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This presented by Saminda Kodithuwakku who is a project planning consultant and remittance consultant in Sri Lanka. He is reading for his PhD in remittances and development
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Sector Study for Remittances from
Europe
Presented by Saminda Kodithuwakku (Reading for PhD in Remittances , B.Sc(First class) and Project
Planning Consultant
Total foreign revenue generated by Sri Lankan migrant workers US $ 5.1 billion in 2011
In 2009 US $ 164 in Sri Lanka but South Asia of about US $ 35.
14 % increase in inward worker remittances to Sri Lanka between 2008 to 2009
(Source: Sri Lanka Bureau of Foreign Employment)
Income Quintile (Q)
Income Range (US $ per month)
Region
Q1 Less than 150 Middle East
Q2 150 – 299
Q3 300 – 544 Middle East and Asia
Q4 550 – 1,000 Europe and Asia
Q5 More than 1,000 Europe, Asia, America
Q4 and Q5 subdivided into 03 Remittance Socioeconomic Groups
Based on social and remitting behaviour
Purposes of use
Income Groups (remittance from Europe)
Remi-1 Remi-2 Remi-3
Consumption 62.3% 2% 23.1%
Housing and household assets
26.3%6%
27.1%
Business investment
1%7%
15.0%
Savings 4.4% 82.2% 29.2%
Other expenditure 6% 2.8% 5.8%
Remittance from Europe represents the highest value in per capita terms
- approx 400 Euros/ Rs. 60,000 per month
- (approx 48,000 Euros/ Rs. 7.2 lakhs per
annum)
Usual poverty parameter- Monthly income
But… Remittance Receivers of Remi-1 Overall monthly cash balance is minus Low level of social development
Remittance Receivers of Remi-2 Save money on simple financial instruments Opportunity cost – forego investment
income 8
Work and earn in Europe
Start a business or invest
All for Consumption
Bankruptcy or loss of
investment
Sheer impact to Sri Lanka’s FOREX earnings and total GDP in monetary terms
Case of the ‘missing’ money (flourishing informal sector – drawbacks and threats)
Case of the ‘missing’ data (reliable case data on remittances to Sri Lanka unavailable with CBSL, SLBFE, Dept of Census and Statistics)
Sender side – Sri Lankan migrants in Italy, Germany, France, Netherlands and Cyprus
Fall into 3 categories:1. Legal migrants remitting through formal
channels2. Legal migrants remitting through
informal channels3. Illegal migrants remitting through
informal channels
Receiver side – remittance recipients and returnee migrants residing in Colombo, Gampaha, Kalutara, Kandy, Kegalle, Kurunegala, Puttalam and Trinco.
Keen on1. Business start up/ expansion/ revival2. Investing on financial market instruments3. Investing on capital market instruments
Create (indirect) incentives for legal migrants using informal channels to shift to formal (induce financial sector and policy bodies)
Provide recipients/ returnees with financial literacy, SME and technical training
Facilitate direct linkages to financial institutes for investment and business development purposes
Banking Sector (including state, private and international banks)
Non-bank financial institutes
Microfinance institutes
Stock brokers
Create incentives to develop customer oriented remittance/ financial products
Provide opportunity to present their services to Sri Lankan migrants in Europe
Facilitate direct linkages to potential clients
Central Bank of Sri Lanka
Sri Lanka Bureau of Foreign Employment
Colombo Stock Exchange
Arrange advocacy workshops (National Remittance Forum)
- raise awareness on remittance sector issues
- a platform to discuss possible improvements
- introduce socioeconomically viable remittance models
Induce authorities to create a conducive environment
- support to financial sector - preferential treatment to users (social
benefits e.g. health, education)
Present models of incorporating illegal migrants who are currently unable to utilize formal channels, into financial mainstream
Social remitting behavior of receivers and sender to craft socially viable, cost effective remittance products.
Opening Exchange houses in different European countries
Interbank remittance agreement: while maintaining a common current account
Zero physical handling of cash is emphasized Prepaid rechargeable remittance cards Simple KYC to introduce pre-paid rechargeable
remittances cards Intra-bank remittances: transfer money via the
international banking system22
In Sri Lanka, there is no problem in disbursement of remittances
Microfinance institutions are required to Develop SME development financial products Educate receivers to invest on sustainable
businesses Link receivers with banks to invest on advanced
financial instruments Provide pre-departure remittance literacy
Decision on remittance channels done by sender after migrating to Europe
23
Sri Lankan migrant in Europe Europe (Exporter)
Remittance receiver tends to buy imported goods
Increase the aggregate demand for imports
Increase deficit of BOP
24
Remittance is end product
Need to add marketable features to remittances
Provision of preferential treatments for remittance receivers’ families
Policy level and financial sector interventions 25
Sri Lanka Bureau of Foreign Employment
integrate migrant returnees to Sri Lanka’s Society
Liquidate skills & knowledge Educate for next trip
26
Black Market = Formal remittance market
?27
Other countries 2.58 USD billion
Europe Informal 3.76 USD
billion
Europe formal0.72 USD billion(22%)
All Formal 3.3 USD billion in Year 2009
28
In Europe ------------- 680,000 Remittance Active Migrants (BASUG field research)
Avg. Remittance per head per year--------- 6,600 USD
(SEEDS field research)
Total Europe per year----------------------- 4.48 USD billion
EUROPE-formal -------------------------------- 0.72 USD billion
EUROPE-informal------------------------------ 3.76 USD billion
Total -formal for Year 2009------------------ 3.3 USD billion
Europe informal out of Total-formal--------------1.13 ≈ 1.0
29
First NEEDS: Speed of service
•High speed of service reduces the risk of missing
•Rather than loss due to high cost of channel
First NEEDS: Speed of service
•High speed of service reduces the risk of missing
•Rather than loss due to high cost of channel
Second NEEDS: Psychological Access
•Mental Easiness or compatibility with service providers
•Hide themselves and their details
Third NEEDS: Conversion Rate Attractive FOREX rate provides Extra -Remittance
30
Sudden influx of income flow
Response
Artificial affluent Social Behavior
Unfeasible IGA Flying Mentality
31
Usual poverty parameter = Monthly income
But remittance ReceiversOverall monthly cash balance is minusLow level of social development
32
Nationalisation of Exchange houses
Interbank remittance agreement
Minimum physical handling of cash(not at frontline)
Closer relationship at Sender side
Arrange KYC for pre-departure rechargeable cards
Transfer via Account to Account 33
Thank You
34