Washington, D.C., October 2, 2008
—The World Bank Group has published the first global database of remittance prices that is expected to benefit low-income migrant workers and households in developing countries. The database, which provides information on 120 remittance corridors, will make pricing more transparent and put competitive pressure on providers to improve services and reduce prices.
The data shows that it is more costly to remit through banks than nonbank money transfer operators. Remittances from Russia, Saudi Arabia, Singapore, Spain, the United Kingdom, and the United States tend to cost less, while Germany, Japan, and the Netherlands are among the most costly. Fees can be as high as 40 percent of the total value sent and as low as 0.2 percent. Making this data available should help lower prices in the longer term, benefiting remittance users and their families.
In Latin America, publishing prices helped reduce fees from about 15 percent in 2000 to 5.6 percent in 2006. A concerted effort to offer more competitive services, as in the United States-Mexico remittances market, can significantly reduce fees.
Michael Klein, World Bank Group Vice President for Financial and Private Sector Development, said, “Any reduction in remittance prices will enable more money to remain in the pockets of migrants and their families. If the sending cost could be reduced by 5 percentage points relative to the value sent, recipients in developing countries could receive $12 billion more each year. This is equivalent to transferring the World Bank’s International Development Agency credits and grants, each year, straight to the people.”
Remittances from migrant workers are important sources of family income in developing economies, representing a large portion of the GDP of many receiving countries. In 2007, recorded remittances flows worldwide were $337 billion, of which $251 billion went to developing countries. For many migrant workers, the cost of these transactions is high relative to their incomes and the amounts sent.
Peer Stein, IFC Manager for Financial Infrastructure and Institution Building, said, “Transparency in pricing is a big issue for migrants. Shedding light on prices also creates opportunities for new operators to enter the market and offer services at lower prices.”
About IFC
IFC, a member of the World Bank Group, creates opportunity for people to escape poverty and improve their lives. IFC fosters sustainable economic growth in developing countries by supporting private sector development, mobilizing private capital, and providing advisory and risk mitigation services to businesses and governments. IFC’s new investments totaled $16.2 billion in fiscal 2008, a 34 percent increase over the previous year. For more information, visit www.ifc.org.
About the World Bank Group’s Payment Systems Development Work
The World Bank Group, through the Payment Systems Development Group, is a leader in financial infrastructure development in emerging markets, including payment systems and remittances, credit reporting, and secured lending. Through a variety of instruments, it develops and supports reform programs in countries, provides advisory services, and manages multicountry and regional initiatives that position the Bank at the center of a network of more than 150 relevant institutions. The World Bank and the Bank for International Settlements, at the request of the G-8, have led the international community in developing standards for remittances, the General Principles for International Remittance Services.
