Finally, Something We Can Agree on with Bill Gates!

Peruvian workers and activist protest against the 2015 IMF/World Bank Annual Meetings in Lima, Peru, Oct 9, 2015.

Peruvian workers and activist protest against the 2015 IMF/World Bank Annual Meetings in Lima, Peru, Oct 9, 2015.

New Orleans   There’s an old saying that the sun shines on an old dog’s, how shall I say this, hind quarters, eventually, and that’s about how often we agree wholeheartedly with mega-billionaire Bill Gates, but when it does shine on his rear end, we should all have the grace to acknowledge it.

While we’re just trying to make it to the weekend, Gates laid out his weekend plans to the Wall Street Journal where he is attending the spring meetings of the World Bank Group and the International Monetary Fund. Yes, I know, I’d rather join you on a worm dig as well, and believe me, we’re definitely not invited. But, on this rare occasion Gates is publicly arguing a position that ACORN International and I have advocated for years, including in the Social Policy Press book I edited, Global Grassroots, so instead of having to cringe at Gates and his foundation’s unending efforts to break teacher unions, promote charter schools, and redirect all health aid to a few diseases rather than generally, we are totally on the same page.

The issue may seem narrow, but it actually involves whether or not billions of dollars in foreign aid can be given to countries that desperately need the money to advance health, education, and opportunity to poor families living in precarious positions. The problem is that the World Bank and the IMF, creatures from the last century, classify countries based on average income in determining whether they are poor or middle-income, and it matters. Several years ago in Gatineau, Canada we met with the well-respected Canadian International Development Agency (CIDA) seeking support for the work ACORN was doing in mega-slums in various countries in Latin America. The program officers could not have been nicer or more supportive, but they were clear with us that the standards followed by the conservative government at the time mandated that any new allocations of CIDA support could only occur in countries that the IMF and World Bank classified as poor. In Latin America that mean that only Nicaragua and Bolivia were eligible. La Matanza outside of Buenos Aires, San Juan de Lurigancho in Lima, and the Neza outside of Mexico City were three of the ten largest slums in the world, but Argentina, Peru, and Mexico were all classified as middle-income countries, so we were out of luck.

Gates correctly makes the point that, “Today, more than 70% of the world’s poorest people – those living on less than $1.90 per day – live in countries defined as middle income, according to the World Bank.” How absurd! He also references another study that, “Countries with huge pockets of poverty like Nigeria, India, Pakistan, Ghana and Vietnam could lose as much as 40% of their development assistance in the next few years….,” all because of this out of date classification system and its deadly consequences.

Of course now that he’s more of a politician than a philanthropist, he throws out some red meat for the conservatives about how we can make these countries better at collecting taxes, which seems a little like trying to get water out of a stone, but, whatever, he’s right that the IMF and World Bank – and all of the countries griping the purse strings – need to get with the 21st century and get over their post-World War II thinking about countries and look at what is really has to be done to reduce poverty, rather than some bright light test that fails to help the poor. They may not have been willing to listen to us, but Gates’ voice needs to be heard, and they might just listen to him, and that would be a good thing for a change.

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Shaming the World Bank to Put its Mouth Where Its Money Is

World-Bank-land-and-water-grab-protest-e1396800202193New Orleans     The World Bank, a joint financing project invariably led by an American, but amalgamating many countries resources for major, and sometimes controversial, public works and other investments in developing countries particularly, is big bucks. If you want to build a power plant, a dam, a railroad, or anything in the billions, your country’s delegation is going to apply for a visa and start packing for a trip to Washington, DC to appeal for funds. Let’s agree from the onset that the World Bank has the purse strings so it has a big stick in stirring the drink and making stuff happen.

Human Rights Watch has issued a report called “At Your Own Risk” running almost 150 pages and documenting cases in countries from India to Cambodia, Uganda to Uzbekistan, and around the globe where despite their own rules, demanding community engagement and a direct process for complaints and grievances, they have allowed critics of World Bank funded projects to be harassed, imprisoned, and abused with impunity.   A story cited in India is standard. Dam projects in India have been battlegrounds for more than a decade on any number of grounds, so the World Bank is fully aware that any project of this nature they fund is going to be controversial.

Human Rights cited a recent example that is as good as any:

Beginning in February 2015, 40-50 residents of Durgapur village in northern India, mostly women, sat in protest for more than a month. A state-owned company called the Tehri Hydro Development Corporation India Ltd. (THDC) was developing a hydroelectric power project near their community and some villagers believed that tunneling for the project endangered their homes and the overall well-being of their community. The women and their children sat all day in protest, singing folk songs that gave voice to their worries regarding the future, as well as songs of courage and hope.

Seems like standard fare and no big deal in the world’s largest democracy, as India styles itself, and certainly a country that has a long history of dealing with much harder edged protests and demonstrations. But in this case the women were harassed, threatened with reprisals, personally attacked, and abused. Human Rights and just plain common sense raises the question, “Why does the World Bank allow this kind of activity?”

Human Rights Watch had a multi-paged list of recommendations for the World Bank, its management, shareholders, and the countries involved about doing better. More training, more consultations, more serious attention to complaints, and so forth.

Strangely missing was the one recommendation that would have real meaning: cut the money off!

If you have a big stick, use it!  Not just to dig dirt, block water, or whatever but also to protect speech, assembly and the basic rights of communities on the wrong end of these high-faluting developments.

What’s with the World Bank? Can’t they really stand for something besides interest rates and repayments schedules? Can’t they stand for the voiceless as well as the big whoops among the politicians and rich developers where their projects are being built? And, why are we – and Human Rights Watch – biting our tongue and not demanding that they cut the money off, if basic rights of people and communities are not respected?

Shaming isn’t enough. They need to step up or shut down.

***
Pete Seeger – This Land is Your Land

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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.

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Western Union and Money Mart Lobby Up to Fight Remittance Justice

New Orleans   Finally, the big-time money transfer organizations and the gazillions in predatory profits for moving money for migrant workers and immigrant families are at least hearing our footprints coming after them in the distance.

Several months ago Ontario NDP Member of Parliament Jagmeet Singh introduced a bill we had collaborated in writing under the provincial consumer protection statutes that would achieve the 5% ceiling on costs related to transfers supported by all of the G-8 countries and the World Bank.  Realistically, since the NDP is the minority party, it is hard to get a bill passed.  In Ontario lobby registration rules require lobbyists to register expressly on which bill or bills they are retained.  Bells and whistles went off for all of us in recent days when two lobbyists, jointly employed by Western Union and Money Mart, registered specifically on our 5% cap bill.

The obvious question was whether or not these slick operators had already started putting the squeeze on the McGinty government on our bill?  In the question period in the Provincial Parliament, MPP Singh asked the questions.  The answer was a non-answer and a classic runaround response, that I will share here with all of you in case for your personal and political enjoyment.

It’s on!

CONSUMER PROTECTION

Mr. Jagmeet Singh: My question is to the Minister of Consumer Services. In May, I introduced Bill 98 to stop large companies from charging unfair international money transfer fees. Now we have learned that the two biggest money transfer companies operating in Canada, MoneyGram and Western Union, have registered to lobby both the Ministry of Consumer Services and the Ministry of Finance on this bill.

Has the minister met with these advocates for these powerful companies, and what are they saying to her?

Hon. Margarett R. Best: I thank the member for the question. Certainly, consumer protection is an important issue for our government, and we are reviewing the bill that the member has put forward. As always, we’re reviewing this bill with a view to improving consumer protection in the province of Ontario. It is important to note as well that the federal government has a role to play in protecting consumers with regard to federally regulated financial services.

The ministry continues to analyze the bill, and we continue to look at options to improve consumer protection for Ontario consumers with regard to remittance fees. This is an issue which certainly impacts a great number of people in the province of Ontario, including myself and many of us in this Legislature—I would no doubt think that—and it’s an issue that also impacts many people who are new Canadians, so this is an issue which we find very important to us.

The Speaker (Hon. Dave Levac): Supplementary?

Mr. Jagmeet Singh: Again to the Minister of Consumer Services: When Ontarians send their hard-earned money to relatives overseas, multinational companies should not be allowed to siphon off as much as they please. Now, powerful US-based companies are fighting against a bill that would protect Ontarians.

Ontarians need to know: Will the minister take action to protect Ontarians from predatory money transfer companies, or will she capitulate to the high-paid lobbyists for these US companies?

Hon. Margarett R. Best: I would like the member opposite to know that this is an issue on which we continue to listen to all the interested parties, all the interested stakeholders, and certainly our consumers in the province of Ontario.

This issue, as I said, is a very complicated issue. There are many complicated factors that require a very thorough review of the bill. Because of the complex nature of this issue, we continue to review this bill carefully, the proposed legislation that has been put forward by the member opposite.

We continue to look at other ways to protect consumers in the province of Ontario, which is an issue which is very important to me and to our government.

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Remittances and a New World Bank President

New Orleans   The president of the World Bank, one of the premier world credit and developmental financing institutions created at Breton Woods, serves a 5 year, renewable term, and is currently occupied by former USA Trade Representative Robert Zoellick, appointed by George W. Bush.  Traditionally the post has been held by a US citizen because the US is the largest shareholder in the bank.  Luckily, this June marks the end of the five year term and allows a new president to emerge.

ACORN International and its affiliates have been pressing for more than a year through the Remittance Justice Campaign for there to finally be some real progress on capping remittance fees at no more than 5% of all transactions, which is a goal set by the G-8 top industrial countries and enabled by the World Bank.  We have also called on both the World Bank and these countries to seriously regulate remittances rather than continuing to allow predatory conditions to prevail that are fleecing the hard earned transfers of migrant workers and immigrant families.  Unfortunately given how voiceless this population is, their concerns have been shunted to the side over and over.  The World Bank, when confronted on the issue of remittances and doing what is necessary to achieve these reforms has repeatedly attempted to virtually disavow the existence of this goal and its own role.

ACORN International is demanding that President Obama and the leaders of other countries finally take the robbery of remittances seriously and make a precondition of the appointment of the next World Bank president be a real and robust commitment to achieving this 5% cap and supporting appropriate regulations of remittances.

To support this campaign, please sign our petition.

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Informal Hawala Remittance System Huge, Competitive, and Dangerous

remittance1

New Orleans Yesterday on the ACORN International website (www.acorninternational.org), we released the third of our investigative, research reports in connection with our Remittance Justice Campaign.  The bottom line is that the amounts of informal transfers are huge and underestimated.  They are wildly cheaper by many orders of magnitude (0.25% to 1.25% compared to World Bank 10% and our earlier survey of 22%).  They are most unregulated because the system often lacks a paper trail, also allowing easy access for money laundering and terrorism.

The hawala system proves that money can be transferred cheaply and efficiently between immigrant families and migrant workers back home.  This failure of regulation is predatory and dangerous.  We argue the case for reform and demand change.  See the whole report below:

VOTING WITH THEIR MONEY IN A RIGGED ELECTION[1]

The Demand for Alternative Mechanisms for Remittance Transfers from Immigrant Families and Migrant Workers

Campaign for Remittance Justice Update

In December of 2010, ACORN International’s opening report of the remittance campaign, Past Time for Remittance Justice, exposed the trials and tribulations of migrants around the world who pay exorbitantly high fees to send small amounts of their hard-earned money back to their home countries to support their families. The message was clear: the high costs charged by money transfer organizations were predatory and no one was taking the plight of the remitting migrant worker seriously. When ACORN International’s second report, Looking the Other Way: The Absence of Remittance Regulation, was made public, sadly not much had changed.

Our calls for regulation and doing away with exorbitant fees are only being seriously engaged at the provincial and federal levels in Canada, and even there the response remains grossly inadequate.  Elsewhere in the world, the financial community, aided and abetted by the responsible national banking authorities and their global counterparts, continues to ignore this scandal.  This is easy for them to do. This is a crisis for poor people, immigrants, and migrants, not a crisis for bankers and governments. In other words, regardless of their responsibilities to protect and serve, the people in a position to remedy the situation have no interest and are feeling no pain.

In both of these reports, ACORN noted that alternatives to formal restraint or regulation of fees and predatory practices were being sought every day by victims of the system, and in the absence of real progress, people would be voting with their money for different systems throughout the world.  Change will come here.  The party will not last forever.

Informal Money Transfer Systems

Today the largest informal money transfer system is likely “hawala.”  ‘Hawala’ is a term that is regionally-specific to the Middle East, but similar systems exist elsewhere under different names (such as ‘hundi’ in Pakistan and India and ‘fei ch’ien’ in China). Together they all fall under the technical, World Bank-like title of ‘Informal Money Transfer Systems’ (IMTS). Since hawala is the most popular IMTS, and the one that has gotten the most publicity, this report will refer to IMTS as ‘hawala’ with the understanding that it is interchangeable with other regional-specific versions.

Before discussing more about the size, scope and importance of hawala, we will examine more closely how hawala works using the following example:
A migrant worker in country A wishes to send money home to his family in country B. He has no bank account and is not an excellent speaker of country A’s language thus he finds dealing with any bureaucracy extremely intimidating. In his local ethnic paper, written in his own language (and perhaps even own dialect if he’s lucky), he finds an advertisement for cheap money transfers back to country B through a small local business. The worker goes and meets hawaladar A, the owner of that business, to whom he gives $150 to send to his family. Hawaladar A is an importer of handicrafts from country B and thus he has many business contacts there, one of which will be referred to as hawaladar B. After receiving the migrant worker’s money, charging him a commission between .25% and 1.25% and giving him an ID number that can be used to pick up money in country B, hawaladar A rings up hawaladar B and informs him of the transaction. Within 24 hours the migrant worker’s family can go to hawaladar B in country B and pick up the amount transferred by the worker.
What is important to note is that this entire transaction has taken place without any physical movement of funds. The only debt that exists is the one between the two hawaladars. Sometimes this debt will be settled via a formal bank transfer or perhaps hawaladar B owes hawaladar A money and this is a settling of that debt. More likely, however, both hawaladars are in an import-export relationship and by over/under invoicing for goods shipped between countries they can settle their debts through manipulation of their balance sheets.

We could substitute a thousand other examples from neighbours to personal business acquaintances or family friends and relatives. This example highlights many of the attractive features of IMTS; It’s cheaper, faster, and often more accessible than formal systems which the World Bank claims cost an average 10% worldwide (as compared to .25%-1.25% of the informal sector and the over 20% found through ACORN International’s own surveys), and it often takes several days for transactions to go through.[2] However, it is also very important to note that no paper trail is left and the balance-book manipulation makes the transaction untraceable and therefore illegal in many countries, including India where it is widely used.

So How Important is the Informal Sector Anyway?

In Past Time for Remittance Justice, ACORN International estimated that if quantified, volumes of money going through hawala (and other equivalent informal money transfer systems around the world) may add 20-40% to the value of worldwide remittances. Having looked further into informal money transfer systems, we now have reason to believe that this amount may be much larger. Official figures, such as those referenced by national governments and the World Bank among others, do not take informal money transfers into account when quantifying remittances. Even academic attempts to measure the size of hawala (and other equivalent mechanisms) admit that the best that can be done is to simulate rather than estimate. From our example above it becomes very clear why such difficulties exist. The most reliable estimation that our research has come across is a 2002 estimate of the United Nations Department of Economic and Social Affairs (DESA) that $100-$300 billion flow through Informal Money Transfer Systems each year.[3] In 2010, the World Bank estimated that global remittance flows would reach $440 billion by the end of the year, $325 billion of that going to developing countries.[4] If both of these estimates are valid then the importance of the informal sector is much greater than we had anticipated. Rather than 20-40% of formal remittance figures, it could be anywhere from 25-75%.

$440 billion in remittances and transfers is a huge amount, but the importance of this figure is dwarfed by something that the banking authorities and others are missing. When we take estimates of informal remittance flows into account, the real values of remittances worldwide can be conservatively calculated to be at least $550 billion and more aggressively to be $770 billion. When we apply the .25%-1.25% range of fees charged by the informal sector, the $44 billion in fees paid on remittances, using the 10% figure used by the World Bank as a global average, increases as well. At the lower fee level of .25% the range in additional money is anywhere from $275 million to $825 million. At the higher level of 1.25% this range increases to be $1.4 billion to $4.4 billion. We can now see that by quantifying informal remittances and their additional costs, the $44 billion could be increased by up to 10% and we start knocking at the door of $50 billion in fees collected for various forms of transfers.

A senior economist in the World Bank, when fielding our queries on informal remittances, admitted that he was not able to come up with a ballpark figure though he suspected that numbers had decreased since 2003, largely due to impacts of the recession. Regardless, he maintained that informal flows were still significant and categorically confirmed that hawala and other informal systems are not included in any of the World Bank estimates on remittances which are the gold standard in this area of inquiry.  While it may be impossible to accurately measure the use of informal money transfer systems, one thing is extremely clear: the informal sector is an extremely popular way to send money around the globe.

Security Concerns

The same characteristics that make hawala and other IMTS attractive to migrants looking for a quick, easy and cheap alternative to formal Money Transfer Organizations have also been flagged as conducive to money laundering and terrorism financing. In the wake of September 11th, IMTS, especially hawala due to its Middle Eastern origin, were considered security threats. Most of the literature on hawala is from this period where international bodies and national governments sought to work together to combat such threats through the attempted regulation of hawala.[5] However, as the United Nations DESA points out, while hawala is an attractive medium for illegal transactions, it is also extremely important to many migrants around the globe who are using it for perfectly legal means.[6] For this reason it is important that any attempts to combat terrorism and crime through the hawala system take the importance of legal activities carried out through the hawala system into account.  Paradoxically, the global and developed world concerns for increased security in these times has not tempted them to trifle with the more than $40 billion in transfer fees in the formal section in order to compete with the hawala system or create a more efficient system for immigrants, migrants and others.

The anonymity and absence of a paper trail that are hallmarks of the hawala system are enough to cause great concern to national security. It is also enough for ACORN International to remain wary, despite all the benefits the hawala system presents to migrant workers. Just as we can never quantify the volumes of remittances that flow through these informal channels, we will never be able to know when, and how often, the system breaks down to the misfortune of migrant workers and their families. Even though anecdotal evidence leads us to believe that hawaladars are typically honest, since their customers would “vote with their feet” presumably, with any system as opaque and off-the-record as hawala, one must always remain vigilant.

It is here that ACORN International and national security workers find common ground: the desire to bring hawala and similar systems into the open.  Given the World Bank’s only argument for reducing the fees to G8 targeted 5% by 2014 is “competition,” moving the informal system towards the formal would finally introduce real competition rather than the nodding and yawning between banks and MTOs that exists now.  In a joint World Bank-IMF paper, the recommendation was made that hawala operations existing parallel to the formal remittance channels be brought into light ‘without altering their specific nature’.[7] This paper cannot ignore one of the most important points about hawala: it is an extremely attractive and efficient option for remitting money!

Glimmers of Hope

One country that has had great success in formalizing remittances is the Philippines. Their official remittance figures show $3 billion having been remitted in January and February of this year (2011) alone. This is a 6.2% increase from the same period last year.[8] Following from the discussion above, official statistics do not necessarily reflect the total flow of remittances into a country due to the non-quantifiable nature of informal remittances. The increases seen in the Philippines have been greatly influenced by their pro-remittance policies. ACORN International has found that the Philippine government now trains migrant workers in the smartest ways to send remittances home before they leave the country for work. The Banker’s Association of the Philippines has even encouraged banks to innovate and replicate the advantages of the informal sector. One company, SwiftCash (UK) in cooperation with a Philippine bank has offered another incentive not to use informal channels by using the receipt from the transaction to enter the customer in a raffle where a multitude of prizes can  be won ranging from a sack of rice to medical services (For an example visit: http://www.suremoney.swift-cash.com/promo-mmp.php).

Bringing the informal money transfer systems into the light is advantageous for many:

  • Migrants will enjoy greater transparency and protection through the documentation of their transactions;
  • National Security Workers will be able to target illicit operations occurring in the informal sector without the worry of severely damaging the financial life-lines migrant workers send to their families;
  • Governments of the remittance receiving country will benefit from the knowledge of the true capital flows in their economies and thus will better be able to construct economic policy.

Learning Lessons

While hawala operations often occur illegally and without documentation, we can learn from them how to best serve migrant workers and immigrant families. Perhaps the biggest lesson to be learned from hawaladars is that overhead costs to send remittances need not be large at all as ACORN International has consistently argued.  The reason why a hawaladar can charge only .25%-1.25% to send a remittance is because it does not cost much to carry out the transaction! Many banks have high overhead costs (for example, heavy-duty safes, large, expensive buildings and highly trained and paid staff), but all a hawaladar needs is some form of communication (often a telephone). He or she doesn’t even need an official location for hawala as many hawaladars are already business owners with small shops.  If your average small business owner can operate a small scale remittance business and charge less than 2% in fees then it further drives the point home that it is completely indefensible for organizations that enjoy economies of scope and scale to charge fees that are much higher.

Logically in a computerized and electronic world, the same hawala principle of cash received in one place and cash turned over in another would work easily within different branches of the same bank, different offices of Western Union, MoneyGram, and other MTOs, and even between banks in the developed world and their correspondent banks in the developing world.  In fact for all we know similar adjustments may be already happening between a Citibank and a Banamex for example and simply adjusted with real dollars or pesos on a quarterly or annual basis and done as entries on accounting ledgers at other times.

Recently for example, ACORN International’s own US-based bank ran a test run on its international transfer system and inadvertently used our “live” account number and moved unimaginable (to us!) sums between our account supposedly and our payees.  The bank was apologetic of course, since it was their error, and furthermore they needed our help to potentially recover their money.  In difficult cases like those in India and Kenya, they sent electron “messages,” as our banker described it to the recipient bank where our payee had an account saying that the XX amount was mistakenly sent, and asking for it to be routinely transferred back.  We all fretted for a day or two, and our bank was less than thrilled with how quickly their correspondent bank was able to assist them when it seemed to be taking too long in Nairobi, but it worked out well for our bank, no harm, no foul.  We cannot have a hawala system for banks managed digitally and electronically, and a paper, cash, hope and a prayer system for immigrant families and migrant workers, but that is exactly what “look the other way” national banking regulators and “everything my way” financial institutions are maintaining today.

Other Alternatives to Money Transfer Organizations

Besides hawala, ACORN International has identified several other methods that can be used to remit money abroad and avoid the predatory money transfer organizations.

If the migrant worker has a bank account, he or she may be able to send an extra debit card to his/her family that can be used at any ATM to access the bank account from anywhere in the world. However, this is not a satisfactory scalable solution because many migrants do not have bank accounts. Even if they do, the ATM withdrawal fee (which can be several US dollars) and exchange rate used by the banks will greatly diminish the value of the funds that will actually be available to the family. Not all banks will agree to provide an extra ATM or debit card and thus this solution only works for a small percentage of migrants.

If a bank does not allow one to obtain an extra card then services such as Ikobo (www.ikobo.com) that enable you to send a Visa pre-paid card to your family can be used instead of a debit or ATM card from your bank. However, there is a $500 daily limit on withdrawals and each time you withdraw there is a $2.25 ATM fee charged. You also have to physically send the card to your family which represents yet another cost.

Services such as PayPal have also been cited as good ways to send money over the internet across borders. However, the problems with PayPal include the cumbersome nature of its operation (ACORN International staff still don’t completely understand the ins and outs of it, and we use it!) and the necessity of having either a bank account or a credit card. To compound the problems of using PayPal, a recent study has shown that migrant workers tend not to have the level of technological literacy necessary to utilise such tools.[9] Add all of these problems to the well publicized capriciousness involved in PayPal opening and closing accounts, and even though the company estimates it may move $3 billion by the end of 2012, this service is not ready for prime time for migrants and immigrants yet.

And the Campaign Pushes On…

Overall, while there are formal alternatives to Money Transfer Organizations, none of them really fit the needs of migrant workers.

It is obvious to us that the potential for low-cost, accessible solutions are available, but up to now the formal sector obviously has not felt the need to develop them (and with charges on global remittances exceeding $44 billion USD it is easy to see why they face no pressure to feel otherwise!)

We have seen both the formal and informal alternatives to using banks and Money Transfer Organizations to remit money and our argument remains strong: The only true solution today is regulation and cost cutting. We have seen that both are possible and there is no defensible reason to continue brushing the plight of the migrant worker aside.

There can no longer be any doubts about the importance of remittances worldwide and the severe injustices that migrant workers face every time they attempt to send their hard-earned money home to their families. With this report we have repeated the irrefutable case that costs do not have to be as high as they are. All the pieces of the puzzle are exist to create a better alternative for immigrant families and migrant workers and their families.

ACORN International is committed and determined to put these pieces together.  It is past time for the world financial community and governmental banking systems to join us!


[1] This is the third report ACORN International has issued as part of its Remittance Justice Campaign.  This report  and the earlier two reports are all available at www.acorninternational.org.  For more information contact chieforganizer@acorninternational.org.

[2] World Bank Global Remittances Working Group (http://siteresources.worldbank.org/FINANCIALSECTOR/Resources/282044-1257537401267/RomeConferenceRemittances.RathaAndCirasino.pdf)

[3] United Nations Department of Economic and Social Affairs (http://www.un.org/esa/desa/papers/2002/esa02dp26.pdf)

[4] World Bank (http://web.worldbank.org/WBSITE/EXTERNAL/NEWS/0,,contentMDK:22757744~pagePK:64257043~piPK:437376~theSitePK:4607,00.html)

[5] Interpol (http://www.interpol.int/Public/FinancialCrime/MoneyLaundering/Hawala/default.asp);
Financial Action Task Force (http://www.fatf-gafi.org/dataoecd/16/8/35003256.pdf) and (http://www.fatf-gafi.org/dataoecd/32/15/34255005.pdf);
US Department of Justice (http://www.ncjrs.gov/pdffiles1/nij/grants/208301.pdf);
West African Institute for Financial and Economic Management (WAIFEM) (http://www.waifem-cbp.org/v2/dloads/INHERENT%20RISK%20IN%20GLOBAL%20REMITTANCES.pdf)

[6] World Bank (http://web.worldbank.org/WBSITE/EXTERNAL/NEWS/0,,contentMDK:22757744~pagePK:64257043~piPK:437376~theSitePK:4607,00.html)

[7] Joint World Bank – IMF Commissioned Paper (http://johnfwilson.net/resources/Hawala+Occasional+Paper+_3.24.03_.pdf)

[8]The Philippine Star (http://www.philstar.com/Article.aspx?articleId=676699&publicationSubCategoryId=200)

[9] Orozco, Burgess and Ascoli, 2010 http://www.thedialogue.org/PublicationFiles/a%20match%20in%20migrants%20remittances%20and%20technology%20MO_FINAL_11.4.101.pdf

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