Sending money home to Haiti from the U.S. proves difficult

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By Peter Whoriskey
Sunday, January 24, 2010; A11

MIAMI -- Even in normal times, the dingy money transfer storefronts in this city's Little Haiti provide a critical lifeline for the island nation. Here, and in other immigrant hubs in the United States, money passed to tellers behind plastic glass and then relayed back home is part of a flow that amounts to as much as a quarter of Haiti's economy.

But since the Jan. 12 earthquake, just as Haitians in the United States and elsewhere rallied to send money back home, the critical economic conduit stopped working, and is still far from restored.

"It's chaos," said Miami cabdriver Windel Pierre, 41, who was in Little Haiti this week to send money. "A very sad chaos."

Many here, with their relatives suddenly homeless, have been desperately trying to send funds for food and water. But while the companies can perform the electronic transfer, many of the transfer offices in Haiti's capital are closed, and many of those open elsewhere in the country are short of cash because the banks have yet to operate.

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Ginette Clark, 38, a hotel server, said that she transferred money on Friday but that her sister hasn't yet been able to get the cash. "There's so much trouble over there," she said. "Nothing is working."

Similarly, Pierre spent an entire day this week trying to send funds so a friend could buy gas for a bus to drive people from Port-au-Prince back to their village in the provinces.

Pulling the receipts from the back of his cab, Pierre said he first paid for a $1,000 transfer with one company. His friend could not get it. Then he tried a $400 transfer with another. No luck. Then, running low on cash, he sent $330 via Western Union. He thinks that worked. "The people desperately need the help, and I can't stop thinking about that," Pierre said. "But it's very difficult to get it to them."

Even the cityscape here reflects money transfers' critical role in the immigrant economy. There aren't many stores in Little Haiti, but amid a couple of botanicas and mini-markets, there are three money transfer offices: Unitransfer, CAM and, in the Isaiah Check Cashing Store, Western Union. More than one-third of Haitians receive cash from overseas, with a typical transfer of $150, according to a recent survey for the Inter-American Development Bank.

In 2008, "remittances" to Haiti totaled nearly $1.9 billion, equal to more than a quarter of the country's gross domestic product. Most of that is spent on food and other necessities, according to the survey.

Remittances are a "life force for Haiti," said Jean-Marc Piquion, vice president for sales and marketing at Unitransfer Florida. "The transfer services must reopen."

The main trouble for now is the lack of currency in Haiti.

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"The big issue is liquidity and getting cash to the recipients," said Greg Watson, remittance program coordinator for the Inter-American Development Bank. "What we have been hearing is that all of the services are having problems in getting their money dispersed -- and in a time like this people want to have cash."

"We have emergency ways to get cash, but not enough for the demand," said Katleen Felix of Fonkoze, a major microfinance operation in Haiti, noting that the banks have yet to open. "We are hoping the central bank will open its vault soon."

Security has also posed a problem at money transfer offices in Haiti. Jean-Claude Saliba, a general manager at CAM, said about 5,000 people turned up at one of the offices in Carrefour. The company asked the government for backup security, and when no help arrived, officials decided to shut down.

Similarly, some residents are hesitant to collect the cash. "My dad is afraid to go to pick up the money -- he's afraid someone will rob him," said Stephanie Laurent, 29, a customer service worker for a phone card company.

Restoration of the flow of remittances is considered a key to the country's recovery. Last week, in deciding to give undocumented Haitians in the United States temporary amnesty, federal officials noted that the measure would allow the immigrants to work, and that, in turn, would mean an increase in private aid to Haiti.

At Notre Dame d'Haiti Church here last week, hundreds of undocumented Haitians turned up seeking assistance in filing for the new federal program, known as temporary protected status. Several said that one of the main purposes of their work will be to return money to relatives in Haiti.

One woman turned out at the church in prim professional clothes hoping she could get the documents that would allow her to get a job. "Nobody is going to hire me without papers," a relative interpreted for her. "I just want any job because I need to help my family. My mom and dad are sleeping on the streets."

Somali Money From Abroad Is a Lifeline at Home - NYTimes.com

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By MATTHEW SALTMARSH

PARIS — As Somalis struggle to survive the chaos that has overtaken their country, a network of companies that distribute money from the nation’s large diaspora has quietly expanded, providing a crucial safety net.

As in other poor countries, the main purpose of these companies is to ensure that money from those working abroad reaches family members left behind.

But in war-torn Somalia, where the government has little control of the country and is itself struggling to survive, the companies are now also helping international organizations shift money into and within Somalia, according to the World Bank, academics and aid workers.

And in Somaliland, a breakaway region where the government is more stable than in other parts of the country, the Somali diaspora has contributed money for education, health and other social programs.

“The remittance system has become the lifeline for the Somali people and the lifeblood of the economy during the last two decades of civil strife,” said Samuel Munzele Maimbo, a World Bank specialist based in Mozambique, who added that many Somalis survived only because of the money from abroad. For others, the money has been crucial to establishing or propping up businesses.

A study sponsored by the British Department for International Development from May 2008 found that 80 percent of the start-up capital for small and medium-size enterprises in Somalia benefit from money sent by the diaspora.

Dilip Ratha, a World Bank economist, said that Somalia, like Haiti, was among the countries that are the most dependent on money from abroad.

The remittance system — and its importance in Somalia — has grown as decades of political upheaval have driven many Somalis abroad and, in recent years, as Islamists have wrested control over much of the country from a weak transitional government. The government, which has international support, is trapped in a small section of the capital under the protection of African Union peacekeepers.

A recent study by the United Nations Development Program estimated the size of the Somali diaspora at more than one million and the amount of annual remittances to Somalia at up to $1 billion, equivalent to about 18 percent of the nation’s gross domestic product.

The system began to take off during the dictatorial rule of President Mohammed Siad Barre, who ran the country from 1969 to 1991. As the banking system weakened, according to Mohamed Waldo, a consultant who has worked with Somali remittance companies, traders stepped in with a solution: act as middlemen in the resale of consumer goods shipped home by the increasing number of Somalis working abroad, especially in the Persian Gulf region. The traders kept a small cut of the proceeds and turned the rest over to the laborers’ relatives in Somalia. The shipments got around currency restrictions.

Eventually, when the government collapsed, Somali workers abroad began to send money instead.

Mr. Waldo said that these days, there were more than 20 active Somali remittance companies, five of them large. One of the leading companies is Dahabshiil, founded in the early 1970s by Mohamed Said Duale from his general store in Burao in northwest Somalia.

In 1988, fighting between government forces and rebels with the Somali National Movement swept Burao. Mr. Duale subsequently left the country and continued his work from abroad.

In 1991, when the Barre government was overthrown, Mr. Duale returned to Somalia. He opened offices in major towns and later in remote villages that the Western money-transfer giants would struggle to serve.

“Through word of mouth we built this business,” said his son, Abdirashid Duale, now chief executive of the company.

Today, Dahabshiil says it has more than 1,000 branches and agents in 40 countries.

The United Nations Development Program uses Dahabshiil to transfer money for local programs, said Álvaro Rodríguez, the agency’s director for Somalia. Such companies provide “the only safe and efficient option to transfer funds to projects benefiting the most vulnerable people of Somalia,” he said. “Their service is fast and efficient.”

Abdirashid Duale, who gives his age as “35, but with 25 years of experience,” declined to provide profit or revenue figures, saying that would only help his competitors. The company charges commissions that vary from 1 percent to 5 percent depending on the size of the transaction; he said most Somalis he worked with abroad sent home $200 to $300 a month.

Nikos Passas, a professor at Northeastern University in Boston who researches terrorism and white-collar crime, said Dahabshiil was helped by the closing of a larger rival, Al Barakaat, at the behest of the United States authorities in the wake of the attacks on Sept. 11, 2001.

In the end, F.B.I. agents found no evidence linking Al Barakaat to terrorist financing. But for Dahabshiil, gaining market share from Al Barakaat was “like shooting fish in a barrel,” Professor Passas said.

Dahabshiil’s image has been helped by its charitable works. It says it invests 5 percent of annual profit in such ventures; Abdirashid Duale said this represented around $1 million a year.

In Mogadishu — a city of pockmarked Italian architecture and rubble — Dahabshiil operates from Bakara Market, despite continued clashes in the area between the weak government and Islamist insurgents.

Its office, in an unassuming two-story building, is protected by security guards.

Looking ahead, Abdirashid Duale plans more expansion.

“One day the fighting will stop,” he said, “and we will still be here.”

Mohammed Ibrahim contributed reporting from Mogadishu.

Dollars Without Borders - Foreign Affairs

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Can the Global Flow of Remittances Survive the Crisis?

Dilip Ratha
DILIP RATHA is Lead Economist of the Migration and Remittances Team at the World Bank.

Between 2003 and 2008, on the back of a growing world economy, remittances more than doubled, reaching as much as $330 billion in 2008. Now, with the world's largest economies in steep decline, many fear that the flow of remittances will also take a hit, threatening the millions who depend on funds sent by relatives and friends working abroad to meet basic needs.

In fact, remittances are proving to be one of the more resilient pieces of the global economy in the downturn, and will likely play a large role in the economic development and recovery of many poor countries. Remittances provide the most tangible link between migration and development, a relationship that has only increased in importance since the crash. To ensure that these funds can move efficiently and easily around the globe, governments of rich and poor countries should attempt to make remittances as accessible and cheap as possible.

In the economic boom years of the last decade, the amount of remittances to developing countries grew to several times the size of official development aid. For many states, remittances are now the largest and least volatile source of foreign exchange, and for some countries -- such as Lesotho, Moldova, Tajikistan, and Tonga -- they exceed one-third of national income. Meanwhile, in many countries such as El Salvador and Nepal they help anchor the value of the national currency by bringing in the foreign currency required for financing imports and foreign debt. More locally, remittances provide funds for education and health expenses as well as capital for small businesses. In Sri Lanka, for example, the birth weight of children in remittance-recipient households is higher than that of children in other households.

Lant Pritchett, an economist at Harvard University, recently estimated that allowing 3,000 additional Bangladeshi workers into the United States would generate greater income gains than the annual income contribution of Grameen, the pioneering microfinance bank, to Bangladesh. Although private remittances cannot take the place of official aid efforts, this does suggest that an increase in remittance flows could be an effective way to continue development efforts in the face of shrinking national budgets.

Historically, remittances have tended to rise in times of financial crisis or natural disasters because migrants living abroad send more money to help their families back home. For example, remittance inflows increased to Mexico following its financial crisis in 1995, to the Philippines and Thailand after the Asian crash in 1997, and to Central America after Hurricane Mitch in 1998.

But today's global economic crisis is different. The world's wealthier countries are also suffering, which, in turn, is causing employment opportunities for migrant workers to disappear and their incomes to fall. For the first time since the 1980s, remittances to developing countries are expected to decline between seven and ten percent in 2009.

The anticipated drop, however, will not be as dramatic as many fear. Despite growing economic hardship in host countries, many workers are choosing to remain, both because immigration controls have made reentry more difficult and because income levels back home are even lower. In order to continue sending remittances, many migrants are accepting lower compensation, switching jobs, sharing accommodation with other migrants, and cutting back on living costs -- one meal saved in Dubai or New York is worth several in Mumbai or Mexico City.

A shift toward stricter immigration and labor policies means that a large number of these migrants are losing their legal status -- which means they are increasingly forced to rely on unofficial agents to send money, such as couriers; informal traders; bus drivers; airline crew; trading companies; and hawala brokers, who use a paperless remittance system. This is a reversal of a previous trend that began after 9/11, when many countries cracked down on informal remittance channels and pushed migrants to use banks and registered money-transfer operators. With the return to unofficial means, official data may be understating the true size of global remittance flows by as much as 10-50 percent.

As the crisis deepens, a lack of jobs will force some workers home. But they will return with savings that are typically recorded in official statistics as remittance inflows. During the Persian Gulf War in 1991, for example, a large number of Indian migrants came back home from the Gulf, driving up the amount of remittances to India. Migrants not only bring back savings but also business skills. Jordan's economy performed better than many observers had expected between 1991 and 1993 because of the return of relatively skilled workers from the Gulf.

Return migration in the current crisis appears to be negligible so far, but if it happens, the workers coming back home should be provided with help in setting up small businesses and reintegrating into their communities, instead of being the object of envy or fear of job competition.

In the global downturn, fluctuations in currency rates have led to some surprising increases in remittance levels -- especially between India and the United States. Remittances meant for consumption will likely fall as the U.S. dollar appreciates against the Indian rupee, because the same basket of local goods and services in India can now be purchased with fewer U.S. dollars. However, the remittances meant for investment -- or the purchase of goods with long-term payoffs -- will rise as the depreciation of the rupee produces a "sale effect" for housing and other assets in India.

Indeed, as the Indian rupee has depreciated more than 25 percent against the U.S. dollar in recent months, there has been a surge in remittance flows to India. In March 2009, the World Bank revised its estimate of remittance flows to India in 2008 from $30 billion to $45 billion; a few months later, the official number for 2008 was reported as $52 billion. There are signs that a similar surge in investment-related remittance flows is happening in Bangladesh, Ethiopia, Moldova, Nepal, Pakistan, the Philippines, and Tajikistan.

The crisis is also producing "reverse remittances" in the case of migrants who are left without work or with less work than before, but who choose to remain in their adopted countries. To fund their living costs, some of these migrants are forced to spend savings they have previously sent home. This phenomenon is most visible in the United States, where some workers from the Dominican Republic and Mexico are relying on such funds to stay put during the economic downturn.

With lower levels of foreign aid and investment likely over the short term, remittances will have to shoulder an increasing percentage of local development needs. Unfortunately, the greatest risk to remittance flows does not come from the economic downturn itself but from protectionist measures taken by many destination countries, including those in the developing world. Such measures include lower annual quotas, higher salary and skill requirements, and longer waiting periods for hiring migrant workers.

All parties -- national governments, private enterprises, and workers themselves -- would benefit from a market-based approach. In the face of falling revenue, businesses need flexibility in hiring decisions, not to be forced to fire or hire workers based on nationality. There is increasing evidence that migrant workers, especially the unskilled millions, do not compete for jobs taken by native workers. And if there is competition for skilled work, it is mostly a short-term effect; over the medium term, skilled migrants contribute to the growth of businesses and to the development of new products and processes. In the United States, for instance, migrant workers have made valuable contributions to the domestic health and information technology industries.

Many remittance providers currently charge fees of more than ten percent. That is too high. To facilitate the transfer of funds, source countries should make it easier for migrants to access cheap and reliable providers. This would require improving competition and transparency in the remittance market, applying a simpler and identical set of regulations across state and national boundaries, and greater use of postal networks and mobile phone companies. Onerous regulations intended to combat money laundering and the financing of terrorism are a major impediment to cross-border remittances. Such regulations need to be balanced and simplified.

The exclusive partnership arrangements between money-transfer companies and the postal and banking networks of most countries are a hindrance to competition among firms offering remittance services. Instead of operating under these closed agreements, all providers should have access to global financial networks. A standard remittance is a simple financial transaction that -- if lightly regulated and processed using modern technology -- can cost as little as one percent. If funds were transferred through banks and other financial intermediaries, migrants and their beneficiaries would be encouraged to save and invest. Intermediary banks could also use remittance inflows as collateral to borrow larger sums in international credit markets for local investments.

To best leverage these flows for development, it is time to create an international body -- an "International Remittances Institute" -- that would monitor the flows of labor and remittances and oversee policies to make them easier, cheaper, safer, and more productive. The proposed African Remittances Institute, supported by the African Union and the European Union, is a small but important step in this direction. But a global institution can only be created with the support of the entire global development community -- as such, the forthcoming Global Forum on Migration and Development in Athens early next month should consider this proposal. It is not just a question of economic growth for the developing world but of economic recovery for the West.

Money Sent Home by Latin American Expatriates to Drop

By MIRIAM JORDAN

The amount of money Latin American expatriates send home is expected to drop by 11% in 2009, as the global recession shrinks job opportunities for immigrants.

The projected decline to $62 billion this year from $69 billion in 2008 marks the first decline in global remittances to the region since the Inter-American Development Bank began tracking flows a decade ago. It also brings remittances to a level last seen in 2006.

About four million people across Latin America and the Caribbean will receive less money from their family members abroad, according to an IDB-commissioned survey to be released Wednesday by the Inter-American Dialogue, a Washington think tank.

A significant portion of money that relatives send home is used for daily necessities, such as food, shelter and clothing.

Remittances from the U.S. alone are expected to drop by 11% to about $42 billion this year. Currently, 12% of Hispanic immigrants in the U.S. are unemployed. Work in the service industry and construction, which employ many Latino immigrants, has withered.

The survey, conducted in March to June in six major U.S. metropolitan areas, found that 25% of unemployed immigrants still send money home by dipping into their savings and reducing personal consumption.

About 12 million immigrants from Latin America and the Caribbean who live in the U.S. send money home. The survey projects that nearly half of them will send less in 2009 than they did last year. In 2008, a similar study found that only 8% of immigrants would send less money home than the previous year.

Last year, immigrants averaged 15 money transfers; this year the average is expected to drop to 12. The average amount sent per transfer is expected to slip to $230 from $241.

A third of those surveyed said they would like to return to their home countries, up from 20% last year. Only 5% said they planned to do so because of lack of work in the U.S. Of those who said they might leave, 37% said they would consider returning to the U.S. "The data doesn't back up the notion that people are going home because of the crisis," said Gregory Francis Watson, a remittance specialist at the IDB.

However, immigrants are becoming poorer as they seek to survive in the U.S. and still support their relatives back home. "They don't have cars or own houses," says Manuel Orozco, the author of the report. "For the most part they keep cash in hand. If that goes away, they are going to come out of the recession more vulnerable."

Haiti, Nicaragua and the Dominican Republic are among countries most dependent on remittances, and thus most affected by a decline, the study found.

Write to Miriam Jordan at miriam.jordan@wsj.com