MIAMI – Although remittances from migrant workers in the United States to Latin America and the Caribbean are growing at a torrid pace, much needs to be done on the receiving end to capture and use the money efficiently, experts say.
Such money transfers amounted to $45.8 billion in 2004, a 20 percent increase from the 2003 figure, according to the latest report from the Inter-American Development Bank.
Mexico was by far the top destination for remittances, receiving about $16.6 billion, an increase of 17 percent. Brazil was second with $5.6 billion, followed by Colombia with $3.9 billion. Some countries received more in remittances than in foreign aid and investments, the report said.
But most recipients are spending most of the money directly on their basic needs, such as food and health care, rather than putting the cash into a financial system where its impact would be increased, the experts said.
Manuel Orozco, senior associate director at the Inter-American Dialogue, a Washington-based group that monitors Latin America, said commercial banks and credit unions need to offer more incentives to lure the recipients of remittances into “banking the unbanked.”
“Once recipients transform their money into the (financial) … system, there is credit efficiency for both the recipient and the community,” Orozco said.
“In Mexico, for example, you have small cooperatives of savings and credit, consisting of a network of microbanks, that are doing (receiving) remittance payments and then attracting recipients … to offer them loan packages and debit cards.”
In other countries like the Dominican Republic, Orozco added, initiatives have also included offering financial products tailored to women. The overwhelming majority of both remittance senders and recipients are women, according to the U.N. Institute for the Advancement of Women.
According to the IDB report, migrants in the United States typically send $100 to $300 at a time to relatives in their homelands, using international transfer companies such as Western Union and MoneyGram.
Among the primary sending states are California, New York, New Jersey, Illinois and Florida.
On the U.S. side, senders must pay transfer fees, currency exchange rate commissions and other costs, at times eating deeply into the money that arrives.
And with 35 percent of the remittances going into rural areas, improvements in more than just the banking system are needed to ensure an efficient use of the money, Orozco added.
“Introducing wireless Internet technology so that there is (faster) delivery to more areas (would) integrate these countries into a range of other benefits,” Orozco said.
Comments are no longer available on this story