Remittances come at a high cost
Report recommends bank-to-bank transfers
Stabroek News
December 8, 2002
Encouraging account holders to receive remittances via direct bank-to-bank transfers would significantly reduce high transaction costs for those sending money back home.
This was the conclusion of immigration specialist, Dr Manuel Orozco, who presented a paper at a recent USAID seminar.
Western Union, which has 70% of the transfer business in Guyana, charges an average of US$31.60 for sending US$250 from the US while the lowest charges are tagged at US$19.76 and US$21. This is a total charge made up of the spread between the transfer- house's exchange rate and the inter-bank exchange rate along with the actual fee charge.
Orozco said the transaction costs at the money transfer businesses in Guyana are currently "high, not only in relationship to the value of the principal, but also in relationship to the amounts charged in other Latin American countries."
Orozco noted that the cost of transferring US$250 averages about US$26, when considering the top four main sending businesses in Latin America and the Caribbean. Western Union's charges of US$31.68 are among the highest in Latin America, and Guyana is the most expensive country after Cuba for sending US$200 from the USA.
Stabroek News has been unable to contact any senior Western Union official in Guyana for information on what determined their rate structure.
According to data compiled by Dr Orozco, the charges for transferring US$250 to Guyana from the US of some of the leading companies were as follows: MoneyGram-US$27.68; Ria Envia/Laparkan-US$22.68; Ria Envia-US$26; Caribbean International Shipping Services-US$19.76; Caribbean International Shipping Services- US$21.
Stabroek News also found that King Solomon's charges a rate of US$30 for the same amount, and National Pride, US$24. Moneygram said that contrary to Dr Orozco's findings, its charge was US$20.
A check with the National Bank of Industry and Commerce (NBIC) showed that sending the same amount from the Bank of America in the US costs US$10 and a local charge of $500. Trans-ferring through the Bank of New York costs US$20 with a $500 local charge.
The Guyana Bank for Trade and Industry receives transfers from Chase Manhattan in the US and though the cost was not ascertained, it was considered considerably lower than that of the money-transfer companies. Two per cent of the remittance is charged locally.
Remittances, according to Dr Orozco's report, are also sent through the New Building Society and this is often done to pay mortgages.
Dr Orozco, in his report, noted that the most expensive countries for transferring money in the Caribbean were the Dominican Republic ($17.39), Cuba ($25.33), Haiti($16.10), Jamaica ($19.89) and Guyana ($21.15). In these countries, he noted that one of three patterns could be observed: a company controls over 60% of remittance transfers as in Guyana and Jamaica; there is a high level of informal transfers - above 50% of the amounts transferred as in Cuba and Haiti; or the business is controlled by a conglomerate of companies as in the Dominican Republic.
Costs matter to both senders and recipients, Dr Orozco said, noting that it affects the sender as well as those who would be able to receive more from the senders.
He therefore recommended the use of banking institutions to transfer remittances saying that senders would be able to transfer remittances, via Automatic Teller Machine (ATM) technology or by depositing directly into a recipient's account at lower costs than prevailing ones.
Recipients could then access their money from a bank or via an electronic deposit fund as needed.
In most countries, he noted that the majority of recipients were poor, without bank accounts. Unable to save, they were using remittances to make ends meet.
Having a debit card guaranteed the recipient the opportunity to access his or her money on an 'as-needed' basis, while safely keeping a balance in the electronic deposit fund. For those able to save, he said that money could be deposited into a regular checking-account and access-ed by cheque, debit or store value card.
