Mobile Phone Remittances Increasing in Africa with Questions Unresolved

mobile-money1New Orleans   The constant risk in reading the business press, and, yes, I’m talking about Rupert Murdock’s Wall Street Journal, is picking a path between the facts, the news, and blatant sales and promotion. That’s especially dangerous because at ACORN we eat up almost any article that pretends to talk about lowering the costs of money transfer remittances for migrant workers and immigrants as if it were an ice cream sundae. Needless to say, I scooped up an article with the headline, “Turning African Phones Into Wallets,” particularly because days ago in a Canada to France to the USA skype conference we had been all over this topic!

First the news. The World Bank, years away from the G-8 commitment to lower all costs of remittances to 5%, is now saying that they believe the cost globally is 8% and in Africa 12%. The facts continue to be that they are hedging their bets on the figures by not including all of the charges, but I’ll get to that. They do offer that remittances to sub-Saharan Africa rose by 2.2% to $32.9 billion in 2014 compared to 2013, doubling the average growth rate globally and projected to hit even higher between 2015 and 2017.

Interestingly, a lot of the transfers are now cross-border transactions between migrant workers in other African countries led by Nigeria, Senegal, and Kenya. Seeing that development elsewhere ACORN has been trying to change our strategy in Honduras and Ecuador. In Africa many of the transfers are being enabled by mobile phones, led by MFS Africa a 6 year old South Africa based company. Importantly, a smartphone is not required. 500 million users of cooperating communications companies allow access through a mobile payment account on the cell enabling transfers to the mobile phones of other enrolled customers who can essentially text something like a money order to the receiver’s phone and confirm completion with a PIN number. Pretty straightforward. MFS Africa makes its money, according to the Journal on a 30 cents per transaction charge with the average transfer being $80, which also resonates with ACORN International’s research.

There’s still a devil in Paradise though, which is where the story takes a bad turn into sales and promotion for the businesses and against the workers who are moving money home. There’s no discussion of the charges applied for currency exchange and pickup. The Journal obliquely mentions that MFS Africa gets a taste of the exchange from some communications companies, but it’s silent on how much rip-and-run is there. Same problem with the World Bank figuring.

In a conversation with an interesting startup called that thus far was only transferring money from Kenya and trying to open soon in Ethiopia to channels in the USA and Canada, their representative told me they take no front end charge but make all of their money on the exchange rate, though assuring me they took less than the 5% cap ACORN has been fighting for globally. There are huge, deep-pocketed companies trying to get a slice of migrants’ hard earned wages going home, including MasterCard and other joint ventures, so having no money for marketing makes such small efforts like Wave imperiled, but it also signals that without strong rules and regulations the exchange and after-transfer charges will likely continue to be predatory.

For a change it would be nice if the G-8, the World Bank, and countries around the world, desperate to maximize the money for development and personal investment in communities represented by remittance receivers, actually got ahead of the dark-side of this market, rather than just sitting in the stands and waiting for businesses to flash an applause sign. ACORN Canada is hopeful that it can convert a platform commitment from the Liberals to remittance reforms and caps into reality, given their recent election success, which would break new ground.

In the meantime the best we can hope is that we’re at two steps forward and only one step back, but it’s hard to be certain.

Demanding a Suspension of Remittance Fees During Disasters

_85611725_e26ea287-55ce-49b3-8ea6-b02ceba61ef7Newark   An 8.3 level earthquake hit Chile in recent days. The quake lasted three minutes. The tsunami carried boats from the port onto city streets along the coast. One million people were evacuated. Over 100,000 continue not to have electricity. Many are displaced. Amazingly, the death count has been relatively minor for such a tragedy with only eleven reported at this point. Many believe this may be due to progress in governmental response and the institution of tougher building codes since a 2010 earthquake killed over 500.

Several years ago when the tsunami hit Japan the focus was huge, damage immense, and attention riveting. Many are just coming back to their homes three years later in the worst impacted areas. Nuclear plants are still under observation and the existence of the plants themselves and the threats of climate change are heated debates.

In a global community what is the best response? Many will be moved to help, but families will feel special obligations whether it is Chile now, Japan then, Katrina ten years ago, or Aceh in Indonesia.

Sending money costs money. Big money. Even the Economist in a recent editorial and article chided the lack of progress by the G-8 and World Bank on reducing the fees to the 5% cap that was supposed to have been achieved years ago. They claim the average is 7.5% but that figure has little credibility given how much it leaves out of the calculations. There are regular reports of technological breakthroughs and new competitors, but many institutions have raised their rates claiming the costs of money laundering and terrorism legislation requires more scrutiny. The Economist called for reductions across the board, and ACORN’s Remittance Justice Campaign has long made that demand.

Can there be any better argument for reductions than disasters like Chile? A number of banks in Canada and the United States lowered or waived fees for transfers after the Japanese tsunami. Western Union and MoneyGram even said the right things for a bit. Where are they now?

Many are joining in a call for Western Union particularly to lead the way by reducing the cost of transfers to Chile during this crisis and time of displacement. Any of us that can need to raise our voices now.

ACORN and many other organizations have begun online petition drives among other tactics to get the message to the CEO of Western Union in Colorado to act now. Do whatever you can and sign the petition with us.

Suspend Remittance Charges for Philippines Typhoon Recovery

o_keeley_tigra_500x279New Orleans   There was a front page story in the Wall Street Journal about the fact that more and more of the remittance business from banks and money transfer organizations like Western Union and MoneyGram is between countries in Latin America rather than from US and Canadian immigrants to Latin America.  Western Union in 10 years has seen US-based transfers drop from more than half of its business to only 30% of the $79 billion it moves.

            What I have not seen, that I should have seen, and correct me if I’m wrong, so ACORN International will know and Google can get right, is any indication that Western Union, MoneyGram or any major US-based bank has suspended remittance fees for immigrant families and relatives in the US who are trying to send desperately need money to the Philippines in the wake of the terrible typhoon disaster the country is experiencing.   I heard from Judy Duncan of ACORN Canada yesterday where our Remittance Justice Campaign is a major emphasis, that some banks had announced that they were suspending fees temporarily to help out.   In the US, we may be reading about a $13 billion dollar JPMorgan Chase settlements, but we are not reading about banks or MTOs stepping up in this huge Katrina-level disaster.

            And, in the Philippines this matters even more than in most countries.   Some of the best remittance policies in the world exist in the Philippines, because, like it or not, exporting labor is a linchpin in their national economy, so before issuing a work visa overseas, the government instructs traveling workers in how to handle transfers at the lowest possible cost.  With workers all over the globe, and all over the US in hospitals and other occupations, a suspension of remittance fees during this crisis even for a couple of weeks could mean many more millions that could go to direct relief, family-to-family, person-to-person.

            ACORN International is calling on banks and MTOs in the US to immediately suspend remittance fees so that money can move immediately to families in perilous circumstances desperate for aid from their families.   This is the season for Thanksgiving and Christmas.   Rather than just bowing our heads, let’s stand up straight and demand that banks, Western Union, and the rest do right and do it right now.

Remittances Increase from USA, Progress on Disclosures, and Pushback from MTOs

New Orleans  I badly want to say that there is finally progress in the United States on remittances, which are financial transfers from immigrant families, migrant workers, and others to their families and communities back in their home countries.  The Wall Street Journal reported that the volume of money being remitted has in fact gone up based on the numbers available for 2010.  Our colleague, Manuel Orozco, the foremost US expert on remittances, even predicts an increase of 7% to 8% to Latin America and the Caribbean this year, which is also good news for developing countries.  The toothless World Bank says that the 215 million migrants it estimates around the world are moving $372 billion to developing countries in 2011 and they expect it to hit $399 in 2012 and $467 billion in 2013.  These are huge numbers, especially when one country after another continues to look the other way as migrants and immigrants are gouged by the costs of sending the money through the various money transfer organizations (MTOs).

The much heralded Consumer Financial Protection Bureau (CFPB) that was the brainchild of Elizabeth Warren, now running for the U.S. Senate in Massachusetts took up the matter this year and has promulgated regulations.  Unfortunately, they gummed the problem as well, possibly because of the limits on their authority.  Rather than addressing the predatory nature of the pricing, the final rule which takes effect in February 2013 simply puts forward the standard liberal palliative of better disclosure.  I’ve often shared the limited value of the disclosures in the tax preparation industry for predatory refund anticipation loans (RALs), where the companies (H&R Block, Liberty, Jackson-Hewitt) were all too willing to flaunt their 250% on computer screens and big posters, knowing that the marks (clients?) were so desperate for their money they had no choice but to suck down the charges.  This is the same song now with remittances, simply another verse.

To quote their own website summary, the CFPB rule says the following:

The rules require companies to give a disclosure to a consumer before the consumer pays for a remittance transfer. The disclosure must list:

  • The exchange rate,
  • Fees, and taxes,
  • The amount of money to be delivered abroad.

Companies must also provide a receipt or proof of payment that repeats the information in the first disclosure. The receipt must also tell consumers the date when the money will arrive.

Companies must provide the disclosures in English. Sometimes companies must also provide the disclosures in other languages.

I’ll read the whole 113 pages of the rule in coming days in hopes of finding something more helpful, but I’m afraid that’s the deal.

Outrageously, Miriam Jordan of the Journal reports this new rule “could raise costs for consumers…some experts said.”  She then quotes someone from Wells Fargo, which is an embarrassment of a bank on almost every count,

Daniel Ayala, head of global remittance services at Wells Fargo, praised the rule for creating a level playing field.  But he cautioned that, ‘there are details that could…ultimately result in limiting access, higher costs and confusion.’

Are you kidding me?!?  Finally having a wee bit of transparency (in English which doesn’t necessarily help!) and a receipt is going to raise costs.   Wells Fargo and their banking and MTO buddies simply have no shame.  I hope these hypocrites made a big fat contribution to Clinton’s Global Initiative, because they certainly don’t mind exploiting the living bejesus out of these immigrant and migrant families.

In Canada the bill to cap costs at 5% (remember that is the World Bank and G-8 goal!) is making progress.  More endorsements have come forward from the Canadian Union of Postal Workers (CUPW) and the University of Toronto Student Union.  There are also encouraging discussions with the Liberals, who may actually join with the NDP in a joint bill.  I’m holding my breath.  Somewhere developing countries and the workers trying to help their families have to get a real break on costs, not just a piece of paper with some numbers on it.

Finding Friends on Microfinance, but Western Union Not so Much

Phoenix 3462_WesternUnioncampaignimage Winning any kind of global financial justice for low-and-moderate income families is admittedly a slog, but misery loves company, and I cannot resist keeping you in the loop as ACORN International pushes forward on these campaigns.

Good news first.  Our report, “Mega Troubles for Microfinance”, picked up some friends in high places, which felt very nice, though we will have to see if it develops into real progress.  A letter from the Swiss international development agency indicated that they were in agreement with us that microfinance does not reduce poverty, and in line with our recommendations they had already scaled back involvement.  They were still hopeful about microcredit, though we are not sure what that really means other than saying that the poor should save, which is not exactly a development program.  Similarly when we issued our report the head of the United Kingdom parliamentary committee which has oversight over development joined in our argument heartily and indicated that they will take the report up more seriously now that the summer is past.  All very encouraging since we feared that we might burn at the stake for heresy!

On the other hand there is Western Union.  A long, as these things go, direct conference call between leaders of ACORN International and ACORN Canada with representatives from the Loveland, Colorado based king of remittances was difficult and indecisive.  Western Union conceded that there fees were not the 5 to 6% they claimed in their correspondence, but tried to argue that they were transparent nonetheless even though perhaps not fully.  If you can follow that sentence, you must have been behind the looking glass with us.  Their primary argument continued to rest in a defense of competition, which essentially is to say that they charge what the market will bear, until the market changes, and in response to ACORN International’s three reports on these questions tried to argue that there were 16,000 remittance channels so our dozen countries might just be out of luck.  We have pleaded with them for a direct face-to-face meeting in hopes of making real progress, and they agreed to consider it, but promised nothing.

Meanwhile we are pursuing meetings of the major countries who are soon looking at development issues to see if there might be a way to push ahead on financial justice for the global poor at those forums.  Optimism is boundless, but reality continues to intrude.

Ripping off Mexican & Caribbean Migrant Workers in Canada

Buenocurrency-transfer-compareds Aires One of the flash points in the USA immigration reform debate continues to be over the demand from farmers for help in their fields from migrant agricultural workers.  Recently  they left the Republican (and Obama Administration) consensus in droves as US-farmer organizations and Congresspeople bridled at the fact that employers, i.e. farmers, would have to pay steep fines for hiring undocumented workers.  The so-called bracero program has long been out of business in the US, which used to bring up seasonal workers from Mexico into the fields of California, Texas, and Arizona, and from the Caribbean to help in tobacco, cranberry, and other harvests in the Northeastern states.

ACORN International crack researchers led by Carleton University (Ottawa) volunteer, Amanda Sullivan, and ramroded by ACORN International and Edinburgh University (Scotland) super-summer intern, Melanie Craxton, stumbled onto a huge program though in Canada while researching remittance ripoffs as part of ACORN International and its federated partners on-going Remittance Justice Campaign (   The Canadian SAWP is not an armed strike team, but 20,000 migrant workers from Mexico and the Caribbean Islands who are recruited through bi-national agreements and shipped up to the fields of Canada, largely in British Columbia and southern Ontario, as part of the Seasonal Agricultural Workers Program.  Needless to say conditions are regularly reported as substandard and exploitive by our long-time partners, the UFCW and its agricultural workers organizing program which has been in the fields for years with these workers.

In fact the Canadian government extracts a 25% of wages share for taxes and the like which will never benefit these workers who will return home after a maximum of eight (8) months in the field.  Neither does the Canadian government seem to care much about how much money they actually go home with even though ostensibly that is one of the goals of this cooperative labor exchange.  The workers are in fact even chosen according to the SAWP criteria because they have stable families, and that means invariably they send significant remittances (about 50% of wages while in Canada) back home to their families.

The money transfer organizations of choice according to our researchers interviews are Western Union and a smaller, somewhat cheaper company called Vigo.  Either way a huge chunk of their checks are extracted by these MTOs, way over the 5% maximum demand that ACORN International has made as part of the Remittance Justice Campaign and that Canada as part of the G-8 has claimed to adopt as a world standard.

Talking to SAWP representatives though was like visiting Mars.  Yes, Canada collected its taxes.  Yes, the migrant workers made remittances home.  No, the governmental representatives had no idea how much was extracted by the MTOs of the checks, despite these bi-national agreements with Mexico and Caribbean countries.  It is impossible to escape the core immorality, even venality, of this predatory governmental operation.  The Canadian government gets migrant help for its agricultural enterprises, profits from taxes that can’t benefit the workers, and then turns a blind eye as predatory fees are extracted from the laborers before they return home with what little is left.

ACORN International and its federated partners like ACORN Canada, ACORN Mexico, and ACORN Dominican Republic, have stumbled onto a scandal and are busily preparing demands to force immediate change in these practices along the lines we have continued to make in recent months for cost caps and desperately needed regulations.  Without a doubt this is an outrage that demands the authorities finally listen and act!