Global remittances are on the rise. Now, coupled with mobile technology, cross-border payments are even more effective at spurring poverty alleviation, but women may lag behind.
Officially recorded global remittance flows to developing countries were estimated by the World Bank to have reached $406 billion in 2012, with Kenya accounting for $1.2 billion, a 31.4 percent increase from 2011. The magnitude of money transfers into developing countries now exceeds official development aid by more than three times and counts for a large percentage of GDP in many countries. In Tajikistan, remittances account for almost 50 percent of the country’s GDP, and Liberia, Kyrgyz Republic, Lesotho, Moldova, Nepal, and Samoa all have remittances that count for over 20 percent of their GDP.
Remittances are a significant source of poverty alleviation for developing countries because they are often a family's primary source of stable income and have also demonstrated extraordinary resilience.
“The most remarkable thing about remittances today is their continued growth, year after year, despite the global economic crisis,” states Dilip Ratha, head of migration and remittances at the World Bank.
The World Bank expects remittance flows to experience continued growth in all regions in the world, reaching $685 billion by 2015.
One tool speeding remittance growth is the mobile phone, which provides quick and cheap money transfers.
“The money travels fast," states a research report from Maastricht Economic and Social Research Institute on Innovation and Technology (UNU-MERIT). "It takes only a text message to send money around the globe, which is generally faster than sending by money by any banking system or other money‐sending operator. Another advantage is that the service is highly accessible to all segments of society. Even in rural communities that have relatively low access to transportation and financial services, sending mobile remittances is an option.”
Not only are mobile remittances quicker and more accessible, but compared to cash, they can:
- Prevent "leakage" to loss or corruption while cash is being moved.
- Be immediately stored into savings if the user has a mobile money banking account, where it is less likely to be spent right away.
- Provide a revenue source for mobile money operators, as well as increased customer loyalty and network traffic, reduced churn rates, and fee-sharing with banks.
And compared to wire transfers, such as through Western Union or Moneygram, mobile remittances can:
- Cost less because the money transfer fee is often the same cost as a text message, and is just one of many ways mobile companies make money.
- Speed up and lower the cost of traditional transfers, especially critical during emergencies.
- Allow for more frequent transactions.
- Offer more "cash-out" channels beyond traditional banking infrastructure, like grocery and hardware stores where pre-paid phones can be purchased.
- Eliminate the extra step of the receiver having to “cash out” their money from a kiosk, if the user has a mobile money banking account.
In developing countries, women are the primary receivers of remittances and have the most control over remittance fund management. Mobile financial services, such as remittances, can help women manage household expenses better than most formal and informal devices they use today including hiding money in the home and asking friends or relatives to hold onto their cash for a period of time. Compared to mobile financial services, informal tools fail to meet women's needs for convenience, reliability, security and privacy. Women are most often responsible for making sure the family can withstand economic shocks such as illness or failed crops, and therefore tend to shy away from perceived higher risks, like trying new financial tools.
"Women often work with high frequency, low value cash flows, which indicates a good match between the services they need and the opportunity for the mobile financial services industry to broaden and stabilize their consumer base,' said Daryl Collins of Bankable Frontier Associates.
Fortunately, 95 percent of Kenyan women who are already utilizing mobile remittances rated them as secure and private, as found in a February 2013 study by Bankable Frontier Associates. Alternatively, only half of those using personal delivery of cash (such as sending it with a bus driver) as their primary method of money transfer consider it secure and private.
According to the Bankable Frontier Associates' study, while many Kenyan women are eager to try out mobile transfer services, those who have not attribute lack of access to a mobile phone as one of their largest obstacles. Although prices for mobile phones have dropped, women are much more likely to spend money on household necessities than on a mobile phone, which is considered a luxury item.
However, only a SIM card is required to make a mobile money transfer, as a phone can be borrowed to make the transaction itself. While this could be one solution to women lacking cell phones, it is often the male of a household who buys a phone and then has influence over whether or not the woman has access to the phone. Payment plans specifically designed for women could be made available for buying mobile devices. Closing this gender gap can help mobile financial services providers build scale and volume for their businesses while serving women's needs.
Juniper Research projects that by 2016, migrants will send $55 billion by phone, compared to $12 billion in 2011. Given the conveniences of sending money directly from a mobile phone, it's not surprising.