Attracting Remittances: Market, Money and Reduced Costs

This report analyzes the market of remittances from the United States to nine Central American and Caribbean countries. The report focuses on remittance companies, and business practices that benefit customers sending and receiving remittances.

This report's findings show that:

• In the past three years, remittance charges have declined significantly in some countries;
• Fee charges decrease with competition;
• Distribution networks demanding lower commissions tend to promote the decline in charges;
• The use of electronic interfaces also helps in reducing costs;
• Banks are increasingly opening money transfer franchises and are offering some of the lowest charges; however these institutions continue to have a small and limited reach;
• Credit unions and cooperatives continue to offer the lowest fees;
• The home country distribution networks are not well established within the credit union system.

Finally, the paper recommends steps to foster an environment in which remittances are less costly and also have a developmental leverage:

• Offer incentives to unbanked migrants in the U.S. to use formal financial institutions;
• Create a board that provides oversight for remittance companies, and in particular their fees and exchange rates;
• Establish a customer rights office on the recipient side to educate recipients about costs and better measure effectiveness and efficiency of services;
• Money transfer company partnership with small banks and credit unions;
• Bank partnership with banks and credit unions;
• Expand debit card use and motivate recipients to open dollar accounts.