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FROM REMITTANCES TO SAVINGS

Tomás Miller, Access to Finance Unit Chief, FOMINGlobal Forum on Remittances and DevelopmentMilan, Italy, June 18, 2015

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Background Member of the Inter-American Development Bank Group Established in 1992 Funded by 39 Country Donors

Objectives Promote entrepreneurship, economic opportunity, and financial

inclusion in Latin America and the Caribbean Innovate, pioneer and pilot private sector solutions for empowering

low-income population Identifying successful interventions and models Helping others in the private and public sectors take them to scale

Our vehicles Equity Investment Loans Grants

Access Areas Finance Markets Basic Services

ABOUT US

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Market information. Annual remittance reports, market research, capacity building to collect and publish information

Market Environment. Analysis and technical assistance on legal and regulatory framework

Business Models. Remittances and financial inclusion projects, with an emphasis on savings

FOMIN’S REMITTANCES WORK

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REMITTANCES AND SAVINGS APPROACH

40 million LAC remittance clients sent and/or received a total of $65.4 billion (2014)

Majority of remittances paid in cash and channeled into consumption

Still, 48.6% of adults in LAC do not have a savings or checking account

Opportunity to reduce economic vulnerability of remittances senders and recipients and increase client base of financial institutions.

MIF published a practical framework for our approach which is available on our website for institutions to use as a guide (available in English and in Spanish) Inclusive Savings for Remittance

Clients: A Practical Framework

Burgess. December 2014.

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REMITTANCES AND SAVINGS APPROACH

Design productsUnderstand

clients’ financial lives

Build accessDiversify revenue

Involve communities and social networks

Help clients set concrete savings goals

Increase customers’ access to deposit and withdrawal s

Set account pricing with clients’ income and behavior in mind

Label products to reflect clients’ mental accounting

Provide financial education, linked to actionable ways to

save

Open savings accounts remotely, not just in

branches

Cross-sell insurance and credit products

Send reminders and communicate with clients

regularly

Integrate budgeting tools into account services to

improve short-term money management

Improve merchant acceptance of non-cash

transactions

Look to remittance senders for new markets

Automate savings behavior

Offer rewards and make savings fun

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Objective. Promote the development and implementation of business strategies, including the design of liquid and planned savings products, targeted to remittance clients.

Projects. The Program will co-finance at least 10 projects

Activities eligible for funding.- Design or adjustment of savings products;- Promotion and financial education strategies; and- Testing of new distribution channels to offer savings

products.

Technical assistance. - The Program provides up to US$500k in grant

assistance per project

REMITTANCES AND SAVINGS PROGRAM

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PROJECTS APPROVED TO DATE

Country ParaguayApproval Date December 2013

Beneficiaries 27,750 direct beneficiaries

Executing Agency Visión Banco S.A.E.C.A.

Country HondurasApproval Date July 2014

Beneficiaries 20,000 direct beneficiaries

Executing Agency Red Katalysis

Country HaitiApproval Date December 2014

Beneficiaries 13,800 direct beneficiaries

Executing Agency Federation Le Levier

Country Dominican Republic

Approval DateOctober 2011 (prior to facility)

Beneficiaries 94,000 direct beneficiariesExecuting Agency Banco Unión S.A.

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LESSONS LEARNED

Financial inclusion of remittances clients, has to be accompanied by the development of an enabling legal and regulatory framework that promotes private sector innovation.

- Legal and regulatory framework in this area should take into account the needs of the lowest income populations and find a balance between the objective of financial inclusion and the stability of the financial system.

Access to reliable and updated remittances data can help private sector understand market’s dynamics and inform investment and operational decision-making within the private sector

In order to promote savings of remittances clients it is necessary to bring remittance’s payments closer to this population and have the appropriate infrastructure to undertake cash- in and cash-out transactions (Ex. Agent banking).

Technology, including mobile and internet, represent an opportunity to reduce costs of receiving the remittance and accumulate assets.

Financial education is key. Savings’ habits should be created since early stages and efforts by public and private sector are needed.

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