IFAD social reporting blog

By Pedro De Vasconcelos, Manager of the IFAD Financing Facility for Remittances

How can we maximize the development impact of remittances?

This was the key question of the fifth Global Forum on Remittances and Development, which ended in Milan last Friday after four days of substantive dialogue and debates. More than 400 participants attended from 88 countries around the world.

In 2014, global remittances to developing countries reached US$436 billion, exceeding official development assistance by at least three times. The forum focused on how to leverage these funds for social and economic development in recipient countries. It is estimated that about 20 percent of the funds received could be invested in productive activities and small businesses.

While today there is greater appreciation of remittances by governments and the international community than ever before, there are still many barriers that prevent remittances from meeting their development potential.

Kanayo F. Nwanze, IFAD's President, opens the Global Forum on Remittances and Development. ©IFAD

The forum started with the warm-hearted observance of the first International Day for Family Remittances. 

In his opening, IFAD President Kanayo Nwanze reminded the audience that remittances are the largest poverty alleviation mechanism adopted by millions of migrant workers around the world in benefit of their families back home.

In her keynote address, Queen Máxima of the Netherlands, speaking in her role as the United Nations Secretary-General's Special Advocate for Inclusive Finance for Development, also acknowledged the importance of remittances. "We should never forget that to millions of families in developing countries remittances represent their only hope for building a better future", she said.

Enabling environment to transfer remittances

Participants rallied around the need for more proportionate regulations and a more enabling regulatory environment for remittances. In particular, payments systems should be more integrated and adapted for transfers of small amounts of money.

The issue of de-risking was much discussed and will remain an area for future work. Money transfer operators and companies present at the forum called for the opening of a dialogue with regulators. De-risking is the closing of bank accounts of money transfer operators, which they need to operate, by banks due to perceived legal, regulatory sanctions and anti-money laundering/countering of financing terror measures.

Unleashing the potential of new technologies 

There was a wide consensus on the promise of technology to provide cheaper, more efficient and far-reaching remittances.

The use of mobile and online technologies has led to a transformation of the landscape for domestic remittances in many countries, for example in Kenya. Their use in cross-border transactions, however, remains limited and is hampered by the lack of international interoperability of mobile systems and of regulation harmonization between countries. The value of international remittances sent through mobile phones accounted for less than 2 percent ($10 billion) of global remittance flows ($542 billion) in 2013, according to the World Bank.

H.M. Queen Máxima of the Netherlands delivering her keynote speech at the opening of the Global Forum ©IFAD

Ensuring impact on development: financial inclusion is key

Public-private-people partnerships and dialogue with migrants and recipient families were the leitmotiv when discussing concretely how remittances can harness development locally.
The private sector is very key in that respect. By providing access first to savings accounts and then loans and insurance, banks and money transfer operators can offer millions of people the possibility to invest, develop their activities and start small businesses. Currently only about 10 per cent of rural people in developing countries have access to even the most basic financial services.

Participants discussed how to go beyond pilot activities and take proven models and scale them up to maximize development. The IFAD Financing Facility for Remittances is launching a call for proposals to that effect. Guidelines will be published in September 2015.

Costs can be further reduced

While progress has been made to reduce transfer costs in recent years, more should and can be achieved through increased competition and the introduction of new technologies. With a global average of about 8 percent, costs remain too high and are much higher in many places, for example in Africa.

Next steps

It was agreed that joint efforts need to be pursued to reduce transfer costs, to increase the use of new technologies and to improve financial inclusion. Particular attention also should be paid to the role remittances can play in the post-2015 development agenda and their contribution to the sustainable development goals.

The next global forum will take place in New York in 2017 to assess progress towards the goals related to remittances.

First awards for excellence in remittances and social and economic development

The forum closed with a ceremony to recognize practices that make a real difference to migrants and their families.

The FFR gave four awards for efforts to help leverage remittances for development. Awardees were: WorldRemit, the world’s largest mobile-centric money transfer service; Mame Khary Diene, CEO of Bioessence and a successful diaspora entrepreneur; the Central Bank of the Philippines which set up a Economic and Financial Learning Programme one component of which targets overseas Filipinos and remittance-recipient families; and the non-profit Asociación Mexicana de Uniones de Crédito del Sector Social (AMUCSS), a network of rural financial institutions and micro banks.

Written by Sanjib Kumar Chaudhary, SNV, Nepal

Mobile technology has greatly aided farmers in India; Nepal should emulate such practices.

The hills of Almora in Uttarakhand of neighbouring India resemble the landscape in Nepal. The culture and way of life of the people are similar too. However, farmers there are a little more fortunate than Nepali farmers. They can obtain information on market prices, weather conditions, agricultural policy news, and tips on farming cycles via short message service (SMS) from Reuters Market Light (RML). The RML service is delivered in the form of a simple SMS that fits into the daily workflow of the farmer in his/her preferred language. Information can be obtained on 450 crop varieties in eight different languages.

Mobile power 

A woman hidden behind a veil narrated to me her experience with mobile technology. She had laid out the whole lot of crop to be dried out in the sun. It was a sunny day and there was no sign of rain in the horizon. Then she received an SMS from RML. Being illiterate, she ran to her daughter who read it out. The SMS predicted rain.

All at once, she collected her crop and stored it in a safe place. It rained just after that but her crop was safe. A lean farmer standing next to her shared a similar experience. He was ready to spray pesticide on his standing crop of vegetables. But he changed his mind after receiving an SMS notifying him of a light shower. It saved both time and money.

Such is the power of information. And it is a blessing when it comes to a mobile set worth a few thousand rupees and in your preferred language. In Uttarakhand, the RML services are free of charge, sponsored by the Department of Telecommunication and the German development agency, GIZ. In other parts of India, RML services can be availed of through a paid subscription. This service is being used by over 1.2 million farmers in 50,000 villages across 17 states of India. Even the information can be personalised based on the type of crop, region of the crop, region of the country and local language. This enables farmers to make informed decisions, reduce waste and maximise their profits.

Farmers are well informed about the prices of their produce in two nearby markets. It helps them sell their products at a fair price to buyers. The service also has a provision of flashing the name and mobile number of a farmer or a trader who wants to sell or buy the commodities. The seller and buyer can then negotiate with each other for an agreeable price.

Likewise, RML flashes the name and contact number of successful farmers periodically. The farmers end up receiving thousands of calls from fellow farmers asking them about their success mantra.

The farmers can also enquire about diseases and pests affecting their crops with experts and specialists through a toll-free number provided by RML. They simply need to dial the number and record their problems with the call centre employees. The problems are then discussed with experts and the caller gets a reply-call with prescribed solutions.

With the ever-growing use of mobile phones, farmers in Nepal are also discovering ways to make their life easier. Now they can enquire about the price of their produce at major markets and negotiate prices with middlemen, avoid unnecessary travel to fetch agricultural inputs (especially if it is not available in the market) and seal deals with buyers. Farmers in Surkhet and Dailekh in the Mid-West development region can find out the price of vegetables and fruits through an SMS service provided by the Agro Enterprise Centre. Likewise, by calling a toll-free number, they can find out the prices of vegetables and fruits through voicemail. This service was piloted by Practical Action.

Mobile innovations 

While we are being hit hard by loadshedding, farmers in India have found a unique method to deal with power cuts. With the help of a device designed by Vijay Bhaskar Reddy Dinnepu, founder of Vinfinet Technologies, they can direct their irrigation pump motors to switch on and off whenever they choose.

Through the device, the motor can also call back the farmer if there is voltage fluctuation or a power cut. The device connects to farmers’ mobiles through an interactive voice response system (IVRS).

With the provision of krishi meter (electrometers measuring subsidised electricity for agriculture), Nepali farmers can now irrigate their crops even during the dry season at cheaper prices. A device similar to that of Vinfinet Technologies could help them cope with regular power cuts and they can avoid staying on their fields for the whole day and night—in the cold and heat—waiting for power to resume.

The brains that developed the popular Android application ‘Taxi Meter’ which calculates the price of the distance travelled in a taxi and prevents travellers from being fleeced by taxi drivers must not leave behind farmers and agriculture in the ‘mobile revolution’.

Ever growing mobile users 

Cellphones, which are a necessity these days, is ubiquitous even in the remotest corners of the country. People living below the poverty line, above the line and the ultra-rich, all have access to mobiles and the telecom network. What aid workers could not do in decades has been accomplished in years by mobile operators. While the thought of building toilets in every household seems to be a dream, Nepalis from all walks of life hold mobiles in their hands. The private telecom service provider, Ncell, boasts of having reached the mark of 10 million subscribers while state-owned Nepal Telecom has similar claims (including Namaste, CDMA and 3G subscribers).

Like RML in India, across the developing world, mobile services in agriculture have focussed on sharing and obtaining information. The programmes developed so far provide farmers access to research and best practices, weather information and market prices via SMS, IVR or call centres. With the rise in population and intense competition in agriculture, it is of vital importance for farmers to increase their production and raise incomes. This is possible only if they have access to right information at the right time through mobile technology.

Recently, in an Information Communication Technology workshop held in Rajbiraj, one of the presenters asked the participants about the best way to reach people who do not have access to the internet. Three hands quickly rose in unison. The answer was the mobile phone in their hands. With millions of farmers with mobiles handy, what we need now is the right technology, like RML. It could be a ‘game changer’ for Nepali agriculture.

Article originally appeared: http://www.ekantipur.com/2013/11/10/related-article/cell-of-change/380562.html