Sharing Nicely

I had a really interesting conversation about remittances and micro-finance and the connection between the two. It seems (excuse my ignorance) one big issue with remittances is that the financial transaction costs are too high, because sending small amounts of money is very expensive (comparably) and some of the intended recipients live in remote places. micro-finance institutions are one way to create the financial infrastructure in developing countries that is needed to bring down costs at least on that side. so rather than focus on local loans and saving, the could consider their potential role in the global flow of remittances.

Also, mobile telephones are emerging as a new financial transaction instrument. In some countries in Africa, vodacom allows users to conduct actual money transfers via SMS. Theoretically this allows money transfer from UK to Kenya to South Africa in 1 hour at the cost of a few SMS (plus some transaction charge).

The numbers are also staggering. According to my breakfast discussant, global remittances are currently about 120 Billion $, which is twice the amount of total Official Development Assistance. average fee on financial transactions is 12%. total global remittances is expected to grow to 600 Billion US$ in 2015. bringing down the charges to something like 5% would free the amount of money we are spending on ODA in total today.

Do you know if these numbers are correct? What alternatives exist for cheap money transfers?

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