Linking money transfers with banks could lower costs
-study on US remittances
By Johann Earle
Stabroek News
January 31, 2004
Companies operating in the US could link with Guyanese banks to offer low-cost remittance services, which may increase sending and improve monitoring of money transfers.
Project Director for Central America at the Inter-American Dialogue, Dr Manuel Orozco, said yesterday that companies operating in the US and Guyana have the capacity to link their businesses with Guyanese banks in order to reduce transfer costs and offer new financial services. He said the low volume of remittances that Guyana receives from overseas keeps the cost of making those transfers high. He also made the point that it is still unknown how much money comes to Guyana in remittances and other transactions and that efforts need to be made to improve the monitoring of transfers.
Speaking at a United States Agency for International Development (USAID) forum on the contributions of the Guyanese Diaspora, Orozco said Guyanese who receive remittances usually have bank accounts in which they save and as such can benefit from the new financial services that those same banks could provide. In a report titled 'Distant but Close: Guyanese Transnational Communities and their Remittances from the United States', commissioned by USAID, Orozco said: "Remittance-receiving households have a savings capacity and may...invest in small entrepreneurial activities. It is therefore important to link micro-finance institutions that can reach low-income individuals searching for credit opportunities."
He said special financial packages can be offered to persons from within the Guyanese Diaspora as part of the promotion process, in order to attract their capital. To illustrate this point, Orozco said the experiences in other countries suggest that migrant capital investment can have significant impacts in the home country.
USAID has quantified annual remittances to Guyana at US$250 million but Minister of Finance Saisnarine Kowlessar, speaking at the forum yesterday, said this figure is highly overstated. According to the Government Information Agency (GINA), the minister made the point that nothing is reflected in the balance of payments - current account, monetary aggregates - money supply and reserves. Further, Kowlessar said, if the figure were accurate, the total figures from other countries, such as Canada and the United Kingdom would be much higher. He said another flaw in the report is the omission of net remittances and that the report does not account for the remittances out of Guyana.
He said the cost for training persons who leave Guyana was not included in the report. He said also that the private sector, especially the banking sector, needed to be more involved in the process, as the government is only the facilitator of that process. He then cited the promulgation of the Investment Code, the New Companies Act and the Small Business legislation as the government's efforts to facilitate the process.
World Bank figures indicate that the United States is the biggest source of remittance dollars followed by Saudi Arabia and Germany. The data indicate too that India and Mexico are the two largest receivers of remittances, with US$10 billion and US$9.9 billion respectively on an annual basis. The World Bank said remittances to Latin America and the Caribbean have grown from US$15 billion in 1999 to US$25 billion in 2002.
An article appearing in Newsweek of January 19, 2004 said total remittances last year reached an estimated US$100 billion, an increase of about 15% over 2002. It said that for many developing countries, remittances are more important than foreign aid. The article said that Foreign Direct Investment (FDI) is larger but tends to fluctuate with "global economic swings." It also said that remittances now dwarf the amount of official development assistance poor countries receive.
An interesting fact is that immigrants, after working for some time in the United States while sending money home to relatives, tend to return to the country of their birth for retirement.
Dr Percy Hintzen underscored this when he spoke at the forum at Le Meridien yesterday. He said many persons, upon retiring, continue to receive their foreign pensions when they return to their country to settle down.
He said if these persons were attracted to come home, they would bring their equity assets with them. Hintzen also suggested that the government appoint a junior minister of foreign affairs to look after the interests of immigrant Guyanese.
Hintzen believes that while people see the brain drain in a negative light, it can bring some measure of economic gain to the country of origin. He cited the case of India, whose immigrants dominate the information technology and telecommunications sectors. He also shared Orozco's view that once people found better ways to transfer funds to their relatives, they would send more.
Orozco made the suggestion Visa International could be linked with a money transfer operator and banks in Guyana and the United States. He said that Visa offers an electronic money transfer instrument that, when tied to banks, can better serve recipients. He said money transfer businesses could benefit from such an operation.
Orozco said that trade linkages could also be made to tap into what he termed the nostalgic market, for those persons who want a part of their culture to remain with them. He said the formation of alliances could be made between small Guyanese entrepreneurs and larger businesses in the United States and business fairs could be used as a tool for the promotion of these links.
Orozco's study found that spices are the most sought after nostalgic product among the Guyanese in the United States. Other popular products are fresh and salted fish, peppers, noodles, rum and fruit and vegetables.
Among Orozco's list of suggestions for Guyana was that donors support joint investment ventures targeting tourism or the imports of Guyanese goods. He said supporting government's programme for small and medium enterprises could also develop these activities.
With regard to tourism, he observed that Guyanese immigrants visiting Guyana represent a significant share of tourists in the country. He said offering financial and technical support to develop tourism packages aimed at the Guyanese Diaspora is a key incentive for raising revenue.
According to the study, most Guyanese visitors like to see traditional places and are also willing to discover new aspects of their country. He said this is the case mainly with second-generation immigrants.
Of the United States-based Guyanese sending money to relatives in Guyana, the study showed that 63% of them are from New York.
The overseas Guyanese also represent 34% of immigrants interviewed from five Latin American and Caribbean countries. The report said that persons from the five countries indicated that they send home US$235 per transfer.
The report found that the senders are predominantly young persons, under the age of 40. But the study said Guyanese immigrants have a higher percentage of senders over 50 years old. The study showed too that 44% of Guyanese immigrants are citizens. "...It is important to point out that their citizenship status may signify that most Guyanese immigrants have arrived in the United States legally and did not face the same hardships as Central Americans who tried to obtain asylum status in the 1980s," Orozco said in his report.
He said the recipients of the financial assistance range from parents and children to aunts and uncles and the money is sent predominantly to manage the basic needs of the household such as food and clothing.
He said the pattern of remittance transfers is only one illustration of a broader level of exchange between Guyana and the Diaspora. "Guyanese immigrants visit their home country regularly, spend substantial amounts while visiting the country, maintain regular telephone communication with their relatives, and buy home country goods," the report said. It found too that the Guyanese immigrants are significantly connected to their homeland and are not only actively engaged with relatives, but also have bank accounts, mortgages and small family or commercial businesses.
The study found also that 72% of the Guyanese in the United States have bank accounts in that country. This is the highest percentage when compared to Ecuador (65%), the Dominican Republic (62%), El Salvador (33%) and Mexico (31%).
A panel discussion among members of various Home Town Associations (HTAs) followed the presentation. Among these associations were Guyanese Assisting in Development (GUYAID) and the Linden Fund USA. According to Orozco, there are nearly 200 Guyanese HTAs. The study found that most of the HTAs make donations of less than US$5,000 per year.
The event was also attended by United States Ambassador to Guyana Roland Bullen; Mission Director of USAID, Dr Mike Sarhan; Project Director of the USAID/Guyana Eco-nomic Opportunities Project (GEO), Tom Whitney, who made the opening remarks.
During the latter part of 2002, Orozco had made a similar presentation on the impact of remittances on Guyana's economy.