Tài liệu Remittances from Germany and their Routes to Migrants'''''''' Origin Countries: A study on five selected countries docx

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5
Contents
1 Introduction 7
2 Background 8
3 Methodology 10
4 Obstacles to formal transfers 12
4.1 Money transfers are expensive 12
4.2 The difficulty of getting information 14
4.3 No passport, no account—no transfer 14
4.4 Many transfers take a long time 16
4.5 Informal alternatives 18
5 Conclusions 21
Annexes
Annex 1: Workers' remittances from Germany, by country 24
Annex 2: Type of financial institutions surveyed using the questionnaire 26
Annex 3: Type of financial institution interviewed by phone 26
Annex 4: Migrants surveyed 26
References 27
1 Introduction
More and more people are leaving their homeland in
the hope of finding greater security and prosperity
elsewhere. Today, almost 200 million people live out-
side their country of origin.
1
Around half of them live
in North America and Europe.
Most migrants remain in contact with their country
of origin. In fact, many support their families in their
country of origin through money transfers. These trans-
fers, also known as remittances,
2
are the second most
important external source of finance for the group of
developing countries, close behind direct investments.
Their volume is significantly greater than official devel-
opment aid, and in many countries accounts for a high
percentage of gross domestic product. According to
World Bank estimates, some USD 200 billion was sent
to developing countries in 2006 through formal and
informal channels.
3
In these countries, remittances help to reduce absolute
poverty. Beyond this, the effects of remittances depend
on the economic and social context, patterns of migra-
tion and transfer routes. If, for example, migrants send
money through informal channels,
4
remittances can
contribute little towards strengthening the financial
system and integrating the population into a formal
financial system in the migrants' origin country (or the
recipient country for remittances).
5
This also applies if
money is sent as a cash transfer.
Remittances are mostly used to support the family, or
are put aside for emergencies. It has been frequently
observed that remittances enable families to invest
more money in education and health. However, they
also serve as insurance: if the family income is unex-
pectedly reduced, for example because of a poor
harvest, this does not affect the earnings of the family
member abroad. In fact, remittances often run counter
to economic growth cycles: particularly in periods of
crisis or in the face of natural disasters, migrants
support their family members in their country of origin.
The multiplier effect of remittances depends on how
they are used. If remittances are used primarily to
import foreign goods, they do not boost demand for
local products. Part of the money is invested, but it is
small. Not all migrants are entrepreneurs, many save
the money for emergencies. As with the transfer itself,
it is important that this happens through formal finan-
cial institutions. This strengthens the financial system,
and invests the funds through financial institutions.
Often, however, migrants use informal transfer routes
because these are more convenient, and—particularly—
cheaper. The World Bank estimates, that for example
half the remittances from Germany to Serbia are sent
informally.
In addition to the routes used to transfer remittances
to the origin country, it is also important for devel-
opment policy purposes how much money actually
arrives. Migrants often pay large amounts for a
relatively simple financial service. These substantial
fees reduce the amounts sent, and are a major reason
why migrants use informal channels or take the money
with them when they visit.
These considerations are the basis for the present study,
which has been carried out by the Frankfurt School
of Finance & Management for the German Technical
Cooperation (GTZ). The goal was to investigate
whether money transfers from Germany are difficult
and expensive, too, and what the reasons are for this.
The study followed the example of five remittance
corridors, i.e. transmission routes from Germany to
five countries (Albania, Ghana, Marocco, Serbia and
Montenegro and Vietnam). Financial institutions and
migrants were surveyed and the terms for money
transfers investigated. Effects of the money transfers in
the individual recipient countries were not considered.
If the assumption that formal remittance services are
too expensive is confirmed, it is important to increase
competition in the remittance market. This can have a
positive impact on the quality and price of the services
offered. Lower fees would ensure that more money
arrives in the migrants' origin country. Also, formal
transfer channels would become more competitive
and attractive compared to informal ones. This is
particularly important, given that Germany is one of
the largest remittance-sending countries of remittances
in the world.
6
Before the results of the study are summarised, the
following section offers a brief introduction into the
topic of migration to Germany, remittances and German
financial institutions. The last part of the study contains
recommendations for making better use of the devel-
opmental potential of remittances.
7
2 Background
10.4 million people with personal experience of
migration lived in Germany in 2005. If we count the
children of migrants, the group of potential senders
of remittances here numbers 15.3 million, or 18.6%
of the population.
7
According to the balance of payments statistics of the
Deutsche Bundesbank, just under ten billion Euro
were transferred abroad in 2006. This includes what is
internationally described as workers' remittances,
compensation of employees and migrant transfers.
In all, compensation of employees amounts to the
largest with 6,566 million Euro
8
,followed by remittances
(2,927 million Euro) and migrant transfers in kind
(68 million Euro). Since 1999, workers' remittances
have declined from 3,429 million to 2,927 million Euro,
while compensation of employees increased during the
same period from 5,020 million to 6,566 million Euro.
9
For the selected remittance corridors, workers' remit-
tances are decisive, so that the other two categories
can be neglected. The following table shows the
workers' remittances to the five selected countries and
to Turkey.
10
These figures—to emphasise the point
again—do not include informal transfers. A detailed
overview of all recipient countries is given in annex 1.
Wie entstehen diese Volumenangaben? Die „Heimat-
überweisungen der Gastarbeiter“ werden von der
Bundesbank mithilfe eines statistischen Verfahrens ge-
schätzt, da Transfers ins Ausland erst ab 12 500 Euro
gemeldet werden müssen. Der überwiegende Teil der
Where do these figures come from? Workers' remittances
are estimated by the Deutsche Bundesbank using a
statistical technique, as transfers abroad only have to
be reported if they exceed EUR 12,500. However, the
overwhelming majority of remittances are well below
the reporting limit. Migrants mostly send much less than
EUR 1,000 per transfer.
11
How is this money sent abroad? What possibilities
does a migrant worker have to send money to the
country of origin using a formal channel? German
financial institutions, as briefly described here, offer
various possibilities.
Institutions and products available in Germany
for remittances
There are 2,100 banks and 146 branches of foreign
financial institutions in the Federal Republic of Ger-
many. We distinguish between cooperative banks,
public law institutions (savings banks, Landesbanken)
and commercial banks.
12
Almost all offer foreign
transfers. Besides the banks, there are money transfer
operators (MTOs) specialising in remittance services
which offer foreign transfers.
In Germany not everyone is allowed to offer a com-
mercial service for transferring funds, and specifically
not account-based transfers.
13
Operating such a financial
transfer business requires written approval by the
German Financial Supervisory Authority (BaFin).
14
Alternatively, it is possible to operate a commercial
payments transaction business with a banking licence.
15
8
Source: Deutsche Bundesbank (2007)
Workers' remittances in six remittance corridors
1.500
1.250
1.000
750
500
250
0
1.200
110 52 52 16 13
1.000
110 52 52 16 13
Mio. EUR 2002 2003 2004 2005 2006
Turkey
Serbia and Montenegro Marocco Vietnam Albania Ghana
879
42 42 17 13
240
837
35 35 17 12
243
810
49 49 18 12
221
Savings banks and cooperative banks do not have
their own correspondent banks abroad, nor do they
have branches or branch offices there. Their foreign
business is conducted through the relevant Landesbank
or the WGZ Bank (Western German Cooperative Central
Bank)
19
or DZ Bank (German Central Cooperative Bank)
20
These financial institutions in turn do not offer any
retail banking services.
The German Sparkassen- und Giroverband, an asso-
ciation of banks, has reached an agreement with
Western Union—the world biggest MTO—under which
the savings banks can use Western Union's services.
This was intended to give migrants the opportunity
to transfer money to their country of origin. However,
this service is still rarely offered.
21
Reisebank, a subsidiary of DZ-Bank, sees worldwide
transfer of cash as its core business (operation of ATMs
and distribution of travel-related products). Reisebank
offers its services through over 90 branches in Germany,
and cooperates with Western Union on worldwide
money transfer.
Among the institutions described, we distinguish
between the following foreign payments transaction
products:
• transfer through SWIFT, correspondent bank,
• transfer within the institution's own network,
• payment by cheque,
• cash transfer.
With the exception of two banks, the German banks,
savings banks and cooperative banks participating in
the study cover all five remittance corridors.
However, the route chosen by migrants to send their
money home depends not only on services offered in
Germany by the remittances service providers but also
on the possibilities for disbursement in the recipient
country and the intended use of the money, for example.
For historical reasons, the foreign branch and branch
office network of German banks is weaker than that of
our European neighbours, particularly in developing
and transition countries. In contrast to French, Spanish
and UK banks, for example, German banks concentrate
on corporate clients. This has an adverse effect on
migrants that want to transfer money from Germany.
9
Vietnamese migrants in Germany
In 2006 there were some 83,000 Vietnamese registered in Germany. Together with around 42,000
naturalised Vietnamese, this makes approximately 125,000 people of Vietnamese origin currently living
in Germany.
Before the reunification of North and South Vietnam, there were only a few hundred Vietnamese living
in the Federal Republic of Germany and the GDR. They were mostly part of the elite, and had come
for educational purposes. The Vietnamese studying in the GDR mostly went back after completing their
education. Vietnamese students in the Federal Republic of Germany were recognised as applicants for
asylum and mostly integrated well into West German society.
Later Vietnamese immigrants arrived mainly in two groups. South Vietnamese fleeing from the country's
Communist government by sea (“boat people”)
16
arrived in the Federal Republic of Germany between
1975 and 1986. There were also an increasing number of Vietnamese arriving in the GDR. From the
start of the 1980s on they were brought in as contract labour.
Whereas the boat refugees were well integrated, no integration of the contract labourers was planned.
Many of them left Germany in the years 1989-1991, after reunification. Those who stayed faced serious
problems. Not only was their legal status uncertain, but they were the first to be affected by the
economic crisis in Eastern Germany.
Migrants also contribute to economic growth in Vietnam, with remittances representing 10% of GDP
17
According to figures of the East Asia Bank, remittances in 2005 totalled USD 4,290 million. Some of
this comes from Germany – in 2006, migrants sent EUR 32 million to Vietnam.
18
3 Methodology
The study surveyed both providers and potential
customers of remittance services. Table 1 gives a brief
overview of the empirical studies.
The survey of providers was carried out in a number
of different ways. First, a standardised questionnaire
was produced for selected service providers to be
completed by themselves. Second, information was
gathered using the “mystery shopper” technique
(telephone enquiries by customers, test transfers).
In all, 137 institutions, which offer formal money
transfer services, were contacted.
22
The selection included all those operating throughout
Germany and offering transfer services worldwide.
Institutions were also contacted which were domiciled
in regions with a high share of migrants relevant for
the study. For example, many local savings banks and
Volksbank institutions were contacted for this reason.
In addition, providers using specific channels were
selected—MTOs specialising in transfer services from
Germany to one of the target countries.
For the survey of customers, 74 migrants were contacted.
Those surveyed almost all sent regular remittances to
their country of origin.
In view of the small number of respondents among
both providers and customers, the results of the study
are not representative. Nevertheless, certain tendencies
and problems are clearly apparent, particularly among
providers.
10
Table 1: Overview of the empirical studies
Questionnaires
10 out of 132
financial
institutions
contacted
returned a
completed
questionnaire
Suppliers Customers
Interviews
74 surveyed
migrants
Mystery Shopping
telephone survey
of 47 financial
institutions
14 test transfers
Moroccan migrants in Germany
Currently, three million Moroccan nationals are living outside Morocco. This represents 10% of the
Moroccan population. Many have settled in Europe, where Moroccans form the second largest group of
migrants after Turks.
In Germany, the Federal Central Foreign National Register showed some 70,000 Moroccans in 2006.
Just under 50,000 Moroccans have accepted German citizenship since 1994.
Most Moroccans came after the 1964 German-Moroccan Labour Recruitment Agreement. Few of them
brought their families over, as they assumed they would be returning soon. This changed after the
recruitment freeze in 1973, after which migrants were no longer able to travel back and forth. At this
point, many of the Moroccan migrants decided to stay in Germany for the medium or long term, and
to bring their families over.
Since the end of the 1980s, there has also been an increasing flow of Moroccan students coming to
Germany to go to university. According to the Federal Statistical Office, there were over 7,000 students
of Moroccan nationality enrolled at German universities in the 2005/06 winter term. These students
completed their secondary education outside Germany.
Morocco is one of the top ten remittance recipients. In absolute terms, according to the IMF, it ranked
fourth in 2003 and tenth in 2006. Formal remittances in 2006 exceeded EUR 3.8 billion, corresponding
to almost 9% of Moroccan GDP. According to the Deutsche Bundesbank, Moroccan migrants sent EUR
49 million to Morocco from Germany that year.
It is accordingly not surprising that the Moroccan Government regards migration favourably, and even
encourages it. Migration reduces the pressure on the labour market, it is the most important source
of foreign currency, and it helps balance the trade deficit and reduce poverty. To promote transfers
through legal challenges—and money transfers generally—the counters of the Moroccan Banque
Populaire were opened at the consulates at an early stage.
23
Currently, three Moroccan banks have a
licence in Germany to operate financial transfer services.
4 Obstacles to formal transfers
Given the high branch density in Germany, Volksbank
and Raiffeisenbank institutions, savings banks and
other banks should be the first place migrants go
to send money to their country of origin. However,
migrants face serious barriers in transferring money
to their country of origin, and specifically through
bank channels. This is clear from both the study of
remittance services on the German market and the
survey of migrants.
The high fees charged by the financial institutions cause
the biggest problem for money transfers to countries
outside Europe. In addition—and this is the surprising
and important result of the study—it is extremely
difficult to get exact information on transfer conditions.
In many cases it is difficult or even impossible to find
out how much the transfer will ultimately cost and
how long it will take. Requirements for financial pro-
ducts—such as the need for proof of identify or have
a bank account-are such that some migrants cannot
satisfy them, and therefore cannot use the service.
4.1 Money transfers are expensive
Fees for a money transfer are generally high. Migrants
face the choice between relatively expensive transfers
through MTOs and the comparatively more favourable
bank transfers, although these often involve hidden
costs.
Most of the migrants surveyed cited high costs as an
important obstacle to using formal remittance services.
The telephone survey of German financial institutions
also showed that fees are indeed high. Table 2 shows
the fees for various types of transfer for sending
EUR 100 from Germany to Albania. We are limiting
ourselves here to showing one remittance corridor as
fees in the other corridors differ only marginal. The
transfer costs depend less on the destination country
than on the type of transfer and the provider.
The online transfer is the cheapest way to send money.
However, there are many requirements that have to be
met for a bank transfer, and particularly through the
Internet. These are frequently not satisfied, so that a
transfer is impossible (see section 4.3). The table clear-
ly shows that even fees for the same transfer type vary
widely between providers. A comparison would be
useful for the customer, but this is often difficult (see
section on 4.2).
12
Table 2: Transfer fees for sending EUR 100 from Germany
to Albania
Transfer type: Fee in EUR
Bank cheque
Cash transaction
Foreign transfer via SWIFT,
with voucher
Voucherless online foreign
transfer order
Foreign wire transfer
order
8.60
7.50-25.00
3.50-18.80
1.50-18.80
7.87-17.50
Besides the five transfer types shown in table 2, there
is another option available in the Serbian and
Moroccan remittance corridor—a transfer through the
intrabank network of one Serbian or three Moroccan
banks which have a licence for financial transfers in
Germany. For example, the customer transfers money
from his or her German current account to an account
of the Serbian institution Komercijalna Banka in
Germany, which forwards the money to Serbia. The
sender must identify himself or herself once before the
transfer, in an uncomplicated procedure. On the other
side, the recipient needs a free foreign exchange
account at Komercijalna Banka in Serbia. In Germany
only the minimal intra-German transfer fees incurs. In
Serbia, the fees for the transfer are automatically
deducted from the transfer amount. To transfer EUR
100 here costs only EUR 5.
24
As this example clearly shows, the fees of the German
financial institutions generally represent only part of
total transfer costs as there are additional fees in the
recipient countries. This particularly applies to bank
transfers. Analysis of the questionnaires shows that
bank transfers and payment by cheque mostly involve
fees in the recipient country. However, the financial
institutions surveyed were unable to release the
amount of these fees.
The test transfers confirmed that financial institutions
in the recipient country also charge fees. The fees
varied from just under EUR 1 to EUR 60, so substantial
amounts were involved. Surprisingly, and contradicting
statements by the providers, there were additional
costs to recipients with some MTOs as well.
Leaving aside the extreme case of the savings bank M,
fees averaged EUR 17 on the EUR 100 transfer.
In addition to the high fees in the originating and re-
cipient countries, there is an unknown variable: if the
money is transferred in another currency, the exchange
rate is unknown to the customer.
25
If the financial
institution uses an unfavourable exchange rate, the
resulting loss in value of the transfer must be added
to the transfer costs. But the exchange rate is not the
only unknown factor in the transfer. Other uncertainties,
the overall intransparency of the market, and the
difficulty of getting information, are described in the
next section.
13
Table 3: Test transfers of EUR 100
26
Providers Destination country Amount received, EUR Charge in Germany Total costs
MTO
Bank C
MTO/Bank
Cooperative bank A
Bank D
MTO/Bank
Bank A
Cooperative bank B
Savings bank M
Ghana
Ghana
Serbia
Serbia
Serbia
Morocco
Morocco
Vietnam
Morocco
97.72
99.05
100.00
97.50
97.50
96.09
91.35
81.30
39.20
106.50
109.50
114.50
112.50
114.50
114.50
111.55
115.50
112.00
8.78
10.45
14.50
15.00
17.00
18.41
20.20
34.20
72.80
4.2 The difficulty of getting information
In addition to the exchange rate, it is also very difficult
generally to get information about the costs and time
needed for the transfer. This usually does not apply
to MTOs, which are mostly able to provide exact infor-
mation.
27
By contrast, getting information from a bank
on foreign transfers is a laborious exercise.
These difficulties also hampered the production of the
present study. The fact that only ten of the 132 financial
institutions surveyed returned a questionnaire can
simply be an indicator of a lack of interest. However,
the fact that in the telephone survey many customer
service representatives could only give vague or no
information at all shows clearly how difficult it is to get
information about remittance services, and not only for
migrants.
Even if most migrants in Germany have a bank account,
this does not mean that they are aware of the possibility
of making foreign transfers through their bank. Many
of those surveyed see the lack of transparency about
conditions as a key obstacle to using formal remittance
services. If they ask their bank about this, the bank
generally cannot answer many questions, and specifi-
cally cannot give any information about the costs in the
country of origin.
The banks also misjudge the time needed for the
transfer. A comparison between the test transfers and
the information given by the financial institutions
concerned during the telephone survey shows that of
all the banks tested, only one correctly estimated the
time needed for the transfer. The transfer to Vietnam
through a cooperative bank did in fact take five days.
In all other cases, the banks either gave incorrect or
no information. For example, a transfer to Ghana took
eight days instead of five. Conversely, a transfer to
Serbia was faster than expected, arriving three days
early.
The tests also showed that in some cases transfers were
not carried out at all. One month after the test transfer,
the designated recipients for four transactions had still
not reported the received equivalent of EUR 100 and
the time taken. At one MTO the EUR 100 had not been
debited to sender's account even one month after the
test transfer, and there was no credit to the recipient
either.
These results document the difficulties associated with
an apparently simple transfer abroad. The next section
shows that many remittance services cannot be used
by migrants, as they do not satisfy the necessary
requirements.
4.3 No passport, no account—no transfer
Specific conditions often have to be met for a formal
transfer, otherwise the financial services are unavailable.
For example, to transfer funds, you have to be able to
prove your identity. Furthermore, for a bank transfer
both sender and recipient must have an account with
a bank. Technical problems can arise, for example with
online transfers, or if the financial institution does not
have correspondent banks in the destination country.
Many countries lack the financial system infrastructure,
particularly in rural areas.
The introduction of a general requirement for depositors
to prove their identity means that people without valid
IDs will be unable to send remittances formally to their
country of origin. The study confirmed that all the insti-
tutions surveyed asked for proof of identity in the form
of an ID or passport and the residence permit, some
even requiring proof of the registered address. Driving
licences and bank cards are not accepted.
If foreign transfers are made via SWIFT, both sender
and recipient must have accounts with the institution
executing the transfer. In the case of payment by
cheque (bank cheque, customer order cheque), the
sender must either be an account holder or pay the
money in advance.
14