Undergraduate Economics Association10/2/2012

Undergraduate Economics Association

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AnnouncementsEuropean Union in Crisis: Hopes and Woes of Politics and

EconomicsRishi Chakraborty-- Africa’s Challenge in Developing Migrant

Remittance MarketsDaniel Currie-- Problems With Small Governments Abdul Hannan-- The Multilateral Trading System: Strengths &

Challenges from Least Developed Countries' Perspective

Undergraduate Economics Association

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Economics Majors Expo Members of the undergraduate club to join the economics

department in staffing the table at the Majors ExpoOctober 18th 12:00-3:00, GSU Metcalf Ballroom (775

Commonwealth Avenue)Email uea@bu.edu

Africa’s Challenge in Developing Migrant Remittance Markets Rishi Chakraborty

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Undergraduate Economics Association

• IMF Definition:Compensation to Foreign EmployeesMigrant Worker’s Remittances

• Transfer of Funds between Individuals• Migrant Workers to Country of Origin• $375 billion & 12.1% growth (2011)• Income to Households• Development & Poverty Alleviation• Human Capital Formation

What are Remittances?

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Undergraduate Economics Association

Stable Source of Foreign Exchange

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Undergraduate Economics Association

Regional Remittance Flows

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Undergraduate Economics Association

Migrant Remittance Costs

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Undergraduate Economics Association

Africa’s Remittance Markets

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Undergraduate Economics Association

1) Low Competition 100 MTOs dominate 90% of Remittance Services Post offices lack cash flows, training & infrastructure 2) High Regulation & Barriers to Entry Exclusivity Agreements (Western Union & MoneyGram) Only Banks, MTOs & Foreign Exchange Bureaus authorized3) Poor Rural Coverage 64% of branches serve 83% of population High transport costs4) Lack of Access to Financial Instruments Low savings, loans, interest & insurance Prevents Effective usage of Remittance flows

Factors for High Costs & Inefficiencies

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Lack of Competitors

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Undergraduate Economics Association

• Need for Research & Timely InformationEnhancing impact of public policy on remittances

• Increased Competition to Lower CostsReducing Regulations & Exclusivity AgreementsProviding Incentives for New EntrantsMicrofinance for rural coverage & poverty alleviation

• Improving efficiency of Remittance MarketsProviding training & resources to post officesEncouraging technological innovation (Cell phones)Educating rural population in financial services

Potential Areas for Improvement