Remittances for development not living costs

By Diógenes Pina


SANTO DOMINGO, Dominican Republic September 18, 2007 – Civil society organisations suggest that a plan be designed so that the money sent home by Dominicans abroad, known as remittances, will be used to foment development instead of simply going towards daily expenses.


The idea is “to deepen public reflection and debate to optimise the impact of remittances on the development of the national economy,” says a document by the Asociación Tú, Mujer (“You, Woman” Association), which is carrying out the Proyecto Remesas y Codesarrollo (Remittances and Co-development Project) under the sponsorship of international organisations.


Legislators, ministers, the representative of the United Nations Population Fund (UNFPA) and delegates of civil society groups met Tuesday in a conference organised by the Association.


“We have to find mechanisms so that remittances are used more efficiently towards social development, and in the fight against poverty,” Carmen Julia Gómez, the Association’s director of research and the head of the Remittances and Co-development Project, told IPS.


“We are concerned that they are almost completely used for direct consumption: buying food and clothing, and paying for education,” said Gómez.


“That’s a good thing, but there are other uses that could be of greater help to the families with respect to pulling out of poverty in the long-term,” she added.


Studies show that very small proportions of remittances are saved or invested in small businesses, while larger percentages go towards education, clothing, food and other day-to-day expenses.


Another issue of concern is the large chunk taken out by money transfer companies — a commission that ranges between eight and 12 percent.


An estimated 1.5 million Dominicans live abroad, mainly in the United States, and in 2005, the Dominican Republic received some 2.7 billion dollars in remittances.


According to the 2006 UN-INSTRAW (United Nations International Research and Training Institute for the Advancement of Women) study on “Gender, Remittances and Development: The Case of Women Migrants from Vicente Noble, Dominican Republic”, 59 percent of that total comes from the United States, 30 percent from Spain and nine percent from Puerto Rico.


“Neither senders nor receivers have been integrated into the formal financial sector,” says Lenora Suki of the Earth Institute at Columbia University in her 2004 study “Financial Institutions and the Remittances Market in the Dominican Republic”.


Furthermore, “Recipients have neither incentives nor options for saving a portion of their remittance transfers” in a market dominated by “a handful of money transmitter companies”.


Besides, home delivery is the norm, which drives up the cost of money transfers, says Suki, who adds that “Improving the intermediation of remittances can increase savings mobilisation.”


The latest national census, carried out in 2002, showed that 10.2 percent of Dominican households received remittances. Other studies, however, put the proportion closer to 40 percent of the population of this Caribbean island nation of nine million people.


Remittances contribute close to 10 percent of the Dominican Republic’s gross domestic product (GDP), which amounted to 29.3 billion dollars in 2005, and they are equivalent to 47 percent of the exports from industrial free zones and 62 percent of tourism revenues.


Mar García, UN-INSTRAW’s research specialist for migration and remittances issues, told IPS that encouraging people to open bank accounts with their remittances would help foment savings.


García suggests that agreements be reached by the migrants’ countries of origin and destination, to regulate remittances and help channel them towards development. “It’s a matter of political will,” she said.


“The countries should reach a consensus. It’s clear that migrants benefit the countries that take them in, and they contribute to both economies,” she said.(IPS)