DeniAfrica

The NYTimes writes

Development bankers estimate that some $10 billion of remittances could be saved or invested — if people had access to banks and were encouraged to use them. By banking part of their remittances, recipient families could earn interest, establish credit and provide money for local investment. The result would be more resources to help pay for schooling, starting small businesses or home ownership. Such saving and investment lead to economic growth. And growth at the bottom of the economic scale is the surest way to actually lift people out of poverty. As it is now, most banks in Latin America that receive remittances simply dole out the sums to recipients, after collecting part of the fee paid by the sender. They make no attempt to turn the recipients into bank customers. Bank officials and the politicians that oversee them need to do more to educate the poor about banking and to offer them services. Banks need to be reminded that such lending can be profitable — and will further broader national goals for economic growth. To that end, remittances deserve a more prominent place on the agenda at the meetings of the World Bank, the International Monetary Fund and the Group of 8 leading industrialized nations. Unless those billions in remittances are banked, money that could fight poverty will be left on the table.

The Vanguard reports on a presentation made by Nigeria’s former finance minister,Ngozi Okonjo-Iweala:

She challenged fund managers in the country to device means of tapping into “Nigeria’s money abroad”, either from money owned by Nigerians in diaspora which may be remitted for investments at home or money saved abroad by Nigerians otherwise called capital flight. She noted that though not backed by statistics, there is evidence of high levels of capital flight from the Nigerian economy partly due to lack of appropriate financing vehicles for domestic investors. The former Minister spoke at length on the need to stimulate economic transformation in Nigeria through venture capital, noting that Africa’s long-term development must be driven by economic growth from within, and this, she stated, requires private capital.

The IPS reports that Securitized Remittances have played a role in mainitaining stability for financial institutions within Latin America:

“Securitising remittances,” as the process is called, was first executed by Mexican banks during the 1994-95 peso crisis, and has since become an increasingly attractive way for financial institutions in Latin America to remain operable, particularly in times of economic and political uncertainty. Globally, between 1994 and 2000, El Salvador, Mexico and Turkey raised a total of 2.3 billion dollars through remittance-backed bonds. Since 2000, Brazil, El Salvador, Kazakhstan, Mexico, Peru and Turkey raised more than 10 billion dollars, largely backed by future remittances.

In a related development Banco Sol is exploring methods of funneling remittance flows to the burgeoning microcredit sector:

Microfinance International, led by Atsumasa Tochisako, a former Latin America official with Tokyo-Mitsubishi bank…announced a tie-up with Banco Sol and a money-transfer company, with the idea of channelling remittances to microcredit. It has also signed deals with HSBC and others to explore possibilities in Mexico and central America. Mr Tochisako raised his first $6m from wealthy Japanese investors but is now aiming for institutional funding.

IPEG reports on the securitization of Microfinance:

BlueOrchard Finance SA, a Swiss investment-management boutique, has teamed up with Morgan Stanley to turn these loans — called microfinance — into bonds, using the capital markets to provide small business in the developing world with long-term financing. continue reading…