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International Transactions in Remittances: Guide for Balance of Payments Statistics Compilers and Users

Neil Fantom's picture

As part of the effort to improve estimates of remittance flows within the framework of Balance of Payments statistics, the IMF's Statistics Department, together with the "Luxembourg Group," has completed a draft of the new International Transactions in Remittances: Guide for Compilers and Users (RCG). The chapters and appendices are presented at the IMF's website.

Comments on the draft RCG, with particular reference to content, clarity, and detail, are welcome and should be sent using the form provided on the IMF website by October 24, 2008. Notes for reviewers are also provided on the website. A revised version of the RCG is expected to be posted on the website by the end of the year.

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Submitted by Mohamed Sidie Sheriff on
When there is any talk of remittance these days, it is mostly about how diasporans in rich western countries send monies back home through established money transfer banks or bureaus to their less fortunate loved ones typically in Africa, Asia, Mexico and South America, more for subsistence than for business purposes. On the other hand, there is a form of remittance which takes place often and again within an African country, mostly from the better-offs in the cities to their worse-off relatives in remote impoverished villages. In certain cases, it is done in an ingenious way to substitute for the absence of money transfer facilities where the recipient villages are often so secluded and unreachable by road that it becomes extremely difficult, costly and even risky to entrust travelers with the meager sums meant, for instance, to save an ageing relative from illness or to prevent a child from dropping out of school in the village. In the small West African country of Sierra Leone which has been consistently kept around the bottom of the world’s list of human development performers over the last two decades, both the money remitters in the cities and remittance receivers in the villages belong to the same impoverish class with more or less slight earning edges of the former over the latter. Indeed, it is difficult to explain how city dwellers who can hardly survive on what they acquire can still share their pittances with their people in the villages. Moreover, there are villages and towns that are so cut-off from the rest of Sierra Leone in terms of road access and flow of goods, people and services that their situations pose a special challenge for remittance. The Sherbro Island, which includes the township of Bonthe and its surrounding river side villages, is probably the first of places to think of when talking of disconnected communities in Sierra Leone. Some would argue that this island has been naturally disadvantaged by location on the map of Sierra Leone as a stand-alone territory isolated by water. Others would argue that such a placement should have given Bonthe an added advantage, given that archipelagoes like the Philippines and Indonesia which contend with thousands of islands continue to attract world class tourism; a situation which has by all indications contributed immensely to the economic growth and human development of those two Asian countries. Unlike the cases of Indonesia and the Philippines, Sierra Leone’s lone Sherbro Island with its headquarter town of Bonthe tells a different story. Instead of burgeoning with people, businesses and tourists as was the case in the 60s and 70s, the Sherbro Island has over the years bided farewell to a lot of its own indigenes as well as migrant fortune seekers who once made Bonthe a socially and economically vibrant place to reside. Indeed, Bonthe has experienced enormous depletion of social and economic capital. Infrastructure, facilities and services have so rapidly atrophied over the years that Bonthe is now fastly becoming desolate, unless something is done about it fast. With the end of Sierra Leone’s war four years ago, Bonthe is one of the slowest places in the country recovering from infrastructural, business and demographic loss. Presently, fishing, coconut oil extraction, rice and cassava cultivation as well as piassava processing are among the key economic occupations of the Islanders. Bonthe also has a nice resort hotel, a number of schools and a college as well as a hospital which provide limited employment for the few skilled indigenes. Among the bulk of the hundreds of unskilled youth in Bonthe town, there are few operators of a pay-phone facility which connects to the network of a cell phone company called Zain that not too long ago carried the former brand name Celtel across the African continent. Every one’s guess is that pay phones in remote rural communities – such as the ones in Bonthe - are used solely to facilitate communication with people in other parts of the country and beyond. In the case of Bonthe, the guess would be that the ageing and very young vulnerable people in that remote community would be opportuned by the availability of a communication network such as Zain to always nag their relatives in the cities and abroad to remit their periodic subsistence allowances back home. What many might not guess is how the same Zain is being used in an innovative way as the money transfer mechanism to facilitate the remittance process itself. Joshua Sondie who currently resides in Freetown, Sierra Leone’s capital city, hails from Bonthe. He makes his living through a casual employment as an occasional sales representative of a business enterprise in Freetown. Whenever Joshua is fortunate to earn more, he remits at least the local currency equivalent of US$20 back home as subsistence allowance to his ageing mother and to keep his sister’s son in school. “How do you usually send the money”, I asked Joshua out of curiosity, given that Bonthe is so difficult to reach and there are hardly trust-worthy travelers who can safely carry and deliver the money to his mother. “All I do is to purchase US$20 worth of Zain cell phone scratch cards”, Joshua explained, “…and I then use my cell phone bearing the Zain SIM card or chip to call one of the pay phone operators back home in Bonthe. I tell the operator that I’m sending US$20 worth of top-up card units into the operator’s phone along with 2 extra dollars worth of units as the agreed 10% remittance charges. The operator receives the units and disburses in cash the local currency equivalent of US$20 to my mother. After the transaction, my mother uses the operators phone to call me and confirm receipt of the money. It is as simple as that”, said Joshua. “In the absence of formal banks and bureaus, the cell phone operators in Bonthe have now assumed the role of money transferers”, Joshua continues. This is in short how a remote community in Sierra Leone benefits from remittances. When the former World Bank Country Manager, James Sackey, and myself joined colleagues at ENCISS – an agency responsible for facilitating citizen-state engagement – to visit Bonthe in November 2006 for a development dialogue event, the pay phone business was going on hand-in-hand with money transfer. But it was not until recently, in September 2008, that I learnt about this wonderful innovation. Now that IFC has been established in the country, with the Sierra Leone Business Forum operating in full gear, I am just wondering as to how this story would be of interest to them.

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