tomas miller fomin
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FROM REMITTANCES TO SAVINGS
Tomás Miller, Access to Finance Unit Chief, FOMINGlobal Forum on Remittances and DevelopmentMilan, Italy, June 18, 2015
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Background Member of the Inter-American Development Bank Group Established in 1992 Funded by 39 Country Donors
Objectives Promote entrepreneurship, economic opportunity, and financial
inclusion in Latin America and the Caribbean Innovate, pioneer and pilot private sector solutions for empowering
low-income population Identifying successful interventions and models Helping others in the private and public sectors take them to scale
Our vehicles Equity Investment Loans Grants
Access Areas Finance Markets Basic Services
ABOUT US
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Market information. Annual remittance reports, market research, capacity building to collect and publish information
Market Environment. Analysis and technical assistance on legal and regulatory framework
Business Models. Remittances and financial inclusion projects, with an emphasis on savings
FOMIN’S REMITTANCES WORK
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REMITTANCES AND SAVINGS APPROACH
40 million LAC remittance clients sent and/or received a total of $65.4 billion (2014)
Majority of remittances paid in cash and channeled into consumption
Still, 48.6% of adults in LAC do not have a savings or checking account
Opportunity to reduce economic vulnerability of remittances senders and recipients and increase client base of financial institutions.
MIF published a practical framework for our approach which is available on our website for institutions to use as a guide (available in English and in Spanish) Inclusive Savings for Remittance
Clients: A Practical Framework
Burgess. December 2014.
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REMITTANCES AND SAVINGS APPROACH
Design productsUnderstand
clients’ financial lives
Build accessDiversify revenue
Involve communities and social networks
Help clients set concrete savings goals
Increase customers’ access to deposit and withdrawal s
Set account pricing with clients’ income and behavior in mind
Label products to reflect clients’ mental accounting
Provide financial education, linked to actionable ways to
save
Open savings accounts remotely, not just in
branches
Cross-sell insurance and credit products
Send reminders and communicate with clients
regularly
Integrate budgeting tools into account services to
improve short-term money management
Improve merchant acceptance of non-cash
transactions
Look to remittance senders for new markets
Automate savings behavior
Offer rewards and make savings fun
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Objective. Promote the development and implementation of business strategies, including the design of liquid and planned savings products, targeted to remittance clients.
Projects. The Program will co-finance at least 10 projects
Activities eligible for funding.- Design or adjustment of savings products;- Promotion and financial education strategies; and- Testing of new distribution channels to offer savings
products.
Technical assistance. - The Program provides up to US$500k in grant
assistance per project
REMITTANCES AND SAVINGS PROGRAM
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PROJECTS APPROVED TO DATE
Country ParaguayApproval Date December 2013
Beneficiaries 27,750 direct beneficiaries
Executing Agency Visión Banco S.A.E.C.A.
Country HondurasApproval Date July 2014
Beneficiaries 20,000 direct beneficiaries
Executing Agency Red Katalysis
Country HaitiApproval Date December 2014
Beneficiaries 13,800 direct beneficiaries
Executing Agency Federation Le Levier
Country Dominican Republic
Approval DateOctober 2011 (prior to facility)
Beneficiaries 94,000 direct beneficiariesExecuting Agency Banco Unión S.A.
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LESSONS LEARNED
Financial inclusion of remittances clients, has to be accompanied by the development of an enabling legal and regulatory framework that promotes private sector innovation.
- Legal and regulatory framework in this area should take into account the needs of the lowest income populations and find a balance between the objective of financial inclusion and the stability of the financial system.
Access to reliable and updated remittances data can help private sector understand market’s dynamics and inform investment and operational decision-making within the private sector
In order to promote savings of remittances clients it is necessary to bring remittance’s payments closer to this population and have the appropriate infrastructure to undertake cash- in and cash-out transactions (Ex. Agent banking).
Technology, including mobile and internet, represent an opportunity to reduce costs of receiving the remittance and accumulate assets.
Financial education is key. Savings’ habits should be created since early stages and efforts by public and private sector are needed.