Remittances in the Pacific

by Dom on January 12, 2011

If there is a Tongan in Namibia, a Tuvaluan in Moldova, or a Samoan in Mongolia, chances are they send money home.

It is well known remittances play a vital role in the lives of many Pacific people. They are commonplace. They happen often and regularly. They account for massive (and often increasing) proportions of some Pacific Island states’ GDPs. And they are bloody expensive. This is slowly changing, and there is some amazing work being done spreading information and campaigning for a better deal. But there are still many opportunities.

For Tonga, Samoa, Fiji, Tokelau, Tuvalu, Vanuatu, PNG, and Solomon Islands, remittances are an essential part of life. They account for up to and sometimes over 40% of GDP in some island states, and have fees associated to match this startling figure. Recent reports claim some money transfer services claim over 25% of remittances in fees, charges and levies. The goal was set in 2008 to get remittance fees from New Zealand under 10%, preferably 5-7%, by the end of 2009. That has stalled somewhat, but education and information, lobbying and product development, have combined to start changing the remittance landscape.

I recently met Kim Hailwood from MoneyPACIFIC, and was inspired by what one person can achieve in a short time. But at the same time I was struck by how ridiculous and somewhat predatory the situation remains. And I was left scratching my head as to why someone isn’t undercutting the market. After quickly tuning myself back to reality I concluded it was something of a cartel or oligopoly… I could see three real choices for reducing costs and potentially securing a large market share. One involved banks, another governments, and the last telecos.

I fairly swiftly discounted banks; see note in preceding paragraph about oligopolies.

With regard to Governments, they are really doing all they can (or should) in this sphere by lobbying and ensuring laws (especially international money laundering and anti terrorism legislation) don’t stifle efforts to improve the situation.

Then telecommunications companies caught my attention. Knowing that in Kenya it is not only possible but commonplace do most of one’s banking by mobile phone through M-PESA, I figured that something similar could work in the Pacific. Large companies, such as Vodafone (the parent company of Kenya’s Safaricom) seemed the place to start… Unfortunately, Vodafone’s coverage in the Pacific is smaller than I’d anticipated; this thwarted the plans I had for writing about how a great opportunity was being missed… And further inspection left be somewhat put-in-my-place, but far more jovial.

It appears Vodafone Fiji j have got M-PAiSA operating there too! And as far as sending money within Fiji is concerned, it looks like a good deal, especially for larger amounts. So, I guess this just leaves one problem: how to make international transfers by M-PESA/M-PAiSA? With governments onside it should be easy enough to do. When that’s up and running, look out banks and Western Union. I’m convinced it’s probably the way of the future for remittances, even for that Tuvaluan in Moldova. Do you have any M-PAiSA stories of know any users?

Questions, comments, thoughts, retorts?

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