Pedro De Vasconcelos (IFAD) on Launch of Sending Money Home report - Press Conference

So we're very pleased to have with us today on my left, Pedro de Vasconcelos, the Financing Facility for Remittances Manager of the International Fund for Agricultural Development, or IFAD. And he will talk to you about the Sending Money Home report that IFAD has put out. Mr. Vasconcelos, welcome.

Good afternoon, and thank you for the opportunity to present this report, as mentioned, Sending Money Home, a flagship that IFAD presents each decade. This report is about financial flows of extraordinary scale, but more importantly, it is about families. Remittances are an expression of family responsibility, sacrifice, solidarity across borders. As you can see today, approximately 220 million people, migrants and diaspora members, send money home, supporting over 1.1 billion people in low and middle income countries. The connection that binds these people between senders and receiving adds to over 1.3 billion people. That's one out of six people involved in this mechanism. What is interesting, of course, for, uh, for us is, uh, not only the scale of these flows, but as you can see, migrants around the globe have sent 728 billion or 729 billion. dollars in remittances to their families. And they've done that 300, 400 dollars at a time, nine to 10 times a year. And this is definitely one of the world's largest and most resilient source of household income, as you can see. This has duplicated in the last decade, since the latest report in 2006 was released. For IFAD, one of the key important aspects, I think, as well, is what has changed over the last 10 years. And as you can see, this is a global phenomenon. Every continent in the planet is affected by this. When you start looking at this flows, what you realize is that these dwarfs many others, like ODA and FDI. Many times combined, they're still a smaller figure than what migrants do in support of their loved ones back home. So one comparison in particularly striking over these last 10 years, over the past decade, is that the population of these countries has increased by 10%. migration 28, but remittance flows by 94. The result is very clear for us is that migrants have sent more money home than they used to. There are several factors to that. Of course, this is not adjusted for inflation, but the cost of living has increased. And every survey that we have done showcases that more money is sent by migrants each time to their families. simply the growth was not just simply done by migration, but again, by the fact that migrants on average sending more money. For a fact, one particular aspect is striking is that one, one in, I don't know, one in every, no, I don't know. Here, try this. One in every, can you hear me well? No. I'll try again. Hello? It's working? Okay. That one in every, uh, $3 reaches rural areas in low and middle income country. That's equal to 233 billion. I know we're talking about billions and, and millions, but, uh, you have to have into account what these figures, uh, mean. are, just as a matter of comparison, from this year to the end of the decade, it is estimated that migrants will send $3.6 trillion in remittances. This is how constant these flows have been. But again, rural areas, one of three dollars reaching and for most of this, what do this flow do? They sustain households, local businesses, agriculture, entrepreneurship, and of course also employment. And for remittance families, what we've seen is that some of these flows are also invested in agri-food system. We've calculated this to be around $22 billion just in agri-food businesses, system, sorry. So many of these families remain among the least well-served by financial institutions in the world. This is for rural families receiving these flows, and this represents both, of course, a development challenge, but also our market opportunity, the fact that not being served, and I will explain in a second. When we look at the market, we've been talking a lot about digitalization. over the last years, as you know, and the remittances market has been affected by that. It's been changing rapidly. More than half of global remittance values now start digitally, which was definitely not the case 10 years ago. But still, we are not there because 35% of the service measure are fully digital from end to end, so there's still a lot of opportunity, that in other words means that a transfer today might start in a smartphone here in New York or in, or in, or in Paris and still end with a family member standing in a cash queue to receive this, this money and many times in rural areas to have to do many kilometers to go to the cash queue. So that matters because fully digital services are much lower in cost. It says on the average 4.6% is the cost of sending digitally compared to 7.3 for non-digital services and the global average being in the middle at 6.4. So this is still above the sustainable development goal target of 3%. So there's still a lot of improvement that can be done. But technology really can help, but it's not enough. We need to think about interoperability. appropriate proportionate regulation, reliable last mile access to determine whether families actually receive more of their money faster and safely. This brings us to the central proposition of this report as well, that remittances are already a vital lifeline. The opportunity is to connect that regular flow voluntarily and safely with greater choices. What do I mean by that? Savings, credit, insurance, investment. These are the things that can turn remittances and family much more resilient. We are not suggesting that remittances should be turned into investments or telling families how to use their money. These are private flows. These are resources for immediate needs, and these should definitely come first. The objective is to expand the choices available to families. This is the central objective. We know this can work. In IFAD, we've done this in many projects, small projects to prove, many of those with the private sector. In the Gambia, for instance, just to mention one, we've partnered with a fintech company. And from that very small project, we're able to open almost 13,000 microfinance accounts for those receiving remittances. From that, the services that were linked allow us to generate over 1.4 million in savings for those families that were saving zero before it. And for 400,000 people, these wallets that were created were able to mobilize over 135 million digitally. and remittances. So the transformation is there. This is not a theory. This happened yet not enough. The private sector is still not seeing that opportunity. Governments are not really seeing still much of that opportunity that they could promote through financial inclusion strategies, for instance, just to name a few. So the wider message is simple. Remittances can help families move from coping to the next shock, as we know, towards building greater resilience and opportunity. But they cannot substitute. And I would like emphasize that for public investment, social protection, humanitarian assistance, or climate finance. They contribute to that, but they should definitely not be substituted because it is not the same thing. So the commitment of migrants and their families is already evident. I think the figures showcase this. Evidently, the question is if the institutions are market around them. can match that commitment by making transfers more affordable, more accessible, and more useful to the families who depend on that. And if we do, and we're in doing so, we'll be able to offer millions of families the option to turn migration into, as we say, choice rather than a necessity. Thank you.

Thank you very much for that great and detailed briefing. I'll now turn the floor over for questions. First question goes to Edie.

Thank you very much on behalf of the United Nations Correspondents Association for doing this briefing. My name is Edith Lederer from the Associated Press. I have two questions. First, what impact do you see on remittances of the basically crackdown on migration in both the United States and in Europe to major continents for migrants to work? And secondly, can you tell us a little bit about the survey that produced these results? Thank you.

Should I answer directly the first one? Yes. Well, the figures right now do not show actually a reduction in remittances. I think what you referred to addresses specifically a set of migrants abroad, but the figures from which this Uh, this, uh, or that, that supports the study collected from the World Bank, IMF, and national, uh, national central banks, or, and, and, um, and their institutions. do not reflect a massive reduction in flows. But this is also due to the fact that we've been seeing actually some flows, some totals increase, notably for Latin America. The reality behind that is that this is family driven. So the needs of the families is the first one that that it is addressed. So it can be crisis, it can be sanctions. The objective for millions of families is to support their loved ones back home. So if that involves sending more tap into their savings, they will they will do so. We've seen this time and time and again during any type of crisis you could throw at it, being political, being health crisis, or migration crisis. So in response, we have not seen a major reduction in remittances flows. As I mentioned, these have doubled since the last year. They have continued as a normal average of 8% to 10% a year. And of course, you might see in some specific corridors, but in general, that is not being yet reflected in this flows. There's always a delay also that you need to take into account. We see this from crisis. For instance, the one in the Gulf countries, we have not seen yet the data or evidence in the data showcasing that there's a reduction as of yet.

Namo.

Yes, thank you so much. I have two questions. This is Namo Abdullah with Ruda Media Network. So this report talks about just the traditional money transfer through, let's say, Western Union and other money gram and those companies or I mean, there's no way to include cryptocurrencies, for example, right? Because I assume that many people use crypto and send money via crypto, which I that's the it should be a lot higher than what I'm saying that your reports are just am I correct here? And secondly, like a lot of people in the developing world consider migration, a brain drain, because their engineers, their doctors, their people leave. Does your report suggest that it's not as simple as that? There's a gain, actually, for those countries from the fact that their people leave, they send money back and they help their economies afloat. Thank you.

Sure. Stablecoins or cryptocurrencies, we've looked into that, and I will invite you in the report to look into that. This is certainly a technology that can support, particularly in the settlement. What we are now seeing is a huge phenomenon among migrants using cryptocurrencies that are cashed out on the other side, or the expression of through e-wallets. What we're seeing more and more, and there's several corridors that have that, is more between companies, and therefore in the back office, if I may say so, in the settlement, so where the migrant themselves and their families not see the difference in a way. They can be in a wallet, but the settlement is being done through that. And this is actually calculated. So in the accounts, in what is considered remittances, takes into account that. Of course, it's not an exact science. There's a definition for what remittances are, but some of that might be some payments. So Every remittance figure should always be taken with some caution as to know, but if there's one word that can be a link to that is underestimate. Taming and again, and this report looks at it in a very conservative way in the underestimating those flows. Towards your second question about the cost of migration, Yes, there is always, there's positives and adverse effects in relation to migration and as you mentioned, brain drain. IFAD is not a migration related institution. We're looking about how this flows impact particularly rural areas. And of course, what we see is that from the perspective of those that receive the funds, 1.1 billion people affected in receiving in these flows. What they need is, again, is more options. Sending money home has a very profound word in it, home, that I think for all humankind means something very, very, very warm and specific. This is where we want to go, so leaving home is always a difficult act. But if you have to do it to support the loved ones, you will do it. And this is the reality that we see globally. So brain drain obviously exists everywhere among low and middle income countries as well as high income countries when the benefits might be greater. And it's, of course, a choice, an individual choice. What we're trying to see is to, again, minimize the effects that push people to migrate from rural areas, for instance. This is what we're trying to look. And by linking it, again, with opportunities, such as credit, savings, investment, and so on, you can still promote that migration, again, remains more of a choice, if you wish so, rather than a necessity, where migration is the only option available. to go from a rural area to an urban area and sometimes bypass that urban area and go abroad. This is the reality that millions of families are facing. Can we, through what created, what was created by this lack of opportunities, remittances, can these actually create the conditions to actually curtail that outcome. And what we see is that, yes, it is possible through a simple equation. Again, give me more options and I will consider them. And this is as simple as that and million decisions that can be made by remittance families if provided with those options.

Munah.

Sorry. Thank you very much, sir, for the briefing. My name is Muna Aoutoul. I'm with Al Quds Al Arabi. I have a specific question regarding the central and focal point of the report. And correct me if I'm wrong. I think you mentioned that the central point is an initiative that help families use the money they receive for investment through a partnership with, I think you mentioned, a financial institution. So could you just elaborate and tell us a little bit more about how that works and what kind of support families are getting? And secondly, you mentioned that the private sector is still not fully reaching this opportunity. What would it take to expand access to things like microfinance for these families? And thank you so much.

Definitely. Remittances are a lifeline, already doing a lot. If you try to remove them, you will see what this does. And I think we all got the notion of that during the COVID-19 crisis, where remittances traditionally put money on the counter that was transferred to the other country and received in cash, where that service was not possible anymore. Secretary General's first words in the COVID-19 were, I believe, regarding remittances. We need to make sure that these continue because millions of people depend on them. This is just to give you the notion of what these are. Can we maximize this? Everybody's attracted by the big flows, the billions and the trillions, but this is private flows. Again, I would hate to tell you what to do with your money. or made you do it, but I can always give you more options and suggestions on how your money can, bigger bang for the buck, if I may use that expression. And this is, in other words, what should be done. International organizations like IFAD are trying is to create the right conditions to provide, to bring those options, examples. Many are involved, the public sector and the private sector, the public sector needs to put the regulations in place to make sure that the right enabling environment, safe and secure, is provided so these flows can not only be there, transferred faster and cheaper, but also be linked with other financial inclusion products. Savings, credit, insurance, these are the basic ones. If you include it in your financial inclusion strategy as a central bank, you're going to promote, you're going to incentivize the private sector to maybe develop some products linked to that. And this takes me to the private sector, the same thing. Is there money to be made in rural areas? Yes. Can you be Pro-poor, pro-profit, two very different words in the same sentence. Yes, the answer is yes. There's a market opportunity right now here that allows basically in providing greater services for people that don't have them right now and be sustainable, profitable. And this is therefore why I mentioned a market opportunity. It's a development challenge, but it is also a market opportunity. So many are doing that, are starting to make that, but the scale is not being reached. as, as of yet, but digitalization has brought a lot of new players in the ecosystem to allow this, we see this across the globe, some are going faster than others, obviously, but we see that, for instance, in, in Northern Africa, we're seeing more on this, I'm just thinking about Morocco, for instance, right now, where there's a great push towards digitalization that is really making this linkage with financial services a reality. And it's a reality, a life-changing reality for millions of families that receive these funds. And again, once they have this resilience in place, then you can look at migration as just really an option rather than, again, than a necessity.

I see no further questions. Are there any questions online? If not, I'd like once more to thank our guest, Pedro de Vasconcelos. Thanks very much for your briefing and for your report. Have a great afternoon, everyone.

My pleasure. Thank you so much. Thanks.