UK-GHANA REMITTANCE CORRIDOR

Transcription

1 UK-GHANA REMITTANCE CORRIDOR Developing Market Associates March 2011

2 Background to the Project Presentation Structure Ø Methodology Ø Results Ø Recommendations: Ø Regulation Ø UK Consumers Ø UK Operators Ø Ghana Market Ø Education & Awareness 2

3 Methodology Ø Part of Ghana s Economic Management Capacity Building Project - Financial Sector Reform (EMCB-FSR) Ø Identify sender-end constraints to the flow of remittances through formal channels Ø Identify what makes the informal channels attractive for senders and beneficiaries Ø Recommendations 3

4 METHODOLOGY

5 UK DEMAND An in depth survey of 160 Ghanaians living in the UK 56,112 Ghanaian-born people living in the UK (2001 UK Census) 92,000 Ghanaians in 2008 (Office for National Statistics) Sample includes a broad demographic; Approx. 50% men and 50% women; Respondents from two UK cities with large Ghanaian populations; Ages ranging from the 16 to 24 age bracket to the 65 plus; Number of different employment statuses and jobs Focus group for the informal market 5

6 UK SUPPLY In depth interviews 10 different operators in the UK Multi-country operators / informal operators & 1 bank LEGAL REVIEW Bank of Ghana s Banking Acts & Amendments over the past decade UK regulatory environment: laws and changes, barriers and problems

7 RESULTS

8 UK Regulation Payment Services Regulations (PSD) 1 st November 2009 A new category of business created the Payments Institution Registration applies to all money transfer businesses Conduct of business rules apply to all transactions I.D.is mandatory for transactions > Euro 1,000 (or local currency equivalent) Below this amount operators set their own limits Levels vary between operators ( 0 < X > 700). There is some evidence of self-regulation and promotion of the PSD in UK MTOs Smaller MTOs find it difficult to open bank accounts for their own business Most operators feel that the level of regulation is quite appropriate for the level of risk in the market place 8

9 Ghana Regulation Must use official exchange rate (given on a daily basis by Bank of Ghana) although evidence that this is not really happening Distinction between who is authorised to make international money transfers and who is only allowed to undertake FX Entry barriers (capital requirements) Exclusivity clauses with MTOs have been removed Regulation by the Bank of Ghana means that the remittance outlets are dominated by banks (and the Post Office) consequently services in rural areas are very limited At present, MTOs cannot send money out of Ghana.

10 ABOUT THE SENDER

11 Frequency of Send & Main Recipients Nearly half of all transfers are sent on a monthly basis Little difference between the frequency with which money is actually being remitted and the frequency with recipients would like to send money back 64% send money back to parents 48% to their spouse 45% to other relatives 23% reporting to always send money to the same people and 60% mostly sending money to the same recipients 11

12 Sending Amounts Most popular amount to send in an individual transfer is found to be between 50 and 100; followed by between 151 and 200 Estimates find that the average annual amount sent is approximately 2,250 per person, ranging from 150 ( 25 every two months) to 10,800 ( 900 per month) Main reasons that people cite: the lack of employment opportunities back in Ghana the ability for the migrant to earn a better income in the UK than in Ghana their responsibility as the family s main wage earner 12

13 Transfer Methods 98% of all respondents use cash-to-cash 8% make use of bankto-bank services - never as a preferential choice. Ghanaian specific operators are preferred International market leaders (such as Western Union and Money Gram), are used by some - rarely as main method of transfer Tend to be associated with a higher cost service and dissatisfaction with the regard to the exchange rate 13

14 Informal Transfer Methods 38% send money with friends / family 21% - send money in the form of hard goods (hi-fi, TV etc) Only 2% use sending cash with friends and family as their main method 0% of the interviewees used sending hard goods as their main method Peripheral nature of the informal UK to Ghana corridor. 14

15 Difficulties Experienced 87% have never had to produce ID Inconsistency in the threshold amount for ID within UK service providers Main Difficulty; unresponsive to SMS services 15

16 Banking in the UK Diaspora The Ghanaian Diaspora in the UK is highly banked and somewhat technology savvy Nearly all respondents have a bank account and a mobile phone and the majority have access to the internet Utilisation of electronic, online banking products is low

17 Technology in Ghana Based on the senders responses 67% access to a bank account 26% have an ATM/ cash-point card 57% are known not to have either a credit or debit card Over half respondents have never Financial illiteracy in Ghana in constraining the use of new considered using products prepaid and cards newer technologies developed in the UK Only 19% said that they may consider it, with only 1% indicating that they would actually consider it Distrustful of the internet - potential for fraudulent activity Online products are deemed to be inefficient and not cost effective 17

18 Openness to New Products The majority say that they would consider another transfer method if the recipient did not have to travel so far 43% would if it were cheaper than their current service Positive relationship between the distance recipients travel and whether senders would consider using another service. Average time needed by recipients to travel in order to collect = 90 minutes, (max. 24 hours) - Only 5% : distance to travel as a problem At present the senders of money transfers believe that it is extremely difficult to set up a bank account in Ghana 65% of the Ghanaian Diaspora said that they would like more control on how the money that they are sending is spent 18

19 Overall Informal market is relatively small in the UK-Ghana corridor Ghanaian community are found to still be relatively conservative and traditional in their chosen method of transfer regardless of the products on offer. Ghanaian migrant population are relatively homogenous in their remittance behaviour patterns. Competitive market - high level of transparency and communication with a clear market leader Open to new methods of transfer if it is cheaper and reduces time to travel Financial literacy levels and use of technology in Ghana are constraining uptake of new transfer methods 19

20 RECOMMENDATIONS

21 REGULATION

22 (1) Open remittance services to other outlets Current Situation Benefits Ownership Receive networks are dominated by banks. It is assumed that Post Office has an exclusivity deal Improve rural access. Bank of Ghana Effectiveness High Investment Low (2) Allow MTOs to transmit money out of Ghana Current Situation Benefits Ownership The Bank of Ghana does not allow MTOs to send Cedi out of Ghana. The Bank of Ghana wishes to control foreign currency that is sent out of the country. May lead to new agent networks. Assist in financial inclusion and help financial literacy. Bank of Ghana Effectiveness Medium Investment Low

23 (3) Make it easier for Ghanaians to get a bank account Current Situation Benefits Ownership Difficult for Ghanaians to open a bank account due to capital restrictions and ID requirements Address financial access, inclusion and literacy in Ghana Banks (develop new products); Bank of Ghana (top-down approach); International Development Agencies (encourage innovation & developing education programmes) Effectiveness High Investment Medium (4) More ATM / Visa / MasterCard facilities Current Situation Benefits Ownership Low prevalence of these banking facilities around the country Adoption and absorption of banking facilities more common and widespread. Help improve technological advancement of the money transfer market. Reduce problems in time taken to collect remittances by recipients. Banks Effectiveness High Investment High

24 UK CONSUMERS

25 (5) Guidance on the GBP limit for ID Requirements Current Situation Benefits Ownership The ID requirement threshold is set in Euros and is therefore different between MTOs. They are competing where it is not necessary. FSA/ HMRC do not wish to set a fixed limit in GBP. Standardisation across the market. Removal of levels that people require ID as competitive positioning FSA (through the PSD) Effectiveness Low Investment Low (6) An education programme concerning the different methods of transferring information and addressing the safety fears around them Current Situation Benefits Ownership Ghanaians are not using any new payment methods Improved service for customers; greater financial inclusion Industry-led with support from Government (and DFID where appropriate) Effectiveness Medium/high Investment Medium

26 (7) Encourage RSPs to pass on financial benefits of new products Explanation Benefits Ownership New technologically advanced products can reduce costs and cut out the need for an agent. Reduced costs are not yet being passed onto the consumers. Develop programmes that help RSPs change their behaviour. Contribution to the development of new technology driven initiatives and communication mechanisms to educate consumers in the UK and Ghana. Reduction in costs of services / improved service provision. DFID / Ghanaian Government Effectiveness Medium Investment Medium (8) Continue to promote formal transfer methods and act against informal Explanation Benefits Ownership Increase transparency and competition in the formal market through current and future campaigns/projects. Advertise with regards to the risk of the informal market in community media. Investigation into whether the airline crew are involved in hand carrying GBP. Improved provision of service. Reduced risk. Reduced crime and money laundering. Greater volume and lower prices The Ghanaian and UK regulatory authorities should take positive enforcement action where appropriate against known informal operators. Effectiveness High Investment Medium

27 UK OPERATORS

28 (9) Make it easier for UK MTOs to be able to open bank accounts for their business Explanation Benefits Ownership It is difficult for MSBs to open bank accounts in the UK. Payment Services Regulations should help the Authorised Payments Institutions. Make sure that Banks are aware of this More competition in the market. Reduced banking costs for operating MTOs. Reduced costs for consumers. Discussions with the FSA and British Bankers Association. Refer to Office of Fair Trade if necessary. Effectiveness Medium Investment Low (10) Encourage banks to offer more competitive money transfer services Explanation Benefits Ownership Persuade banks of the potential of this market and the benefits from harnessing it through first mover advantage. Educate banks as to the benefits for their business of using remittances as a tool to attract more profitable customers. Ensure banks offer more competitive pricing through more transparent pricing. Publish pricing of remittance services through different providers to ensure that customers and potential customers are aware of the competitive offerings. More competitively priced services Ghanaian and UK regulatory authorities Effectiveness Medium Investment Low

29 (11) Improve the use of online services Explanation Benefits Ownership Develop initiatives to build awareness and trust of online services. Make it more financially attractive to use online services. Payout locations would need to use bank counter outlets in Ghana to be of real value to the community. Educate the Ghanaian Diaspora on the value of the internet. Diaspora can play a role in educating their families at home. Cheaper service provision; deeper financial knowledge Government & UK Diaspora Effectiveness High Investment Medium (12) Purchase specific remittances Explanation Benefits Ownership Channelling of funds from sender directly to pay for specific items. Research and collaboration between the UK operators and their Ghanaian counterparts to explore the opportunity and demand for using MTOs and remittances to pay directly for: Education / school fees (clear demand) / Health /Community projects (through the Church) / Mortgages / Loans / credit / Construction; finance management companies / MFIs / Use remittances to get credit history / Pensions develop market for banked returnees Improved service. Better financial inclusion in Ghana; increased savings Industry-led (backing from DFID) Effectiveness High Investment Low 29

30 EDUCATION & AWARENESS CAMPAIGNS

31 (13) Integrated campaign to ensure key messages are received by the Diaspora in the UK Explanation Benefits Ownership There are a number of initiatives and changes that are taking place in the market. Must utilise good community outreach methods to educate the diaspora. The High Commission in the UK should be used as a sounding board and a conduit for communication activities in the UK Improved service. Lower costs. Uptake new technologies. Financial inclusion in Ghana. DFID Effectiveness Medium Investment Medium (14) Use the Ghanaian Diaspora to educate those in Ghana Explanation Benefits Ownership Use dissemination techniques to provide information to the UK Diaspora. Develop new products and services and improve the money transfer & financial systems in Ghana. Once these products are available then a full scale communication initiative can be undertaken. Improved service. Lower costs. Uptake new technologies. Financial inclusion in Ghana. DFID Effectiveness High Investment Medium

32 Contact details Leon Isaacs CEO Developing Markets Associates Tooley Street, London SE1 2TU, UK T: +44(0) M: +44 (0) Slide 32 DMA Copy write protected