Estimating workers remittances using household surveys:

Experience and Lessons from Uganda

Presented by Kenneth Alpha EgesaBANK OF UGANDA

International Technical Meeting on measuring remittances, June 11 – 12, 2009, Washington,

DC.

Outline

• Background• Conducting the household survey• Computation of worker remittances using survey findings• Some challenges and lessons learnt

Background (1)• The residual method was used for compiling remittances for the

period to December 2008. • The methodology used total foreign exchange sales and

purchases by all authorised dealers (banks and foreign exchange bureaus adjusted for inter dealings and forward sales and purchases set to mature after the period of analysis.

• The adjusted sales and purchases provided the proxies for funds spent and funds received owing to transactions with the external sector.

• All identified BOP inflows and outflows through other sources would be subtracted from the net sales and net purchases with the residual amounts providing estimate for workers remittances outflows and workers remittances and NGO inflows split using a 60:40 distribution respectively.

Background (2)

• Estimates provided were stable until 2006 after which they showed volatility and high growth due to increased derivative trading.

• The treatment of high high volumes of rollovers of swaps and forwards which could not be identified from the commercial bank reports as new funds led to double counting and explosive growth in the residuals.

• In addition, under-reporting of trade statistics due to under coverage of informal cross border trade contributed to the error.

• Charts 1 and 2 show the trends in workers remittances and NGO transfers and indicate why revisions were made wef 2006.

Background (3)

Workers remittance inflows

0

200

400

600

800

1000

1200

1400

1600

04/05 05/06 06/07 07/08

US$

mill

ions

current

previous

Workers remittance outflows

-1200

-1000

-800

-600

-400

-200

001/02 02/03 03/04 04/05 05/06 06/07 07/08

US$

mill

ions

current

previous

Conducting the household survey (1)

• The household survey was conducted jointly by the Bank of Uganda (BOU), Economic Policy Research Centre (EPRC) and the Uganda Bureau of statistics (UBOS) with funding from GTZ, SIDA and the BOU. \

• 4,100 households in rural and urban areas over 137 enumeration areas distributed proportionately among the four regions (Central, Easter, Northern and Western) were covered.

• Heads of households responded to the remittances questionnaire and community leaders to the community questionnaire.

• The remittances questionnaire collected information on remittances received, source and frequency, use and channels of the remittances etc.

Conducting the household survey (2)

• The community questionnaire collected information on the main economic activity of each locality, migration and impact of remittances on the welfare.

• The survey was conducted over a periods of 6 weeks by 45 field staff after a 4-day training workshop.

Computation of workers remittances using survey findings (1)

• Two different approaches comprised of use of average household receipts from abroad and individual average receipts from abroad were used.

• For the average household receipts from abroad, total workers remittances = {average remittances per household * estimated number of households receiving remittances}

•  The estimated number of households receiving remittances = (number of households that received remittances in the survey / total number of households in the remittances survey) * total number of households reported in the NHS.

• Average remittances per household was obtained from the remittances survey

Computation of workers remittances using survey findings (2)

 

Number of household receiving remittances (a) 307

Average remittances received per household (b) 1,818,381

Estimated sample total remittances received (a*b) 558,242,935

   

   

Total sample of household respondents ( c) 4,077

Total population of households (d) /1 5,224,107

   

Estimated Ushs remittances received ((a/c)*b*d) 715,310,479,380

Exchange rate (USHS/US$) 1,831

Estimated US$ remittances received 390,666,564

1. Obtained from the NHS of 2005/06 307

Computation of workers remittances using survey findings (3)

• In addition to the cash computations, estimates were made for in-kind transfers by using notional prices for the different categories of items received by households during 2006 in the remittances survey.

• Using the estimates for the average in-kind remittances to households derived from the quantities reported in the remittances survey and their assumed cost, total in-kind remittances were computed using the same approach used for cash remittances.

• Total workers remittances of US$407 million were derived as the sum of in kind and cash transfers

Computation of workers remittances using survey findings (4)

Number of household receiving remittances (a) 115

Average remittances received per household (b) 197,478

Estimated sample total remittances received (a*b) 22,710,000

   

Total sample of household respondents ( c) 4,077

Total population of households (d) /1 5,224,107

   

Estimated Ushs remittances received ((a/c)*b*d) 29,099,698,300

Exchange rate (USHS/US$) 1,831

Estimated US$ remittances received 15,892,790

Computation of workers remittances using survey findings (5)

• Using the Individual average receipts from abroad, Total workers remittances = {average remittances per individual * number of individuals receiving remittances}

• The estimated number of individuals receiving remittances = (number of individuals that received remittances in the survey / total number of individuals in the remittances survey) * population from the NHS.

• Average remittances received per individual were obtained from the remittances survey.

Computation of workers remittances using survey findings (6)

Number of individuals receiving remittances (a) 307

Average remittances received per individual (b) 1,818,381

Estimated sample total remittances received (a*b) 558,242,935

   

   

Total sample of individual respondents ( c) 20,713

Total population of individuals (d) /1 27,200,000

   

Estimated Ushs remittances received ((a/c)*b*d) 733,076,224,207

Exchange rate (USHS/US$) 1,831

Estimated US$ remittances received 400,369,320

1. Obtained from the NHS of 2005/06  

Computation of workers remittances using survey findings (7)

• In addition to the cash computations, estimates were made for in-kind transfers by using notional prices for the different categories of items received by individuals during 2006 in the remittances survey.

• Using the estimates for the average in-kind remittances derived from the quantities reported in the remittances survey and their assumed cost, total in-kind remittances were computed using the methodology described above in the section for cash.

• Total workers remittances of US$ 416 million were derived as the sum of in kind and cash estimates.

Computation of workers remittances using survey findings (8)

Number of individual receiving remittances (a) 115

Average remittances received per individual (b) 197,478

Estimated sample total remittances received (a*b) 22,709,970

   

   

Total sample of individual respondents ( c) 20,713

Total population of individuals (d) /1 27,200,000

   

Estimated Ushs remittances received ((a/c)*b*d) 29,822,390,962

Exchange rate (USHS/US$) 1,831

Estimated US$ remittances received 16,276,075

Computation of workers remittances using survey findings (9)

• The two approaches provided almost similar estimates with no particular strong reason to select one procedure over the other.

• A geometric mean equivalent to US$ 411 million from the two estimates was used as the final estimate of workers remittances received in 2006.

• The 2006 estimate provided a benchmark, from which the 2007 and 2008 estimates were derived by applying a growth rate of the developed countries nominal US$ dollar growth, which amounted to US$452 million and US$489 million respectively.

• Quarterly and monthly estimates for 2006 through 2008 were derived by applying the monthly trends in cash remittances through MoneyGram and Western Union to the estimated annual totals.

• However, 2007 and 2008 will be revised using the 2008 survey estimates expected in July 2009.

Some challenges and lessons learnt (1)

• There were households in which there was more than one recipient of remittances, moreover the household head did not know what other household members were receiving which may have affected the estimate for the average remittances received per household.

• Computation of workers remittances received in kind was not properly handled, as the questionnaire simply asked if remittances in kind were received and for a yes response, additional information was collected on what items were received.

• No questions were included on the quality, quantity and other attributes of the items received in kind.

Some challenges and lessons learnt (2)• Memory recall may have been poor due to the questionnaire

requiring responses covering a long period. • Convincing the authorities that the lower estimate was a more

accurate estimate of remittances posed many challenges since there was a perception that Uganda was receiving large amounts of workers remittances.

• The bulk of remittances are received in the urban areas and probably sent on to rural areaswhile the sample was biased towards more rural areas.

• The questionnaire design did not adequately provide information on the relative importance of each of the channels of transmission of remittances.

• Fear of disclosure due to fear of taxation.

Thank you for your attention