© 2006 ACCION International Challenges and opportunities for the financial inclusion of remittance...

© 2006 ACCION International

Challenges and opportunities for the financial inclusion of remittance recipients

October 19th, 2007

Monica Brand, Vice President, Marketing & Product Development Unit

Maria Jaramillo, Senior Director Remittances Program

Perspectives from ACCION’s work in remittances

© 2006 ACCION International 2

Content:

Challenges to bank recipientsChallenges to bank recipients

Opportunities to bank recipientsOpportunities to bank recipients

ACCION’s work in Remittances ACCION’s work in Remittances


ACCION International

ACCIÓN International, a private nonprofit organization founded in 1961,

• works to reduce poverty

• by providing financial services

• through its network of partner financial institutions

• to the millions of working poor throughout the world

Mission: Give people the tools they need to work

their way out of poverty

Pervasive, permanent impact

Means:By building strong microfinance

institutions

Core Operating Principles:Social impact and scale

SustainabilityLink to commercial markets


Where ACCION Works

30 Microfinance Partners in

23 Countries

ArgentinaBoliviaBrazil (2)Colombia (3)Ecuador (3)El SalvadorGuatemalaHaiti

AmericasHonduras Mexico (2)NicaraguaParaguay (2)PeruUnited StatesVenezuela

AfricaAngolaBeninCameroonGhanaMozambiqueNigeria

AsiaIndiaChinaVietnam

Actively negotiating

SenegalS. AfricaTanzaniaUgandaZimbabwe

MENA

EgyptMoroccoPakistan


ACCION’s goals and work in remittances:

Goal: Improve the financial options available to recipients by facilitating access to financial products, particularly products that can help families promote productive use of remittances

ACCION has been working in remittances in the past five years to:

• Identify market opportunities and develop financial products for recipients

• Implement innovations such as the use of pre-paid card for remittances

• Support commercialization and cross-sell strategies including the use of financial literacy tools

• Recommend and support the development of strategic alliances between microfinance institutions and money transfer companies to offer remittance services


Content:

Challenges to bank recipientsChallenges to bank recipients




Unpacking the potential to bank recipients depends on segmentation

Migration life cycle

Relationship w/ immigrant

Recipients


1. Segmenting the market by the stage in the immigration life cycle helps determine how remittances are being used:

Process in country of origin

• Use of loan sharks

• Family pays until immigrant is stable

• Recipient manages funds for household expenses

• Purchase of appliances

• Purchase of 2nd House (as investment or for family)

• Home Improvement

• Car/ Business (Low planning for future goals)

• Purchase of house, land or construction

• Financed with savings

• Sell of homes in country of origin

• Family divided

• Pay debts • Attain stability for immigrant and family

1-1.5 years

1-2 years 2-5 years 6-10 years >10 years

• House in country of origin

• Increases assets

• Supports family

• Decision to settle down in the US or return to country of origin

• Increase of goals in USA

Segment I Segment II* Segment III

Transactional Accounts

Savings AccountsHome Improvement

InsuranceHome ImprovementTransactional Acct


2. Segmenting the market by the relationship between the immigrant and the recipient helps determine how remittances impact household’s budgets:• Who the immigrant and the recipient are determines the type of remittances

that are being sent, why they’re sent and the impact that funds have in the recipient’s household budget.

• This analysis helps determine financial needs, financial products that can be linked with remittances and the type of strategy needed to bank each segment.

Potential for products to help

administer use of remittances

Greater potential to link with

savings and investment

products

Type of remittance being sent: Use of remittances:

Spouses

Children

Parents

Siblings

Consumption --> main source of income

Savings/ investment, joint goals --> additional source of income

Responsability, maintain family back-

home

Gratitude, improve quality of life

Financial Opportunities:


Recipients:

Transactional Accounts:

• Initial Phase: low cost accounts to help manage use of remittances b/c savings balances are low

• Direct deposit into accounts with cards>> gives convenience and security to recipients

Savings Account:

• Programmed savings for specific future goals: Education, emergency, home improvement

Home Improvement:

• Considering remittances as additional source of income for households

Microcredit – limited opportunity:

• Majority not entrepreneurs (only 21%)

• Approx 5% channeled for businesses

• Start-up loans: interest of recipient to start a business with the help of remittances. Product not currently offered by Microfinance Institutions

Banking recipients requires entering new market segments with emphasis on savings, home improvement, insurance. Less potential with microcredit

Immigrants:

Insurance: Help immigrant protect family back home. Health expenses constitute 3rd-4th use. Remittances insurance, life insurance and repatriation of immigrant

Mortgages: adapted to way immigrants want to buy a house, high % financed with savings


Content

Challenges to bank recipients Challenges to bank recipients




• A variety of creative marketing strategies have been employed to promote remittance-linked financial services

– Dedicated tellers (Cooperativa Salcajá), customer service officers (Integral), as well as independent sales force (BancoSol);

– Mother's day Campaign to attract savings (Banco Solidario);

– stamp in remittances receipts to promote products (FAMA);

– meetings with the community (AMUCSS);

• Time needed: So that client builds trust in institution

– To create awareness of potential that remittances funds have

– To help qualify clients for loans: frequency in receiving remittances

• Good customer service: shows that institution wants to establish a long-term relationship with client

Direct marketing and soft-sell needed:


• Barriers to banking go beyond attracting people to come into a bank to pick up a transfer. Using remittances to overcome these barriers presents challenges

– Real barriers: less convenient>>long lines; not open on weekends

– Perceived barriers: bureaucratic process; costs: remittances perceived as more expensive; “globalizing” based on savings accounts which have high maintenance fees

• Work needs to be done on the Client-value offer connection

• Strong marketing and communication strategies needed relying on client education to overcome barriers, create this awareness of potential that funds can have for them, promoting good understanding of products.

Key challenge: making banks approchable to people that have not

used them or have had negative experience using them


Questions or follow up:

• Remittances project: Maria Jaramillo, Senior Director Remittances (Washington DC office: 202/393-5113 x1626 or [email protected])

• General questions: Monica Brand, Vice President, Marketing & Product Development Unit (Washington DC office: 202/393-5113 x1621 or [email protected])

© 2006 ACCION International Challenges and opportunities for the financial inclusion of remittance...

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