Justification of creating a specialised bank to empower migrant workers
Friday, 13 December 2013 00:00
Migrant worker remittances are a staggering US$ 500 b business globally
Currently the global migrant worker remittance stands at a staggering US$ 420 billion and will go up to US$ 700 billion by the year 2016. Mostly over 220 million international migrant workers who live and work outside their country of birth remit this money annually to their families in the developing countries.
There are many studies done, many reports written, many discussions taken place at various international forums yet the global migrant worker community in the countries of their work as well as their dependent families at home stand less empowered economically, and most often the migrant worker community remain in the vicious cycle of poverty. Thus they continue to remain a migrant worker for a longer period of time separated from their respective families resulting in huge social issues.
In the 2009 G8 and the 2011 G20 leaders’ forums, remittances were placed on the world agenda, but without a clear facilitation and sustainable framework to empower migrant workers in the country of their work and their dependents in the country of their birth, remittances continue to be an agenda item at international forums and subject matter to write reports only. Even to date the global banking and finance community is not able to bring the international money transfer cost below US$ 3 per transaction, which is key to empower greater migrant worker remittances through conventional means.
In the last five years nearly US$ 26 b remitted by migrant workers to Sri Lanka
Sri Lanka is one of the Asian countries that stand out in greatly benefitting from migrant worker remittances to its economy. There are nearly 1.7 million migrant workers who are working outside Sri Lanka and of that nearly one million works in the Persian Gulf and Middle Eastern countries.
In comparison to migrant workers of other countries, Sri Lankan migrant workers emigrate individually without their families for a very specific period of time. In 2009, Sri Lankan migrant workers have remitted US$ 3.3 billion, in 2010 US$ 4.1 billion, in 2011 US$ 5.2 billion, in 2012 US$ 6 billion and is expected to reach a staggering US$ 7 billion in 2013, which stands at almost 33% of Sri Lanka’s foreign exchange earnings and also close to 50% of export earnings and also covering 30% of import expenditure.
While recognising the many multiple initiatives the Government is very proactively putting in place, more on the logistical side of the emigrating migrant workers to the countries of their work, many economic empowerment issues relating to migrant workers and their dependents still remain largely unresolved. Greater collaboration and engagement between the banking system and the private sector of the country together with the Government is essential to create a framework that can empower migrant workers and their families economically.
Migrant workers are marginalised by the banking system of countries of their work
Other than a few “white collar” job migrant workers, the majority of the migrant workers have no access to the banking and finance system of the countries of their work. Even though some have access to some of the banking services, the affordability of such services remains a huge issue for majority of them to begin any relationship with banks and finance institutions of the country of their work. Most often migrant workers are serviced by exchange houses and money transfer agents who do not offer the full spectrum of banking and financial services other than facilitating money transfer at high cost.
While Sri Lankan banks have collaborations with exchange houses to facilitate money transfer, they have not been able to offer relationship based banking services to migrant workers in the country of their work. Financial inclusion of the migrant worker in the country of work is absolutely essential to empower migrant workers economically, not just conducting musical shows and special promotions and or sponsoring New Year celebrations to capture only migrant worker remittances. Sri Lankan banks need to look at the 360 degree financial inclusion program to build and sustain relationships for economic engagement and empowerment.
Migrant worker dependent families marginalised by banks of their country of birth
Migrant worker dependent families too are marginalised by the banking and finance system of the country, by virtue of not making their services available, accessible and affordable to this community. They are mainly serviced by the money transfer mechanism of the banks and specialise money transfer companies like Western Union and MoneyGram for the single service of receiving money remitted by the migrant worker. Opportunity to open and maintain a savings, current account, obtaining credit for housing, micro and small business loans and loans for health and education are a distant dream for majority of dependent families that live mostly in rural Sri Lanka.
We have nearly 1.7 million migrant workers and adding their families to this at least it will make a population of a minimum three million. It is interesting to find out what percentage of this population has savings accounts or any form of relationships with the banking system of the country.
This is where we have to face reality since maintaining low value large number of accounts does not make any business sense to the banks.
The challenge faced by the banks is to make their services affordable to millions of migrant workers and their families, without which this community will remain marginalised by the banking system of the country.
Sri Lankan migrant workers contribution to sustainability of sri lanka’s economy
In the last five years since 2009 Sri Lankan migrant workers have remitted a staggering US$ 26 billion to the country through the banking system, leave alone the large amount of money that has come in informal and illegal ways. During the good and bad times of the country the foreign exchange earned by migrant worker community has largely contributed to sustaining and driving the economy of our country.
But still when you take individually the migrant worker and their families, they stand at having no opportunities within the country for economic empowerment other than seeking further opportunity to emigrate to work, cycle after cycle. If there are opportunities for investment of their hard earned money either in financial instruments or business engagements that will give them reasonable returns, they would remain very productive assets to the country and be productively employed or self-employed which will greatly benefit their families socially.
Rationalising the viability of a specialist bank to serve the migrant worker community
Looking at the viability of setting up a separate bank to serve this community is something that can be rationalised in many ways.
Firstly, the value of remittances that have come to Sri Lanka in the last five years, nearly US$ 26 billion, is itself a justification.
Secondly, to create more simple and pragmatic products and services that would match the affordability and accessibility of the migrant worker and their families for financial inclusion is beyond the current business appetite of the commercial banks.
Thirdly, still a large amount of money is remitted via informal and illegal mechanisms, which is detrimental to increase channels for formal remittance. A very dedicated bank would be able to create number of linkages and partnerships with banks and financial institutions and create greater access to migrant workers in their working countries and also reduce informal and illegal remittances.
Fourthly, a dedicated bank can locally work with a number of commercial entities for migrant workers to invest in instruments that can facilitate progressively higher returns. This may not be investments in stock market, the capital markets or in corporate entities but small and medium size businesses that can give opportunity for the migrant worker to invest their capital, talents and skills.
Another reason is by taking advantage of the rapid transformation of technology based banking solutions via mobile phone and internet banking, a dedicated entity can now create an ideal framework to give greater access as well as make products and services to this segment more affordable, clearly working towards bringing cost of remittances below the US$ 3 per transaction.
Need a pioneering initiative to make ‘Rata Viruvo’ the ‘Arthika Viruvo’
This kind of a specialised bank should be created with a greater public and private sector collaboration. We have seen for the common good of the public, the Central Bank of Sri Lanka has created a number of institutions today that run very successfully and profitably, even the migrant worker community too can be made a stakeholder in a dedicated bank.
While we have seen over a 1.7 million Sri Lankan migrant workers very silently contributing at the expense of their individual inconveniences as well as significant social and emotional setbacks to their respective families, it’s time that all stakeholders, banks, private sector and the public sector seriously work towards a more practical and sustainable mechanism to empower migrant workers and their families economically.
(The writer is the Chairman of Asia’s largest microfinance network, BWTP. He also serves on the boards of a number of national and international financial institutions that advocate and practice financial inclusion. The thoughts and comments expressed here are his own and in no way connected to the organisations he represent. He can be reached at [email protected] or [email protected])