July 16, 2009
Reducing the cost of sending remittances to Pacific Island countries and its impact on New Zealand’s seasonal workers was discussed at the Pacific Microfinance Week yesterday during a workshop on financial literacy.
“The cost of sending remittances in the Pacific is high, representing between 15-25% of the amount of money sent. The World Bank estimates that the Pacific is losing up to NZ $80 million per annum through these costs,” NZAID’sKerry Burridge said, adding that the world best practice was a cost of less than 5%.
The problem is of particular significance to Pacific Islanders because they send remittances frequently, albeit small sums of money.
“NZAID aims to reduce the costs of sending remittances to Pacific Island countries to 5-7%,” she said.
NZAID joined partners to tackle this issue in two phases; reducing the cost of transaction fees on remittances and raising the financial capability of people sending and receiving remittances.
NZAID and AusAID funded the development of a website (www.sendmoneypacific.org) that compared the prices of sending remittances home, thereby bringing transparency to this activity and encouraging competition. The website allows Pacific Island workers in Australia and New Zealand to make informed choices about the cost and time taken to send remittance to their country.
Another initiative to reduce the cost of remittances discussed during the workshop was the Westpac Pacific Banking Remittance Card which used a two card system to transfer money. The remittance sender uses the primary card to send money and the holder of the secondary card is able to retrieve money using the card at any ATM.
“In order to avoid money laundering through the use of these cards, there is a limitation of one card per person and up to a total of $10,000 can be transferred in one year. The card is blocked once the $10,000 limit is exceeded,” said Westpac’s Anne Templeman-Jones.
“The Westpac card has brought costs of transferring money to Pacific Islands down to 3-4%,” said Ms Burridge adding that there is a predicted savings of $140 million through the reduced cost of sending remittances.
Financial literacy of Pacific seasonal workers and the receivers of remittances is the next step in this initiative. There were 5,558 Pacific Island seasonal workers in New Zealand for the year ending March 31, 2009. Forty five percent of these workers were from Vanuatu, followed by 24.5 percent from Tonga and 22 percent from Samoa. Solomon Islanders made up 6.3% while Tuvaluans and I Kiribati formed just under one percent each of the Pacific Island seasonal workers in New Zealand.
Improving the financial literacy of workers and remittance receivers will enable the remittances to be better managed. For many Pacific Island countries, remittance is a major source of income.
“Training targeted at these seasonal workers will have elements of basic literacy, numeracy and financial literacy,” said Ms Burridge.
The workshop on financial literacy at the Pacific Microfinance Week was organized by the Pacific Financial Inclusion Programme (PFIP).
PFIP is a Pacific-wide programme helping provide sustainable financial services to low income households. It is funded by the United Nations Capital Development Fund (UNCDF), European Union and the United Nations Development Programme (UNDP) and operates from the UNDP Pacific Centre.