Robin Newnham, Head of Policy and Capacity Building, Alliance for Financial Inclusion (AFI)
Muthukumarasamy Kalyanasundaram, CEO, International Network of Alternative Financial Institutions (INAFI), India
Muhammad Ismail Iqbal, Deputy Secretary, Ministry of Overseas Pakistanis & Human Resource Development, Pakistan
Michael Growder, Deputy High Commissioner to Malaysia, Department for Foreign Affairs and Trade, Government of Australia
Rajeev Kumar Gupta, Head of regional Financial Inclusion program, United Nations Capital Development Fund (UNCDF)
Reducing the costs of remittances is a specific goal under the United Nations Sustainable Development Goals (i.e. SDG 10.c: By 2030, reduce to less than 3% the transaction costs of migrant remittances and eliminate remittance corridors with costs higher than 5%). Nevertheless, remittances would also help in achieving other SDGs, such as:
Goal 1: End poverty in all forms everywhere. Remittances make up 60% of household income. Reducing the cost of remittances could put an additional US$20 billion in the hands of poor people, lifting many above the poverty line.
Goal 5: Achieve gender equality and empower all women and girls. There is a 9% gap between women and men’s income, but remittances can help increase the level of education among women and thus raise their status. Indirectly, these improvements may also reduce domestic violence.
Goal 9: Build resilient infrastructure, promote inclusive and sustainable industrialization and foster innovation. Many countries encourage investment of remittances, which can be used to develop the local economy and infrastructure.
Goal 10: Reduce inequality within and among countries. Indirectly, remittances require a leveling of rules across regions and across borders. By standardizing the rules, even more indigent people have a fairer playing field.
Goal 15: Sustainably manage forests, combat desertification, halt and reverse land degradation, halt biodiversity loss. Remittances provide funds to communities that can be used to combat or offset the effects of climate change.
With the help of the private and public sectors, the SDGs can be achieved. For example, FSPs could link remittances to savings accounts and investment opportunities. Although remittances are transferred digitally, most are still cashed out and spent, which blunts their effectiveness. By linking transactions to other financial services, people are brought into the formal financial sector. They are encouraged to save and invest, thus increasing funds that could be used on local projects and consequently spur the local economy.
Regulators could work to develop harmonized and specific regulations for cross-border transactions. They could standardize and simplify KYC and e-KYC regulations and speed up the migration process, possibly through biometric identity. They could design policies to ensure a level playing field for fintechs and banks, and provide incentives for migrants to use formal channels. For example, prior to migration, Pakistan provides US$10 thousand in life insurance and 5 years of coverage for migrants. In addition, the government subsidizes banks for the cost of remittances, which means there is no fee for transfers.
To help reach SDGs, private sector actors – such as FSPs – should:
Link remittance services to other products such as savings accounts and investment options; and
Develop products that address migrant-specific needs such as microinsurance.
In turn, public sector should:
Harmonize cross border rules for remittances;
Ensure regulations are commensurate to actual risk; and
Simplify identification and KYC standards.