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Remittances in the CIS Countries. A Study of Selected Corridors

Migration and Remittances: Eastern Europe and the Former Soviet Union

Authors: B. Quillin, C. Segni, S. Sirtaine, I. Skamnelos
July 2007
Remittance flows in the Eastern European and Central Asian countries (ECA region) are large and consistently increasing. The formal infrastructure to channel remittance flows in the ECA region is experiencing rapid developments, primarily driven by (i) the number of remittances and money transfer services providers -banks, specialized money transfer operators (MTOs) and the Postal systems, and (ii) the level of competition. However, the formalization of remittance transfers remains complicated and in need of support by policymakers. This paper aims to provide an overview of the current framework and infrastructure for sending and receiving remittances, including aggregate flows, existing and potential operators, cost structures and, barriers and other factors affecting costs. Ultimately, it turns to setting out topics for policymakers’ attention.

1. Overview of Migration, Remittances and Financial Sector Development

This section takes stock of the patterns of migration in Eastern Europe and the Former Soviet Union, the size and regional distribution of the remittance transfer market and the degree of development of the respective financial sectors.

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2. Migrants’ Perspective: Results From Surveys of Returned Migrants

The results from surveys undertaken with migrants who had returned home in six countries in the Eastern Europe and Central Asia region are presented in this section. The authors look at three key pieces of information from the surveys: (i) how migrants’ transfer remittances (informal vs. formal channels); (ii) why formal or informal remittance sending channels are utilized; and (iii) reported costs for various channels.

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3. Remittance Industry's Perspective: Service Offerings and Fees

This section provides an assessment of the formal remittance operators in the reference countries: a) banks; b) specialized money transfer operators (MTOs); and c) the postal network. Informal channels are shuttle traders and migrants, which decide to repatriate remittances as they travel back to their homeland. The authors focus on the formal operators, as an assessment of the informal channels, in terms of volumes, frequency and direction, is beyond their scope.

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4. Concluding Remarks and the Role of Policy

Despite the rapid growth experienced in the remittance industry in ECA, there remains ample room for further improvement. Remittances channeled through formal institutions have a positive impact on financial intermediation and on financial penetration, and vice a versa. It is thus of paramount importance for policymakers, operators and the donor community to encourage the formalization of remittance transfers and the introduction of migrants and remitters to banking, intermediation, savings and investments, as well as to develop the financial sector infrastructure.

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