Remittance Flow Fails to be Captured

Most Central Americans who send or receive international money transfers remain excluded from the formal financial system, according to the IDB’s Multilateral Investment Fund (MIF). “We have to give these families more options to manage their own money by banking the unbanked. This is critical for economic development,” says MIF manager Donald Terry. About $3bn of the money sent by CentAm expatriates is not used for immediate consumption but the potential economic impact is limited by the fact that more than 90% of the flow remains outside the formal financial system. According to MIF, about 56% of the CentAm households that receive remittances pick up their transfers at a financial institution. Typically they are not offered bank accounts. However, survey respondents showed significant interest in financial products and services such as savings accounts (53% said they were “very interested”), life or health insurance (44%), small business loans (38%), mortgage loans or home construction loans (31%) or education loans (25%). The survey focused on adults who receive remittances in Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua and Panama.