Published on People Move

When competition forces the market to serve the poorest

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Poor people are not used to receiving customized services from businesses that are usually vying to serve rich customers. Every now and then, however, one comes across an example that defies convention. The example I have in mind is the story of Esterelle, a remittance agent who goes to the migrant camps in Abu Dhabi to provide remittance services to poor migrant workers from Bangladesh and the Philippines and other countries. In a story published today - Bringing it all back home - John Gravois describes how Esterelle provides not just a standard remittance service, but actually deposit and loan services customized to the needs of the poor individuals. And she does it for profit, not charity (even though the story hints at this motive). Charity is not sustainable; profit motive is.

This example is also an exception to the notion that services for the poor must rely on state subsidies and earmarks. When small numbers add up to create large profit opportunities, market competition can pressure businesses to provide customized services for the poor at market prices. Such services are likely to be more sustainable over time than those relying on public or private subsidies.

The key to such market arrangements, of course, is competition. The remittance market in Abu Dhabi and Dubai is large. Annual outward remittances from the UAE exceed $10 billion and may actually be closer to   $15 billion (sad that we don't know the actual data). As information about the size of the market has become more credible, competition among remittance service providers has become intense (see my earlier post "Dubious Dubai"). The regulatory environment in these remittance markets imposes minimal entry barriers for new players. And the crisis of late has made the rich look vulnerable, shifting attention to profit opportunities that may be thin, but resilient. As John says, "While global private investors trimmed their sails and retreated to safe harbours, migrant labourers mainly weathered the storm." Remittances have become even more important in these markets than before.


Dilip Ratha

Lead Economist and Economic Adviser to the Vice President of Operations, Multilateral Investment Guarantee Agency, World Bank

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