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How digital remittances can help drive sustainable development

Marco Nicoli's picture
 Sarah Farhat/The World Bank
The Plateau area, business and administrative center of Dakar.
Photo: Sarah Farhat/The World Bank

More people in the world have access to financial accounts and tools than ever before. With this access, new products and services are being developed to facilitate convenient usage of these accounts. Taking this a step further, healthy financial inclusion incorporates customers’ ability to balance income and expenses, build and maintain reserves, and to manage and recover from financial shocks using a range of financial tools. The most useful financial services are those that provide customers with convenience, and support resilience through enhanced ability to weather shocks and pursue financial goals; effectively supporting the financial health of the user.

Remittances are an essential source of income for millions of families, many of whom are low income. Global migration is increasing - over 258 million people currently live outside their country of birth, up from 173 million in the year 2000 – and is trailed by a steady stream of transactions. The remittances industry moves over $600 billion around the world, with $466 billion being sent to low-and-middle income countries. As the first financial product used by many lower income people, remittances often act as a stepping stone to accessing a menu of financial services; as such, they are a cornerstone of financial health.

Paying across borders - Can distributed ledgers bring us closer together?

Rodrigo Mejia-Ricart's picture
Two women at bank in Mauritania
Photo: Hoel/World Bank

Remittances are  critical economic resources in emerging economies, helping vulnerable populations withstand adverse economic conditions. Personal remittances represent as much as 10.5% of GDP in the Philippines, 13.7% in Senegal, 28.3% in Nepal and 29.3% in Haiti. Global remittances reached $613 billion in 2017 and are projected to have grown 4.6% in 2018 to a record high of $642 billion. To put this in perspective, global remittances represent four times more than total official development assistance globally, which in 2016 reached $158 billion.
 
Recognizing the vital importance of remittances in and for emerging economies, the international community, including the G20, G7 and the World Bank have led initiatives to bring greater safety and efficiency to the remittances market and better serve the needs of the world’s most vulnerable groups. Clear progress has been made, with a significant decline in the price of remittances as measured by the World Bank Remittance Prices Worldwide database over the last decade. However, more work is needed; the average global remittance cost stood at 7% as of Q4 2018 – 4% higher than the 3% target set in the Sustainable Development Goals (SDGs) for 2030.

Remittances are more expensive precisely in the corridors where they are needed most. Sub-Saharan Africa remains the most expensive region to send money to, with an 8.97% average cost.

Advancing digital financial inclusion in ASEAN

Ana Maria Aviles's picture
People standing in line at check cashing Malaysia
Photo credit: Shutterstock


How can digital financial services effectively support financial inclusion? To answer this question, the World Bank recently collaborated with the Association of Southeast Asian Nations (ASEAN) Working Committee on Financial Inclusion (WC-FINC) on a study titled “Advancing Digital Financial Inclusion in ASEAN: Policy and Regulatory Enablers.” This study analyzes a wide range of digital financial services (DFS) through a framework based on that of the Payment Aspects of Financial Inclusion (PAFI) report.

According to the use of the PAFI framework (see figure below), three foundations must be present to enable the spread of DFS: government and private sector commitment to DFS development, a sound legal and regulatory framework concerning DFS, and an enabling financial and information and communications technology infrastructure. Atop these three foundations stand four catalytic pillars that increase uptake and use of DFS: improving the design of DFS products (and of the regulations that govern them), expanding agent networks and other access points, spreading financial literacy, and shifting large payment streams to flow through digital channels.

Cents and sensibility: three takeaways on investment incentives from Amazon HQ2

Hania Kronfol's picture
In a surprising turn of events, a few weeks ago, Amazon canceled its plans to build a corporate campus in New York City after facing backlash from lawmakers, activists and union leaders voicing concern on the incentives offered as well as the impact the investment would have on the cost of living and the city’s identity.

What’s new: In start-ups, SMEs, and sharing platforms?

Denis Medvedev's picture
Rifat, at her cosmetics shop and general store in Gujar Khan Town, World Bank Flickr
Entrepreneurship encompasses multiple dimensions, which is why it's always a pleasure to follow the NBER Entrepreneurship Working Group meetings – both for the high quality of papers and discussions as well as for the breadth of topics. This year's winter workshop was no exception, with topics ranging from start-up job creation, to corporate structure in Imperial Russia, to negative externalities of ride-sharing platforms.

Here are a few highlights:

Re-thinking informality: It’s all in the details

Andreja Marusic's picture

Informality is the subject of many a report, study, intervention, policy brief, political agenda and fireside chat, and due to its prevalence, rightfully so. In emerging and developing economies, the informal sector accounted for 32% of GDP and 70% of employment in 2016. This is a concern because informal firms tend to be less productive than formal firms and pay workers less than their formal counterparts. Reversing informality is enticing and promises rewards in the form of potential tax revenues, productivity gains, and poverty eradicating capabilities.  But the quest to bring more firms and workers into the formal sector has proven to be complex.

Giving life to numbers: Communicating risk through art

Samantha Power's picture
Risk & Time: A Data Sculpture on Nature, Disasters, & Finance
"Risk & Time: A Data Sculpture on Nature, Disasters, & Finance."
Photo Credit The World Bank

The way disasters impact people’s lives can be difficult to comprehend and so can the data around disaster risk.

Does the gravity of risk data resonate with people if they are only interacting with it through numbers and two-dimensional charts on a page? Can the scale of impacts be conveyed through such flat media? Will data in this format drive the level of action and innovation necessary to address growing risks in a warmer world?

In the face of these challenges, art can play an increasingly important role in risk communication. Art gives life and emotion to numbers, allowing for the communicator to more powerfully convey data that represent significant threats to people’s lives and livelihoods.

What’s holding back digital disruption in remittances in Southern Africa?

Nomsa Kachingwe's picture
South Africa currency
Photo: Shutterstock

In a new World Bank report on the Market for Remittance Services in Southern Africa, we outline the binding constraints that appear to be holding back the digital remittances revolution in the countries that make up the Southern African Development Community (SADC).

Digital disruption in international person-to-person remittances is well underway. New research estimates that international digital remittances will exceed US$300 billion globally by 2021, making up 44% of total formal international remittances, and up from 36% in 2018. Thanks to high rates of mobile phone penetration and growing internet access, digital players are not only gaining ground, but they are also forcing “traditional” incumbents to expand their digital footprint.

Policy hackathon explained: How an all-society approach can engage entrepreneurs and governments to develop better policy in West Africa

Alexandre Laure's picture
Also available in: Français
Brainstorming session at the Bamako Policy Hackathon
Brainstorming session at the Bamako Policy Hackathon. Photo: World Bank

What would happen if you put all the relevant players for the entrepreneurial ecosystem — startup founders, policymakers, developers, students, investors — into one room and facilitated an open dialogue on improving the business environment? This is exactly what is taking place in West Africa through a series of policy hackathons supported by the World Bank.

We all have a stake in development and this multifaceted process – local, top-down, bottom-up – is a great example of African innovation. Civic engagement in policymaking is not happening elsewhere so it’s not just about importing knowledge and best practice but generating lessons we can export to the rest of the world,” said Sebastian Molineus, World Bank Director of the Finance, Competitiveness and Innovation (FCI) Global Practice about policy hackathons taking place in West Africa, at a recent World Bank Brown-Bag Lunch in January.

So what is a policy hackathon?

What did 200 African incubators learn from our webinar on open innovation?

Alexandre Laure's picture
Also available in: Français
 Niger Digital.
Entrepreneurs participating in the e-Takara competition to address specific challenges expressed by Nigerien public administrations. Credit: Niger Digital

The training has completed my knowledge about open innovation. I can now go and talk to potential clients to identify their needs and show what we can offer them.” -- Mariem Kane, Hadina RIMTIC incubator
 
Distributive, participative and decentralized, open innovation programs can pave the way for start-ups to access larger markets and business opportunities. They also allow corporate partners to respond quickly to changing market dynamics and test out new products or target new audiences.

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