High fees slash benefits of overseas remittances

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CASH flows from the Asian overseas workers grew to almost US$260 billion in 2012, but high fees and limited financial services outside of urban areas are reducing the benefits of those remittances for millions of rural residents, the International Fund for Agricultural Development (IFAD) and the World Bank said on Tuesday.

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IFAD and the World Bank, in their latest report, said remittances are equal more than 10 percent of gross domestic product in Afghanistan, Bangladesh, the Philippines, and Nepal, and more than 50 percent in Tajikistan.

The report also said migrants pay an average of 8.35 percent of remittances to Asia, which means that less money is going to reducing poverty and boosting prosperity for their families.

The World Bank provides countries with policy advice and technical assistance in support of the G20’s 5×5 Initiative, which aims to reduce the global average remittance price to 5 percent.

“Remittances are a lifeline for migrant workers and their families, and reducing the average remittance price in Asia to 5 percent would put $8.7 billion every year more in the pockets of migrants and their families,” Janamitra Devan, vice president for the Financial and Private Sector Development of the World Bank Group, said.

“To reduce prices, governments and the private sector need to create a better regulatory environment, foster competition among remittance providers and develop a stronger payments system infrastructure,” Devan added.

According to report, most of the Asian countries have already benefited from government reforms.

“Sri Lanka built up its national payments system and saw inbound remittance prices drop from 10 percent to 5 percent. Malaysia’s Money Services Business Act streamlined the legal framework and increased competition while ensuring the integrity of the remittances market,” the report said, adding that reforms have driven down transfer costs in some countries but they remain high in rural communities, where more than $100 billion in remittances are sent annually.

The report also noted that two-thirds of remittance payment outlets in Asia are located in urban areas, making it difficult for the rural recipients as they travel long distances to collect their remittances.

“With little access to basic banking services, they have few investment options beyond daily subsistence needs such as food, clothing and shelter,” the report added.

NEIL A. ALCOBER

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