Can Financial Literacy Help Migrants Save on Remittance Costs?


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In a new working paper published in the World Bank Working Paper Series, John Gibson, David McKenzie, and I look at exactly this question.

While much of migration policy has been focused on reducing costs of remittances and introducing new and inexpensive transmission channels, relatively little attention has been paid to educating customers on such benefits. After all, this could be pretty low hanging fruit – tell migrants about a cheaper way of remitting and they will switch.

With this thought in mind, we designed an information dissemination experiment for migrant workers in both Australia and New Zealand who had migrated from the Pacific Islands, East Asia, and Sri Lanka. 

We kept the training pretty short and simple – after all, if the low hanging fruit theory were to hang, we definitely did not need a comprehensive intervention. Our training consisted of a two hour session plus handouts and written material that focused on covering the reasons people remit, different components of a remittance cost including the exchange rate premium, strategies for reducing this cost including bundling transactions into fewer larger transactions and comparing costs using the website, explaining new remittance products, and finally comparing costs of different forms of credit.

Our analysis comes from three follow-up surveys conducted each month following the intervention, as well as a final survey after six months. Aside from some econometric issues which we discuss in the working paper, we find fairly large improvements in financial knowledge of the migrants. This of course is not terribly surprising – we tell individuals about a certain product or a remittance channel, and they are able to correctly identify it in follow-up surveys. What matters more is whether they change behavior in response to this knowledge.

Here, our results are not as strong. While we see that migrants are more likely to use different sources of information to compare the costs of remitting, there does not seem to be any treatment effect on either the frequency of remitting or the amount remitted, or even more surprisingly on the take-up of the new cheaper products.

But perhaps this is not surprising. From a migrant’s perspective, the cost saving from switching may be trivial – a simple back of the envelope calculation that we present in the paper suggests savings of at most $46 per year. Subtracted from these meager savings the cost of switching and learning new methods and perhaps some procrastination, and it is no surprise then that our real effects are small or insignificant.

From a policy perspective, clearly we cannot ignore migrant workers and remittance channels. However, maybe we are overlooking an alternative avenue for knowledge dissemination. Maybe the focus of policy ought to be on how migrants and their families use their existing remittances. Indeed, there is extensive evidence that much of remittances is consumed and not saved or invested. Perhaps a financial education program focused on savings and budgeting behavior for migrants and their household members can get better traction and better results. David McKenzie and I are exploring this precise idea in another experiment in Indonesia which focuses on financial education for migrants and their families back in their home countries. We’ll soon write a blog about that paper.  

For more details on the study, see our two-page Finance and Private Sector Development Impact Note No. 18.

For the full paper, see: John Gibson, David McKenzie and Bilal Zia “The impact of financial literacy training for migrants”, World Bank Policy Research Working Paper no. 6073.



Bilal Zia

Senior Economist, DECRG

David McKenzie

Lead Economist, Development Research Group, World Bank

Join the Conversation

Muhammad Naeem Ul Fateh
June 11, 2012

This can work out when UNO by itself create a trust worthy institution for this purpose. In that manner this can be done within the World Bank or in IMF instead to give to any other NGO to expedite such functions.

Then any campaign or fiscal education will have impact as per required by the institutions.

Muhammad Naeem Ul Fateh, PhD

Syed Y Hassan
August 20, 2012

Something to share something really interesting, though it is not directly related but indirectly it is -- to support the above mentioned study.

While working on a study of Financial Crisis -- using ML -- I found a strong correlation between education & financial crisis. The countries where the education level was pretty low were affected the most by Financial Crisis. I am still unable to find out the reasons, since it was not my area of interest. One can think of it, that USA was affected by the crisis in 2008 onward, since having the significant education level. But the thing is the countries where education level is too low they were affected the most in a period of last 50 years. For instance, the countries of Africa.

I agree with the point of Financial Education, but I guess if I've been aware of a low cost solution, why would I go for an expensive one. So in short, awareness of financial solutions is more important.

But its a great effort.

Syed Y Hassan

Suraj Bhatia
September 06, 2012

Some time we have Circumstances where management of NPA is a difficult Task. Therefore we are focusing on a NPA Management Software, So that it will help us from the Problems like managing asset sales like Tendering. Bidding, comparing and valuation.

March 10, 2017

Call me a cynic, but another study from #WorldBank on #Remittances. Too many studies have been done on how to switch, change #remittances behaviors from consumption to productive use, it has to do with covering basic living needs and consumption spending in receiving country. Very few invest in new business and home infrastructure those receiving the funds also tend to stop working and dependance takes place. Will education help, it wont hurt.