The price of monopolies in Tonga

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Remittances are the second biggest component of international capital flows (after foreign direct investment). This makes it important to understand how the money gets from a to b - the senders, recipients, delivery channels and costs of remittances.

In the case of Tonga, in the south Pacific, remittances are a very big deal - making up one third of GDP. But the costs of remittances (15-20% of the typical amount remitted) are also among the highest in the world.

Analysis of data on the flows shows that competition would help lower costs and more than proportionally increase remittances received. But what hampers competition?

A small group of international money transfer operators and a church-run company have cornered the market jointly accounting for 84 percent of all transfers. Banks play little if any role. Senders are unaware of their options.

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