Diasporas for Development: The Remittance Platform
By Bal K. Joshi
From my perspective, recent public dialogue about the development impact of migrant remittances is a little limited. Traditional cash-to-cash money transfers can lack macroeconomic leverage, especially when the funds are used for consumption rather than investment. However remittances can be more then simply funds transfers. Several years ago, we at Thamel Dot Com (TDC) in Nepal asked ourselves a basic question: Are remittances a “product” or a “platform” for development?At the time, Thamel Dot Com had launched Nepal’s first e-commerce portal and was providing Nepalese diaspora with a suite of products and services, including news and information, money transfer and the ability for people living outside of Nepal to remotely purchase goods and services in Nepal for local delivery. Our money transfer service mirrored that of other money transfer companies?remittances were viewed as a “product”. Over time, we came to the conclusion that cash-to-cash money transfer, as a product, is not very interesting…or economically dynamic. We became much more interested in our cash-to-products transactions. This interest came from the fact that the financial margins are better when we “productize” remittances; and also because the economic impact is higher when remittances are directly turned into the value for which they are intended.
“Productized” remittances deliver greater economic impact than traditional cash remittances for several reasons. The cost to the sender for the money-transfer element of the transaction is lower, thus increasing the buying power of the remittance. The remittance sender maintains more control over the use of the remittance, thus lowering waste and misuse of the money. The productized remittance platform offers the sender more options for investment, including financial services like bank-based savings accounts, loan-based purchases, and access to capital. And finally, the intermediary business operating the platform (such as Thamel Dot Com) is motivated to find new ways to add value and offer new products and services to the remittance sender, thus helping develop local businesses. Understanding this relationship between remittances and potential local business development is critical if remittances are to provide optimal economic results.
Cash remittances are just one way that diaspora populations impact development in their homelands. For example, the Chinese and Indian diasporas have fueled development in their countries via both cash remittances and their direct engagement associated with the remittances. Anna Lee Saxenian has superbly described this phenomenon in her book The New Argonauts. She illustrates how diaspora have created networks, pooled their experience and resources and used their capital to create opportunities for themselves and their countrymen in their respective homelands. This holistic approach to diaspora and development, with remittances viewed as a key “platform” rather than as a “product”, reflects a forward-looking perspective.
The real development opportunity for the future rests in how remittances are managed. I would like to see the remittance debate focus more on the role of remittance platforms and the development processes needed to effectively use remittances to provide benefits and opportunities for stakeholders involved in the whole remittance value chain.