pay out to beneficiaries an amount of
$12M.
What Are The Key Success Factors?
Every institution that enters the remittance
market agrees that operating a Remittance
service puts to the test the institutional
capacity of the MFI in terms of its
management, staffing, systems and marketing.
MFI CAPABILITY
Overall financial and operational performance
(stable, growing, shrinking). The institution
must be well managed and governed, with
stable, profitable and transparent operations
for existing financial services.
MFI CAPABILITY
Available human resources, and their
knowledge of remittance operations.
Remittance operations require a significant
investment in skilled human capital. There is
the need to leverage the specialized staff to
provide specialized service for the clients.
MFI CAPABILITY
Capacity to manage the increased cash
flow from money transfers. Capacity of
management to handle cash
management challenges. Making cash
available on a consistent basis.
MFI CAPABILITY
Resilience of the MFI’s systems and
overall capacity for growth in
transactions and number of clients.
Capacity for managing transfers
effectively (number of transactions,
volume of clients to serve, value of
payments to distribute).
MFI CAPABILITY
Data security. The MFI must protect its
data and the security of payment
instructions, because this can attract
both internal and external fraud.
MFI CAPABILITY
Communication system and internet
connectivity in all branch offices. These help to
manage the volume of transfers, ensuring
speedy delivery, guaranteeing transaction
security and interface with other partners, and
generate reports.
MARKET SITUATION
To succeed in remittance operation the
institution needs to have country wide
coverage. Presently Sinapi Aba Trust has
45 branches.
MARKET SITUATION
SAT has more than 90,000 clientele
base of which more than 70% are in
rural areas
MARKET SITUATION
Continuous targeted marketing is the
key to attracting new clients. Although
some marketing on the receiving side is
necessary and effective, marketing
appears to have the most impact on the
sending side, near the point of sale.
MARKET SITUATION
Also remittance provides hard-to-reach
clients of MFI a quality product at a
lower cost.
MARKET SITUATION
Provision of Remittance services
attract new clients and open
opportunities to cross-sell other
microfinance products.
Generate income (and ultimately
profits) from a fee-based product.
MARKET SITUATION
With increasing competition among
remittance providers, the quality of
service that is offered is all the more
important and sets MFI apart from the
competition.
MARKET SITUATION
Identification and penetration of an
appropriate market niche. To identify an
appropriate market niche, CGAP
recommends that the MFI conduct a
thorough market study to assess the
potential value of the remittance product.
REGULATION
While the opportunities of entering the
remittance market may be numerous and
extremely enticing, microfinance institutions
should be aware of the regulatory
framework prevailing in the country.
REGULATION
Governments in both sender countries
and recipient countries seek to regulate
and control illicit money transfers, money
laundering and the financing of terrorism.
REGULATION
Regulations will determine whether the MFI
will have: (1) to have a license in order to
enter the market (2) direct access to foreign
exchange (3) the legal right to become an
agent or sub-agent of a money transfer
company among other things.
REGULATION
In Ghana remittances are offered by
financial institutions like the banks, non-
bank financial institutions like the savings
and loans companies and financial NGOs’
like the Microfinance Institutions.
REGULATION
There is no specific enactment to regulate the Remittance operations.
However there is Anti-Money Laundering
Law (Act 749) which regulates control of
illicit money transfers, money laundering
and the financing of terrorism
REGULATION
And also the Foreign Exchange Law (Act 723) which regulates exchange of foreign currency, for international payment transactions and foreign exchange transfers.
REGULATION
What it means is that in Ghana
remittance operations can be
conducted as long as you comply
with the above provisions.
CHALLENGES
The main challenges that MFIs who enter the remittance market face arise from the following;
Due diligence on customers Software to the run the remittance
business in terms of reporting on timeReconciliation should be regular
CHALLENGES
Cash handling challenges
Operational risk of fraud
Communication and internet connectivity challenges
Slow in reimbursement
Bio data capturing problems
Delays in clearing transfers in the sender’s country
which irritates clients.