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Remittances and Financial Inclusion: Evidence from El Salvador

Maria Soledad Martinez Peria's picture

While we know a lot about the impact of remittances on growth, investment, poverty, inequality, health, and education, the potential effects of international remittances on the domestic financial system and financial inclusion have not received much attention. There are several ways in which remittances could affect financial inclusion (that is, facilitating households’ access to and use of financial services). First, remittances might increase the demand for savings instruments. The fixed costs of sending remittances make the flows lumpy, providing households with excess cash for some period of time. This might potentially increase their demands for deposit accounts, since financial institutions offer households a safe place to store this temporary excess cash. Second, remittances might increase household’s likelihood of obtaining a loan. Processing remittances flows provides financial institutions with information on the income of recipient households. This information might make financial institutions more willing and able to extend loans to otherwise opaque borrowers. On the other hand, since remittances might help relax households’ financing constraints, the demand for credit might fall as remittances increase.

Increasing interest in diaspora bonds

Dilip Ratha's picture

The side event on diaspora bonds organized during the annual meetings of the World Bank and the IMF attracted significant interest. Senior officials in the Bank considered forming a task force to implement diaspora bonds, while the governors of the central bank of Kenya and that of Bangladesh argued in favor the importance of the diasporas as a source of remittances and investments for their countries. Kenya has issued a new series of infrastructure development bonds and is marketing it to retail diaspora investors until February. The governor of the Bank of Bangladesh also expressed strong interest in issuing a diaspora bonds. Separately, Nigeria's finance minister also issued a press release that Nigeria is going to issue a diaspora bond.

More information on this side event is now posted at http://go.worldbank.org/WC69CPEP60.

Implications of “Nitaqat”, Saudi Arabia's Indigenization Program, Likely to be Modest for Migrants

Sanket Mohapatra's picture

Saudi Arabia's recent indigenization effort titled "Nitaqat" came into effect on September 10. Saudi firms have been color coded to four categories - Red, Yellow and Green, and Blue/VIP.  Firms labeled "Red" will not be able to renew their foreign workers' visas and have until November 26 2011 to improve their status by hiring more Saudi natives.  "Yellow" firms have until February 23 2012 to improve their status and will not be allowed to extend their existing foreign employees' work visas beyond six years.  "Green” or “Excellent” firms with high Saudization rates will be allowed to offer jobs to foreign workers that are employed by firms in the Red and Yellow categories and transfer their visas. And firms in the highest “VIP” category will enjoy the ability to hire workers from any part of the world using a web-based system with minimal clearance.

Using Sending Country Surveys as a Basis for Sampling Immigrants: A cautionary tale

David McKenzie's picture

International migration is the most effective action that people in developing countries can take to increase their incomes and well-being. Yet our ability to learn about the policies that enhance or inhibit the gains to migration is severely restricted due to the poor state of migration data. One element of this is the lack of representative surveys of immigrants.

Is it possible to send remittances to North Korea?

Sonia Plaza's picture

I participated in a panel on Informal Markets and Peacebuilding in North Korea at the United States Institute of Pace last Tuesday where we discussed remittances. There is no data available on how much remittance North Korea receives since the country does not publish remittance statistics. 

However, remittances are being sent from South Korea and China through informal channels (hand carried to the border by informal operators or wired). According to the Ministry of Unification in Seoul, North Koreans living in Seoul remit around 10 million dollars per year. Other estimates indicate that the annual amount is within the range of $5-$15 million per year.

The Impact of Low-Skilled Migrants on High-Skilled Women’s Work

David McKenzie's picture

Much of the debate about the effects of immigration on native workers focuses on possible negative consequences for wages or employment. However, a series of recent papers highlights a big positive effect – having immigrants as cleaners, nannies, and home-care assistants allows high-skilled women to work more.

Migration to cities can equalize household income in rural China

Xubei Luo's picture

With Nong Zhu

Migrant workers have been contributing to one-sixth of China’s GDP growth since the mid 1980s. The impact of rural migrants’ contribution is best seen in cities during the Chinese New Year, when they return to reunite with their families, leaving behind a massive urban labor shortage. This happens every year despite urban families and restaurant owners offering high bonuses.

There is a consensus that migration has contributed to increased rural income, but views differ on its impact on rural inequality. My view is that rural households with higher incomes are not more likely than poorer households to participate in migration or benefit disproportionately from it. Adding to my recent blog in People Move, I would like to discuss the reasons behind this.

The impact of studying abroad - and of being made to return home again

David McKenzie's picture

Studying abroad is becoming increasingly common in many countries – with almost 3 million students educated each year at the tertiary level in a country other than their own. For developing countries in particular, studying abroad offers many of the promises and fears of brain drain (both of which I think are overblown).

How migration affects youth - a view from the Philippines

It was a fine day when I left for Japan last year to attend a graduate student’s conference. As I was about to enter the airport gate, a heartbreaking scene made me stop --- a young girl, around seven years old, holding her mother so tightly and not letting her go.

The ECA diaspora can contribute to development

Sudharshan Canagarajah's picture

At approximately 46 million, the diaspora population originating from the ECA (Europe & Central Asia) countries is the largest of all the development regions. Over ten percent of the population of the ECA countries currently lives outside their home countries, a much larger share than the 3 percent of the world’s population who are defined as migrants. Even if some immigrants choose to fully assimilate in the recipient countries, there is still a significant number who maintains active links to their countries of origin. The flow of remittances in ECA coming from this Diaspora is also quite significant, more than 30 percent of GDP in some ECA countries. This financial contribution has led to a dialogue on potential Diaspora Bonds to attract much needed investment for capital projects (see Dilip Ratha’s work).


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