The World Bank plays a leading role in the international agenda on remittances, and deploys its resources on a wide range of research and analytical projects, as well as in operational activities.
The Payment Systems Development Group (PSDG) of the Financial and Private Sector Vice-Presidency (FPD), taking advantage of its leading promotion role in the international payment systems community, supports policy change through discussion fora and operational work on payment and remittance issues through international partnerships and initiatives.
The PSDG has supported payment system reforms in 100+ countries over the past 12 years, and in many of these countries has already created the preconditions for an enhancement of the efficiency in the provision of remittances through better retail payment systems and more effective payment system oversight.
The publication and implementation of the WB-CPSS General Principles for International Remittance Services and the launch of the Remittance Prices Worldwide database in September 2008 respond to the commitment to improving transparency and enhancing competition in the market for remittance services.
Other relevant activities of the World Bank in the area of remittances include the initiatives to monitor and forecast remittance and migration flows, which are led by the Migration and Remittances Team of the Development Prospects Group, and the efforts of FPD’s Financial Market Integrity Group to ensure that AML/CFT programs launched by government agencies do not impose disproportionate requirements on remittance service providers that could reduce competition and service levels, and eventually drive remittance services underground. Further, the Consultative Group to Assist the Poor (CGAP) has developed tools for micro-finance institutions (MFIs) that are seeking to move into the remittance business, and has co-founded a Remittances Fund and a Technology Fund to promote promising business models.
The section below describes some of the most relevant projects being led by the PSDG. For other World Bank activities/projects please visit the relevant websites.
Catalyzing policy change on payments systems issues and policies through international partnerships
International remittance transfers are cross-border person-to-person payments of relatively low value. In practice these transfers are typically recurrent payments by migrant workers. But while there are well established policies and principles applied to payments systems and its use, broad awareness of the impact of remittances on the application of these policies has been limited. One of the important means to raise such awareness was through discussions of such policies at the international level, in particular through the World Bank's participation in the Bank for International Settlements’ Committee for Payment and Settlement Systems (CPSS).
In 2004 the CPSS requested the Bank to co-chair the Task Force to establish general principles of universal applicability identifying the features and functions that should be satisfied by remittance systems, providers and financial intermediaries, including the need for international policy coordination.
The General Principles for International Remittance Services were published in January 2007 and have since been endorsed by the G-8, the G-20, and the Financial Stability Forum.
The General Principles, which are the only international standards in this field, cover areas such as transparency and consumer protection, payment system infrastructure, legal and regulatory environment, market structure and competition, and governance and risk management. The Report also identifies what the role of the remittance service providers and authorities should be to achieve the public policy objective of a safe and efficient market for remittance services.
To implement the Principles, among other things, a Private-Public Sector Partnership (PPP) on remittances under the World Bank Group’s leadership was formally launched during the World Bank Global Payments Week in Vienna, Austria, on September 12, 2008. The PPP aims at developing a practical and actionable mechanism to implement the General Principles. For example, one of its initial tasks is to better structure the international discussion between regulators and the industry on legal and regulatory issues related to remittances.
Another major international initiative related to the latter is the formation of a Global Remittances Working Group. The Global Remittances Working Group is chaired by the World Bank Vice President, Financial and Private Sector Development (FPD), and counts on a small Secretariat and an International Advisory Committee, to ensure quality assurance and technical guidance. Four Thematic Areas, organized around the seven Recommendations on Remittances (Berlin, November 2007), have been established: 1) Data; 2) Interconnections with Migration and Development, and Policy; 3) Payment and Market Infrastructure; 4) Remittance-linked financial products and Access to Finance.
Thematic Area #3 is coordinated by the World Bank’s FPD-PSDG, in cooperation with the Bank for International Settlements. Thematic Area #4 is coordinated by the World Bank’s FPD-PSDG and the Consultative Group to Assist the Poor (CGAP), and leverages on the institutional arrangements of the PPP.
The efforts of the working group were successful in securing the commitment of the G8 Heads of State to reducing the cost of remittances. At their summit in L´Aquila (July 2009), the G8 Heads of State made a pledge “to make financial services more accessible to migrants and to those who receive remittances in the developing world” and “to achieve in particular the objective of a reduction of the global average costs of transferring remittances from the present 10% to 5% in 5 years through enhanced information, transparency, competition and cooperation with partners, generating a significant net increase in income for migrants and their families in the developing world” (the 5x5 objective).
At the G20 Seoul Summit in November 2010, the G20 leaders reiterated the importance of facilitating international remittance flows and enhancing their efficiency to increase their contribution to growth with resilience and poverty reduction and committed to a significant reduction of the cost of remittance services. At the G20 Cannes Summit in November 2011, the G20 leaders adopted the 5x5 as a quantitative target for the reduction of the remittance prices.
Making markets more transparent -- The Remittance Prices Database
In September 2008, the World Bank launched the fist global database of remittance prices. The Remittance Prices Worldwide database provides data on the cost of sending and receiving remittances for 213 "country corridors" worldwide. The corridors studied flow from 31 major remittance sending countries to 91 receiving countries, representing more than 60% of total remittances to developing countries.
The research and publication of the Remittance Prices Worldwide database serves four important purposes: benchmarking improvements, allowing comparisons among countries, supporting consumers’ choices, and putting pressure on service providers to improve their services. The PSDG team believes that simply the act of publishing the database may serve to reduce remittance transfer prices, as it has been already the case with some countries in Latin America, where the publication of remittance pricing contributed to reducing total costs from 15 percent in 2000, to 5.6 percent in 2006.
Some national initiatives seek to gather information on remittance prices in selected corridors (PROFECO's website in Mexico, Send Money Home and Moneymove in the U.K, other national databases, IDB, etc.) but do not collect similar and comparable data. The World Bank’s Remittance Prices Worldwide database is innovative because data on remittance prices has been collected anew, using a unified methodology for all corridors, in order to allow direct inter-comparability.
Collaboration with the managers of other similar databases for improved global coverage and inter-comparability is being encouraged through the Private-Public Sector Partnership on Remittances. Also, the PSDG is working on launching the greatest possible numbers of national databases, which can be tailored more directly to the needs of local communities.
The following databases cover regional and national remittance markets and fully comply with the World Bank official requirements for Remittance Prices Comparison Databases.
Central America: www.enviacentroamerica.org
Italy: www.mandasoldiacasa.it (Italian)
Australia and New Zealand: www.sendmoneypacific.org
Supporting payment and remittance systems reforms
In recent years, the World Bank’s PSDG has been involved in assessing remittance systems in several sending and receiving countries against the CPSS-World Bank General Principles for International Remittance Services. For this purpose, the World Bank has developed, together with other international financial institutions (IFIs), a Guidance Report with detailed guidelines and actions for the implementation of the General Principles.
Many of the necessary actions identified are being integrated in the context of the reform of the national payments system which in many countries the Bank is supporting or has supported in the past, including better retail payment systems and more effective payment system oversight. In fact, the Bank has supported payment system reforms in 100+ countries over the past 12 years.
Some of the most relevant projects undertaken in this specific area include the following.
- IDB–CEMLA–WB project on the implementation of the CPSS-World Bank General Principles. The World Bank, the Centre for Latin American Monetary Studies (CEMLA), and the Inter-American Development Bank (IDB) have undertaken a joint project to assess and facilitate the implementation of the General Principles in the countries of Latin America and the Caribbean. Five country missions have been carried out so far: El Salvador (September 2006), Haiti (March 2007), Honduras (May 2007), Guatemala (April 2008), and Brazil (March 2009). The objective of these country missions is to provide the local authorities with a review of the remittance market on the basis of the General Principles, and identify possible actions to improve the observance of the Principles in the country. One of the most relevant results of the program so far is the forthcoming creation of a Central American Remittance Price Database, in cooperation with the national consumer protection authorities. This database is being built using the methodology of the recently launched World Bank Global Remittance Price Database. Also, in the case of Honduras a new Regulatory Framework for Money Transfer Operators (MTOs) is being developed with the support of the World Bank and its partners in this project.
Czech Republic. In response to a request from the Ministry of Finance of the Czech Republic, a World Bank-led mission visited the Czech Republic from May 6-13, 2008 to provide local authorities with a review of the remittance market on the basis of the General Principles. Following the team findings and recommendations, the Czech authorities agreed to implement a dedicated survey among the main communities of migrants residing in the Czech Republic. The survey was tailored to the specific scope of the relevant authorities and the characteristics of the market, and biut upon previous experiences in the field. Also, a national database on the price of sending remittances from the Czech Republic will be implemented, using the guidelines and the methodology of the World Bank Global Remittances Database. These efforts aim at obtaining a better understanding and knowledge of the market for remittances in the country, and a wider transparency on the real cost of remitting from Czech Republic.
- Uganda. In 2005 a joint team from the World Bank and the IMF conducted a review of the financial sector in Uganda in the context of the Financial Sector Assessment Program (FSAP). To determine the progress made and impediments to the implementation of the FSAP recommendations, and identify concrete additional proposals to improve efficiency and outreach of the financial system, a new World Bank mission visited Uganda from April 28 to May 06, 2008. The mission prepared a detailed report on the national market for remittances, and provided the authorities with an assessment and recommendations.
- Morocco. In the context of the Arab Payments and Securities Settlement Initiative (API), a World Bank-led team conducted a review of the remittance market in Morocco on the basis of the General Principles in November 2006. The mission team provided local authorities with a broad analysis of the remittance market and specific comments on proposed regulations for MTOs. In particular, the Central Bank of Morocco adopted a regulation for MTOs based, to a large extent, on the General Principles.
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