Christian Ambrosius, Barbara Fritz, and Ursula Stiegler,
Freie Universität Berlin
While up to now research on transnational migration and remittances has strongly concentrated on questions linked to poverty reduction and their use by receiving households, we emphasize the potential impact of remittances on financial sector development. We base our research on the assumption that the impact of remittances on the financial sector depends on several factors that can be governed through different regulations and policies. We map policy options, which potentially contribute to the goal of financial development, and present examples from the Latin American context.
Remittances, the monetary counterpart of transnational migration sent to family members staying behind, are highly important especially in the inter-American context. These small-scale transnational transfers have steadily increased since the mid-1980s. Officially registered remittances to developing countries reached an estimated volume of 325 billion USD in 2010, compared to 55 billion USD in 1995 (Mohapatra et al. 2011). They have been the second most important source of external finance for developing countries, being twice the amount of official development aid and almost as much as foreign direct investment. In absolute terms, large developing countries such as India, China, Mexico and the Philippines receive the largest shares of remittances in the world. However, in relative terms, small and poor countries tend to be much more dependent on remittances. A ratio of remittances to GDP of above 15 or 20% is not unusual for many countries with large Diasporas.
As a response to the large increase in officially registered remittances, these flows have received much attention recently, as evidenced by an increasing number of publications on the issue. However, remittances are not a new phenomenon – despite their strongly increasing registration in official data. Formal remittances, defined as those that appear in the statistics of the central bank – mostly money sent through banks or money transfer operators (MTO) – are only a fraction of total remittances. Many financial transfers are not included in official numbers, among them in-kind transfers; cash carried by either the migrant himself or friends or family members; and informal transfer systems of the so-called Hawala type, which is said to have its origin in the early Islamic Empire (Müller 2006). Today, financial liberalisation and reduced costs for sending remittances through official channels have made formal transfers more attractive in comparison to informal channels. As a consequence, remittances are increasingly accounted for in the statistics of central banks. This means that official numbers about the true increase in remittances are misleading: What is observed is partly a switch in transfers from the informal to the formal sector. Also, improved data collection through central banks has contributed to the inclusion of remittances in official statistics, in spite of accounting differences that still exist between countries (De Luna Martínez 2005).
Other authors see the reason for the increased attention given to remittances in terms of changing political and ideological paradigms. According to this view, remittances fit into the development agenda of the leading international organisations because they are a way of engaging migrants as agents for development. As such, they are part of efforts to include the private sector in development strategies (De Haas 2007). The debate on its development impacts to a certain degree reflects the sharply divided views on the effects of globalization on the global south within social sciences. Especially at the policy level, remittances often are seen as a ‘bottom up’ source of development finance (Kapur 2005). They do not require any state bureaucracy and are no burden for public budgets. Transnational migrants are celebrated as new development actors within their origin societies. The financial flows go directly to those who need them. On the other side, social scientists with a critical perspective on globalisation see migration and remittances rather as the negative outcome of neo-liberalism that dismantles the productive apparatus. Authors such as Delgado Wise / Márquez Covarrúbias (2008) argue that remittances are a mere outcome of strangled economic and social development rather than a tool for growth and well-being. In their view, these flows help sustain the fragile socioeconomic stability of the migrants’ country of origin, expanding the asymmetries between north and south and exacerbating phenomena such as employment insecurity, poverty, and social marginalization.
Research on remittances so far has mainly focused on their impact on reducing poverty (Adams/Page 2006), the creation of growth through multiplier effects (Glytsos 2002, Durand et al. 1996), their effects on inequality in remittance-receiving countries (Acosta et al. 2008, Koechlin/León 2006, Jones 1988), a possible loss in international competitiveness through the appreciation of exchange rates (Acosta et al. 2007, Amuedo-Dorantes/Pozo 2004, Loser et al. 2006) as well as morally hazardous behaviour among remittance receivers (Chami et al. 2003). A couple of studies also have addressed the impact of remittances on human capital as well as on entrepreneurship among migrant families (Adams 1991, Cox/Ureta 2003, Goerlich et al. 2007, Woodruff/Zenteno 2001). Recently, a number of studies also have addressed the impact of remittances on the capital accounts of remittance-receiving countries (Apaa-Okello/Aguyo 2006, Buch et al. 2002, Bugamelli/Paternò 2005; Sayan 2006). Because capital usually flows into a country in good times and out of a country in bad times, private capital has been pro-cyclical and has intensified boom-bust cycles in emerging markets. Remittances behave differently. While they function as an insurance against adverse economic conditions at the microeconomic level, they also help to stabilise the balance of payments at the macroeconomic level. As such, remittances can play a strategic role in the prevention of financial crises.
Our approach differs from existing studies on remittances by focusing on the indirect development effects of remittances via the financial sector. Our hypothesis is that remittances are conducive to financial sector development, provided that certain conditions are given. Furthermore, we assume that these conditions can be governed through multiple forms of formal or informal regulations, including governmental and non-governmental as well as national and transnational actors.
The article is organised as follows: As a first step, we summarise the state of research on financial sector development through remittances and describe the conditions under which this can occur. The second part of the paper presents different remittance initiatives, which are likely to contribute to a positive impact of remittances on financial development. Examples are taken from three heavily remittance-dependent Latin American countries: Mexico, El Salvador, and the Dominican Republic.
Financial Development through Remittances: A Neglected Research Field
Developing countries typically suffer from weakly developed financial markets and a low degree of monetisation of the economy, measured as a low ratio of credit to GDP and a low ratio of the monetary aggregates M2 or M3 to GDP. A large proportion of the population and typically the small and micro enterprises of the informal sector have no access to bank credit and thus operate outside the financial sector with low capital intensity and low productivity. Empirical studies confirm that a relative increase in savings and credit is associated with an increase in growth and per capita income (Beck et al. 2000a, 2000b), while weakly developed financial markets limit the process of capital accumulation and hinder economic development.
Few studies have so far explicitly addressed the relationship between remittances and the development of the domestic financial sector, with the notable exceptions of Aggarwal et al. (2006), Fajnzylber/López (2007), Giuliano et al. (2006) and Mundaca (2005). Mundaca and Giuliano et al. differ in their approach to measuring the link between remittances, financial development, and growth. Mundaca finds that the impact of remittances on growth in Central America, Mexico and the Dominican Republic is stronger when the indirect effect on growth via an extension of domestic credit is also taken into account. In other words, remittances have a stronger effect on growth in those countries where a functioning banking system exists. Giuliano et al. arrive at opposite empirical results in a cross-country comparison, saying that the impact of remittances on growth is, on average, higher in those countries where the financial sector is weak. Their argument for this surprising result is that in countries with weakly developed financial markets, remittances can compensate for a lack of access to credit. This leads to higher spending on investment and, consequently, higher growth. However, the findings of Giuliano et al. may be misleading, as they do not take into account the existence of informal remittances. The proportion of remittances sent through informal channels tends to be much higher in countries with weakly developed financial markets (Freund/Spatafora 2005, De Luna Martínez 2005). A series of African countries are among those with the highest proportion of informal remittances, while East Asia and the more developed Latin American countries such as Mexico have a relatively high ratio of formally transferred remittances to total remittances (Freund/Spatafora 2005). Consequently, Giuliano et al. may overestimate the growth effect of remittances in countries with weak financial markets. This is a good example of the difficulties associated with econometric studies based on high and shifting proportions of informal remittances that are not accounted for in the statistics of central banks. Improving remittance data is therefore a challenge for future research.
Aggarwal et al. (2006) show in a cross-country regression that an increase in remittances is positively correlated with an increase in banking deposits and, albeit to a lesser degree, with the volume of credit. The latter is also confirmed by Fajnzylber and López (2007), who stress the importance of differences between countries in the degree of correlation between remittances and credit. Aggarwal et al. conclude that their findings provide strong support for the notion that remittances promote financial development in developing countries, though they recognise that they are not able to give a definite answer to the question of causality: It is also possible that financial development leads to more – and more formalised – remittances and not vice versa. Also, they do not claim general validity for their findings, because individual countries may have experiences that differ from the aggregate results they present (Aggarwal et al. 20). Nevertheless, the study from Aggarwal et al. provides a good starting point for a closer examination of the link between remittances and financial sector development at the country level.
Linking Remittances with Banking Services has Positive Effects on Saving and Investment
Important conditions for the contribution of remittances to financial sector development are the “formalisation” and the “bankarisation” of those flows. For many migrant families, sending remittances through formal channels is an important first contact with the formal financial sector. However, financial development requires a step further than just the formalisation of remittances. Remittances entering the country through MTO or post offices are paid in cash and neither the sender nor the receiver of remittances must necessarily hold a bank account. In contrast, access to banking services opens up the option of monetary savings instead of real savings or immediate consumption from the remittance receiver’s perspective. Furthermore, running a bank account with regular payment receipts may increase access to credit and other financial services. At the macroeconomic level, this may have positive effects on monetary saving and investment. Savings that are kept in bank accounts are available for investment elsewhere and can be channelled to where they earn the highest return, for example, where they have the highest productivity. Where migrants have no access to banking services, saving often takes the form of acquisition of real assets such as land or housing which may not be used productively. This can lead to a speculative increase in prices, resulting in limited investment opportunities at the microeconomic and the macroeconomic level.
Stiglitz and Weiss (1981) have shown how transaction costs and information asymmetries lead to credit rationing, and thus prevent parts of the population from accessing banking services. When individual sums are low, transaction costs are high, meaning that banks do not offer services to low-income groups, especially when they work in the informal sector and do not own assets that banks would accept as collateral for credit. According to data of the Inter-American Development Bank, only one out of ten people in Latin America owns a bank account, while in the USA nine out of ten people own a bank account (Bate et al. 2004). The access of remittance receivers to bank accounts is only slightly higher than the average, with important differences between countries (Fajnzylber/López 2007; Orozco 2006). Additionally, the fact that remittances are only moderately correlated with an increase in credit (Aggarwal et al. 2006, Fajnzylber/López 2007) could point to the fact that remittance receivers are subject to the typical problems of information asymmetries and transaction costs or to the possibility that remittances substitute credits. The unsatisfied demand for financial services has been confirmed by surveys among migrants and their families in El Salvador and Bolivia (Jaramillo 2005).
Remittances and Financial Development – Governance Initiatives from Latin America
Since policymakers and researchers have realised the relevance of remittances for the receiving countries, they have been developing policy options to leverage the development potential of those financial flows. However, due to the fact that remittances are private capital flows at first glance it seems rather difficult to define government policies that could enhance their positive impacts. Despite this, while scholars now agree that states should desist from implementing direct policy intervention – for example, the imposition of a tax in order to divert funds to public budgets – they also emphasise that quite a lot can be done to increase the development impact of remittance transfers through indirect policy interventions (Fajnzylber and López 47; GCIM 26f; Terry 12). Next to governmental initiatives there are also a range of possible initiatives from market or civil society actors and coordinated initiatives of diverse actors. We sum all these up – including the state initiatives –under the label of governance initiatives.
Although there is more and more literature dealing with policies to increase the developmental impact of remittances at a general level (Carling 2004; CPSS/WB 2007; De Luna Martínez 2005; GCIM 2005; IAD 2007; Orozco 2004; Orozco/Fedewa 2006; Orozco/Wilson 2005; Page/Plaza 2005; Terry 2005), there are only few detailed country and/or case studies on existing remittance governance options. Nor have these been, to date, studied in a systematic way. Remittance-related initiatives hitherto realised can be roughly divided into four groups: a) diaspora policies that try to influence remittance flows in a rather indirect manner, b) transfer cost reduction and improvement of payment systems, c) formalisation of flows and improvement of access to financial services for the ‘unbanked’ (often referred to as ‘financial inclusion’), and d) the channelling of remittances towards ‘productive’ or ‘non-consumptive’ use.
In recent years there have also been several initiatives to tackle the growing importance of remittances at the international level. The G8 states concluded at their summit at Sea Island in 2004 that international cooperation was necessary to reduce the cost of sending remittances. Moreover, a series of initiatives from international financial institutions, such as the World Bank and the Inter-American Development Bank, and international cooperation agencies have been dealing with the challenge of designing initiatives to improve the positive economic impacts of remittances (Orozco 2005: 28ff.). The growing international political interest in controlling remittance flows also increased in the wake of September 11; i.e. a range of new regulations emerged because of the fear of terrorist financing and money-laundering activities (Orozco 2007, 138; Hernández-Coss 1ff.).
In the following paragraphs we present some examples of remittance related governance initiatives in the field of financial sector development. Examples are taken from Mexico, El Salvador, and the Dominican Republic, which have all experienced significant labour migration to the United States for long periods of time, through which strong transnational ties have been established between the labour-sending and labour-receiving countries (Terry 7f). All three countries are highly remittance dependent, though the absolute sums and the relative weight of the remittance-flows differ between the three economies. Mexico is the country with the highest absolute flow of remittances in the region (and with one of the largest worldwide). El Salvador and the Dominican Republic have a high relative proportion of remittances in relation to GDP. Whereas in El Salvador remittances account for almost a fifth of the GDP, in the Dominican Republic this share lies around seven per cent, and below three per cent in Mexico (data for 2009, see Table 1). Mexico is a particularly interesting case because of its regional importance and the large absolute size of its diaspora. Related to this is an often pioneering role in terms of remittance-related policies, as will be elaborated below. The United States is the main migration destiny for all of them and also the main remittance-sending country. To a considerable extent, the migrants move without the required documentation, which means that the flows take place through informal channels where the capacities of states to tackle the phenomenon are rather restricted. Table 1 provides an overview of these migration- and remittance-related characteristics as well as the key aspects of financial development in the three countries.
Table 1: Migration, Remittances, and Financial Development: Key Aspects in Mexico, El Salvador, and the Dominican Republic
|Country||Stock of emigrants in the United States (Million) ||Share of respective national population (%)||Remittances in million US$ (2009)||Remittances as a share of GDP
|Share of adults receiving remittances (%)||Diffusion rate of Microfinance-Institutions|
Sources: Data on migration from PEW 2009 and World Bank 2011a on remittance flows from World Bank 2011b; on receiving rates from IADB/MIF  on diffusion rate of MFI: CGAP 2003.
a) Maintaining Remittance Flows through “Diaspora Engagement”
One strand of polices which intends to indirectly increase and stabilise remittances could be summarised as ‘diaspora engagement policies’ (Gamlen 3). Although such goals are not stated explicitly, it can be assumed that these policies are supposed to contribute to high remittances-flows and to increase transfers in bad times in order to balance income losses at the family level. One of the measures to maintain close links between migrants and their home country with the indirect effect of keeping remittance flows high is the right of dual nationality (10), that is guaranteed by Mexico and the Dominican Republic and partly by El Salvador (Vono de Vilhena 2006).
Many strongly remittance-dependent countries also have created special governmental institutions for its diaspora engagement policies. The Salvadorian government institutionalized its diaspora policy by creating the General Directorate for the Communities Abroad (Dirección General de Atención a la Comunidad en el Exterior, DGACE) within the Ministry of Foreign Affairs in 2000. With the aim of upgrading the institutional status of the diaspora policy, in 2004 additionally a special Vice-Ministry for Salvadorians Abroad (Viceministerio de Relaciones Exteriores para los Salvadoreños en el Exterior) was created. The DGACE organizes its activities along three main lines: cultural, economic and social programs. Whereas it doesn’t realize special policies regarding remittances, so does the Mexican Institute for the Mexicans Abroad (Instituto de los Mexicanos en el Exterior, IME), which is also part of the Ministry of Foreign Affairs. The IME offers a wider range of services than the DGACE, among others in the education and health sector, and recently it has also started to realize a range of activities related to remittances. In this field it mainly coordinates and informs about programs and policies of other governmental institutions and seeks to promote the development of further services for the migrant population. In the Dominican Republic there are so called Consultative Councils of the Presidency of the Dominicans Abroad (Consejos Consultivos de la Presidencia de los Dominicanos en el Exterior), whose creation has been justified with the importance of the economic contributions of the emigrated population.
b) Reducing Costs for Sending Remittances
Reducing transfer costs can have a positive effect on the amount of money reaching the beneficiaries. If a migrant’s budget allows him to send a fixed amount per month, then a lower transfer fee results in more money reaching his family. Countries have undertaken various efforts to reduce the costs of sending money home. Cost reduction can be realised through various approaches, for example, improving payment systems, enhancing competition in the remittance market, and increasing transparency (Fajnzylber and López 52ff.)
An example of the improvement of payment systems in the US-Mexican case is the bilateral agreement between the Federal Reserve Bank of Atlanta and the Mexican central bank which implied the coordination of their respective payment systems. Through this program, called ‘Directo a México’, the existing payment infrastructure of both countries is connected, thus lowering the costs of transfers for payments from US bank accounts to Mexican banks accounts (Hernández-Coss 23f). Originally created for the transfer of pension payments to Mexico, this mechanism is now promoted especially for remittances transfers at one of the lowest fees in this bilateral corridor. One reason for the low cost is the usage of the FIX – the inter bank exchange rate – minus a small spread (0,21%) as reference exchange rate for the transaction. MTO in contrast usually apply less favourable exchange rates, thereby often elevating transfer costs considerably. In the Salvadorian and Dominican cases, similar cooperation agreements with the United States do not exist. El Salvador has not yet established a unique paying system for the whole banking sector itself, which is a condition for connecting payment systems internationally.
Another measure concerning transfer costs in the Mexican case was the creation of an internet platform called Calculadora de Remesas (remittances calculator). This information service, aiming at increasing transparency and competition in the market, was launched by the national commission for the protection of consumer rights in the area of financial services (CONDUSEF). It allows the remittance senders to compare the transfer fees of a wide range of transfer companies operating in the market, who themselves are responsible for the actualisation of the database. The internet platform provides information on fees according to the amount, the origin and the destination of the money transfer. Furthermore, it informs on the proximity of the respective bank or MTO branches to the location of both the sender and the receiver.
The various efforts undertaken with the aim of reducing transfer costs have contributed to the fact that the US-Mexican remittance-flow corridor is now at quite an advanced stage in the process of shifting from informal to formal transfer systems (Hernández-Coss 11).
c) Formalising Remittance Flows and Improving Access to the Financial System for Remittance Senders and Receivers
A considerable challenge for better capitalising on remittances is the fact that many migrant families, that is, remittance senders and receivers, lack access to financial services. Remittances can be a point of entry to the formal financial system for the ‘unbanked’, giving them access to bank accounts and other financial products such as consumer loans, mortgages, life and non-life insurance products and pensions (Terry 11f; De Luna Martínez 20). Formalising remittance flows, moreover, has positive implications for the possibilities to register and estimate their amounts and destinations, which, in turn, is a prerequisite for and facilitates the design of effective policies.
On the sending side, undocumented migrants often lack appropriate documentation to accede money transfer services, especially those offered by institutions of the formal financial sector. A large number of Latin American immigrants live in the United States without documentation. In this context, governmental initiatives for the quasi-formalisation of migrants are ways of improving the access of migrants to the formal financial sector. The Mexican consulates, for instance, issue an identification document, the so-called ‘Matrícula Consular de Alta Seguridad’ (MCAS). While the consulates have been issuing an identification document for Mexicans abroad already for more than 130 years, the MCAS was launched in 2003 with a range of security features to prevent forgery. Despite immigration critics that see in this document a subversion of the US immigration system and call it an “ID for illegals” (Dinerstein 2003), this alternative form of documentation is now accepted by a wide range of banks and other institutions in the United States, thus granting access to financial services, including the sending of remittances, to undocumented migrants (Hernández-Coss 11).
On the receiving side, especially the possibility of transfers through Microfinance-Institutions (MFI) seems promising for the improvement of financial inclusion and thereby the development of the financial sector in terms of both depth (i.e. the amount of money channelled through the financial system) and outreach (i.e. the access of the population to financial services). That is because MFI are often located in areas where traditional banks aren’t present and because they have considerable experience serving low-income clients that are often also the ones that receive remittances (Jaramillo 133f.). In this context, for instance, remittances could serve as collateral for credits. An assumed problem in linking remittances with financial services is that MFI are not always authorised to process foreign exchange transactions – even if this problem may be overcome by way of cooperation with financial institutions authorised and actively engaged in international financial transfers. Moreover, the scope and quality of MFI differ significantly among countries (Conger 2001).
In the Mexican case, a prominent attempt to improve migrants’ families’ access to financial services is the so-called ‘Red de la Gente’ (Network of the People). This network was founded by the Mexican national development bank BANSEFI (Banco de Ahorro Nacional y Servicios Financieros) and includes over 180 credit unions and other MFI with more than 1600 branches. Cooperating with various US-based MTO, L@Red de la Gente offers remittance-based services in Mexican rural and urban areas with low incomes and high migration density which are often not covered by the official banking system (Orozco and Fedewa 17; Orozco 2005, 21). A new initiative of the Red to foster the bancarisation of its clients is the so called “Beneficiary Account Registration” (BAR) mechanism through which a remittance-sender in the US can open a bank account in the name of a recipient family member in a credit union branch in Mexico. The receiver then has to formalize the account personally when receiving the remittances.
In El Salvador there is no governmental initiative of that type. However, in the absence of a state led program, there are market-driven or civil society-driven experiences with similar motivations. The Federation of Associations of Savings and Credit Cooperatives (Federación de Asociaciones Cooperativas de Ahorro y Crédito de El Salvador, FEDECACES), for example, has offered remittance services to its clients since 1998. It cooperates with a group of US based MTO and channels money transfers directly to its branches. Receivers have the option to join one of the cooperatives opening an account and/or get access to other financial products like loans or insurances.
In the Dominican Republic, there are also some projects connecting remittances with financial services, but in general MFI have not been very active in the remittance market up to now due to, among other things, capacity and regulatory constraints (Suki 47). One example of a MFI offering remittance services is Banco de Ahorro y Crédito ADOPEM. For an easier entrance to the Dominican money transfer market the MFI started to pay remittances in cooperation with the MTO Remesas Dominicanas (ReD). What makes this case especially noteworthy is the fact that 80% of ADOPEM’s clients are women (Adopem 9). Considering the possible impact of remittances for financial development this is interesting because both female migrants are said to send more of their earned income back home and women that receive remittances seem to be more responsible in terms of household financial management (Mahler 2006; Nyberg Sørensen 2005; Olsen 2008). So far, however, systematic research on these aspects is scarce (Olsen 2008; Ramírez 2005). Like in El Salvador, there is also a network of savings and credit cooperatives (Asociación de Instituciones Rurales de Ahorro y Crédito, AIRAC) with members in most of the country’s provinces that aims at linking remittances with financial services. Both initiatives, however, are still in a quite early phase of connecting remittances with financial services.
Within the growing research on workers’ remittances, the impact of remittances on financial development, as well as the effectiveness of remittance-oriented governance options in meeting these goals has only recently gained attention. Besides a small number of cross-country studies, there is a lack of analytical and empirical work that is based on country studies and a systematic comparison of policies. In this article, we have presented an overview of the most recent and useful research, hypotheses on the potential links between remittances and financial development and some examples of governance initiatives oriented towards financial development through remittances. Whereas we share the sceptical view on the developmental potential of remittances in so far, as we think that – in spite of the recent ‘remittance euphoria’ – the positive development impact of remittances should not be taken for granted. Nevertheless, we are convinced that remittances can have such positive impacts. The effectiveness of this potential link, though, depends on specific circumstances and respective initiatives. The latter require actor constellations where often not only public, but also private actors are involved and that in many cases are cross-border in nature in order to cope with the transnational character of remittances and their development impact. The examples we presented from Mexico, El Salvador and the Dominican Republic not only show the variety of possible options and instruments to tackle financial development through remittances, they also demonstrate the great variety of governance forms in terms of participating actors. Depending on the applied instrument and the respective aims of the initiative, state and non-state actors from the sending and receiving countries cooperate in different constellations. Thus, these examples stand for two remarkable trends in the field of migration and development: Firstly, they give an impression of a new “wave” of initiatives trying to capitalize on remittances for development also in areas that up to now have rarely been linked to migration, as is the field of financial sector development. Secondly, they show new ways of realizing governance initiatives in transnational actor constellations, which, in turn, are embedded in a context of changing state-society as well as changing inter- and transnational relations. Concerning the effectiveness of these governance initiatives, though, we leave the question of how successful these initiatives are in contributing to financial development through remittances for further research. An actor-centered institutionalism (Mayntz/Scharpf 1995, Scharpf 1997) that combines both actor- and structure perspectives as well as different actor models to explain human behaviour, may provide a useful heuristic tool for such an endeavour.
 This paper was written in the context of the International Research Training Group “Between Spaces”, and is based on an interdisciplinary research project within the Collaborative Research Center SFB 700 “Governance in Areas of Limited Statehood”, both located at Freie Universität Berlin. We thank the Deutsche Forschungsgemeinschaft for financial support.back to text
 It has to be noted, however, that the distinction between ‘productive use’ or ‘investment’ of remittances and ‘consumptive use’ is far from clear. In the following, we don’t treat policies aiming at ‘productive use’ because they are not related directly related to financial development.back to text
 One of the following actions was the creation of a task force consisting of members from international financial institutions such as the World Bank as well as central bankers from both sending and receiving countries. The recommendations of the task force were published in 2007 in the document ‘General principles for international remittance services’ (CPSS/WB 2007; Terry 2005: 10f.).back to text
 The International Monetary Fund defines an economy as remittance dependent when the critical percentage of remittances related to the GDP is greater than one percent (IMF 2005: 76).back to text
 The data presented here are from official statistics. Nevertheless, it is important to keep in mind that neither the numbers of migrants nor the amounts of remittances are absolutely reliable due to the fact that those flows often are – to a lesser or higher degree – informal (Page/Plaza 2005: 6).back to text
 The numbers refer only to the first generation. The total population descended from one of the three countries, that is, with the second and third generations included, is, respectively (rounded numbers in millions): Mexico: 31.6; El Salvador: 1.7; Dominican Republic: 1.4 (Pew Hispanic Center 2009). However data presented by the national governments sometimes are much higher. In the Salvadorian case, the ministry of foreign affairs estimates its diaspora at 2.5 Million persons.back to text
 For Mexico: http://www.iadb.org/mif/remittances/lac/remesas_me.cfm, El Salvador: http://www.iadb.org/mif/remittances/lac/remesas_es.cfm, and the Dominican Republic: http://www.iadb.org/mif/remittances/lac/remesas_dr.cfm, 21.11.2009.back to text
 http://www.ime.gob.mx/.back to text
 http://www.ccpde.gov.do/default.asp.back to text
 http://portalif.condusef.gob.mx:8000/Remesamex/home.jsp.back to text
 In fact, remittance recipients usually demonstrate higher levels of account holding than the average population. In Mexico, which shows one of the lowest levels of banking penetration in the Latin American Region, 29% of remittance receivers hold bank accounts compared to 28% of non-receivers. While in this case the difference is not that marked, in El Salvador the respective shares are 31% and 19% and in the Dominican Republic they are 66% and 58% (Orozco 2006: 5).back to text
 http://www.lareddelagente.com.mx/pdf/documentos_de_interes/comunicados/2008/V_conv0508.pdf.back to text
 http://www.directoamexico.com/en/lared.html.back to text
 Interview with Héctor Córdova, Executive Director of FEDECACES, 29th.of February 2008, San Salvador.back to text
 Interview with Eva Carvajal, Banco de Ahorro y Crédito Adopem, 14.03.2008, Santo Domingo.back to text
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