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Press Release

11 December 2007

Help at hand for those who send money home to developing world

– Transparency drive to protect consumers who make international payments –

sending money home As thousands of families prepare to send money to loved ones overseas during the holiday season, the Department for International Development (DFID) is working with the financial sector to make sure payments are easy, affordable, on time and go through registered channels.

More than a third of ethnic minority households send money home to Africa and Asia at an average of £870 per year, according to DFID research.

By sending these payments, known as remittances, they are not just helping their own family and friends, but also helping to tackle global poverty. The World Bank estimates that over US$220 billion worth of remittances were sent to developing countries in 2006. For many poor countries this is a bigger source of money than overseas companies investing in the local economy. For example, Ghana receives 10-15 per cent of its national income from remittances, and around 3 per cent from foreign investment. Remittances can also be bigger than international aid flows.

Yet for many of those sending or receiving money the process can be difficult and insecure. According to DFID research, the biggest worry for people when deciding how to send money home is whether it will arrive safely, followed by concerns over excessive charges. Another obvious worry is how long it will take before relatives can receive the money.

There are thousands of companies and banks in the UK that transfer money overseas. But, until recently, families had little way of comparing the costs or reliability of companies.

Money Transfers made easy

To help consumers make informed choices, DFID has set up a free, independent consumer comparison website www.sendmoneyhome.org , with country-by-country listings of reputable payment companies allowing comparisons of transfer methods, exchange rates, fees, and speed. Users can calculate the amount that will be received in the local currency, and the website also offers advice on what to do if things go wrong.

This online advice service has been backed up with 900,000 information leaflets covering some 20 countries, both in English and the relevant minority ethnic language, which have been distributed among migrant communities.

International Development Secretary Douglas Alexander said:

“The UK is home to large and diverse ethnic minority populations. When these people send money home to loved ones they play a key role in tackling poverty in the developing world.

“By working with the financial sector to improve transparency and competition among payment organisations we are making it cheaper and easier to send money – which is good for families, good for reputable companies, and good for international development.”

There is evidence that this drive towards greater transparency and competition among transfer companies is already helping customers. The cost of sending £100 to countries covered by the programme has fallen by an average of 5.6% since 2005. For remittance payments by Indians, the UK’s biggest ethnic minority, costs are down by over 20 per cent.

DFID continues to work with banks and payment organisations through a UK Remittances Task Force to make it easier and cheaper to send money, and will soon launch a new Customer Charter, committing companies to providing clear, transparent information in a standard format. And HM Treasury will soon be consulting on the implementation of the Payments Service Directive which will bring regulation to the money remittance sector.

Dominic Thorncroft, Chairman of the UK Money Transmitters Association, said:

“There are an estimated 3,000 money transfer organisations in the UK, with some 85 per cent of these focusing mainly on small scale person-to-person remittance payments. DFID has done a lot of work to encourage discussion on how best to protect these consumers.

“The UK Money Transmitters Association has worked closely with DFID and supports the new charter, which aims to provide better information and transparency for people sending money and to encourage companies to stay focused on consumers' needs.”

Adam Clark, a consumer representative on the Remittances Task Force, said:

“Users of remittances should be protected and empowered to the same degree as other financial services consumers. We welcome the customer charter and the 'send money home' website as important steps towards ensuring that consumers sending money abroad have clear information, and confidence that their money will arrive safely and at a low cost.”

Notes to Editors:

1. Information for remittances “fact box” features

FACT FILE on sending money overseas and how DFID is protecting consumers…

Key facts
Ethnic minority communities in the UK send an estimated £2.3 billion a year to loved ones in more than 50 developing countries – including over £300 million to India and £200 million to Pakistan. The next biggest recipients are Nigeria, Jamaica and Ghana. Some 35 per cent of ethnic minority households send money. British Black Africans are the most likely to send money, while UK Asian households send the biggest amounts. Of those who send money, the average amount is £870 per year. The average income of senders is £22,000 and 70 per cent are aged 25-44. Almost half are sending money to their parents, 15 per cent to spouses and children, and 25 percent to other close relatives. Others send money to friends or other contacts. Nearly a third of the money is used to buy food, 21 per cent for medical bills and 17 per cent to help pay for schooling. The cost of sending £100 to countries covered by DFID’s ‘Sending Money Home’ programme has on average fallen by 5.6% since 2005. For remittance payments by Indians, the UK’s biggest ethnic minority, costs are down by over 20%. Globally, the World Bank estimates that more than US $220 billion worth of remittances were sent to developing countries in 2006. India is the world’s biggest recipient of remittances, with an estimated £10 billion a year. Remittances through formal channels into Pakistan are expected to reach around £3 billion in 2007. For many poor countries, remittances are a bigger source of money than investment by overseas companies. For example, Ghana receives 10-15 per cent of its national income from remittances, and around 3 per cent from foreign investment. Remittances also play an increasingly important role in the aftermath of natural disasters. Formal remittances to Pakistan increased by some £90 million following the devastating earthquake that hit Kashmir in October 2005.

Key facts

Ethnic minority communities in the UK send an estimated £2.3 billion a year to loved ones in more than 50 developing countries – including over £300 million to India and £200 million to Pakistan.

The next biggest recipients are Nigeria, Jamaica and Ghana.

Some 35 per cent of ethnic minority households send money.

British Black Africans are the most likely to send money, while UK Asian households send the biggest amounts.

Of those who send money, the average amount is £870 per year.

The average income of senders is £22,000 and 70 per cent are aged 25-44.

Almost half are sending money to their parents, 15 per cent to spouses and children, and 25 percent to other close relatives. Others send money to friends or other contacts.

Nearly a third of the money is used to buy food, 21 per cent for medical bills and 17 per cent to help pay for schooling.

The cost of sending £100 to countries covered by DFID’s ‘Sending Money Home’ programme has on average fallen by 5.6% since 2005. For remittance payments by Indians, the UK’s biggest ethnic minority, costs are down by over 20%.

Globally, the World Bank estimates that more than US $220 billion worth of remittances were sent to developing countries in 2006.

India is the world’s biggest recipient of remittances, with an estimated £10 billion a year. Remittances through formal channels into Pakistan are expected to reach around £3 billion in 2007.

For many poor countries, remittances are a bigger source of money than investment by overseas companies. For example, Ghana receives 10-15 per cent of its national income from remittances, and around 3 per cent from foreign investment.

Remittances also play an increasingly important role in the aftermath of natural disasters. Formal remittances to Pakistan increased by some £90 million following the devastating earthquake that hit Kashmir in October 2005.

2. Building on a DFID-backed pilot enabling customers to use mobile phones to transfer money within Kenya, Vodafone and Citigroup this year introduced international money transfers by mobile. The new service, targeted at global remittances, was first available to customers in the UK sending money to Kenya.

3. There are also initiatives involving arrangements between international, national and foreign banks, money transfer organisations and other companies.

For example, Lloyds TSB and the Indian ICICI Bank have collaborated to offer India Banking Service, which includes free transfers from the UK to India.

Sonali Bank, a state-owned bank in Bangladesh and the largest bank in that country, is part owner of Sonali Bank (UK) Ltd, which has six branches in the UK and is a major conduit of remittances, and much-needed foreign exchange, to Bangladesh.

DFID Department for International Development

Press Release

Help at hand for those who send money home to developing world

– Transparency drive to protect consumers who make international payments –

Notes to Editors:

Key facts

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