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The Role of Microfinance Institutions in the Remittance Market An MFI-to-MFI Model.

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Presentation on theme: "The Role of Microfinance Institutions in the Remittance Market An MFI-to-MFI Model."— Presentation transcript:

1 The Role of Microfinance Institutions in the Remittance Market An MFI-to-MFI Model

2 Demographics Latin America Large and growing population High unemployment and skewed income distribution United States 50 million Hispanics in US (largest minority group) Hispanic population in US increases by 5,000 each day 22 million Latin America- born citizens live in US

3 Migration Effects Latin America Similar to women on the homefront who did work of men during WWII: women make big contributions but experience great suffering Remittances are largest source of hard currency and often exceed export income United States Entrepreneurial; work multiple hourly jobs Maintain close financial ties with family $62B sent to Latin America in 2005 (more than U.S. FDA) – $300B sent globally

4 Latin Financial Market Developing Countries Growing microfinance industry serving poor people Microfinance profitability, efficiency and portfolio quality competitive with banks 2006 Nobel Peace Prize awarded to microfinance MFIs ideally suited to serve remittance recipient market

5 U.S. Financial Market United States 40M unbanked (63% Hispanic) Expensive, fragmented industry of mom-and-pop and non- financial providers Little/no access to credit Low penetration of banks and new technologies in MTO- dominated immigrant market

6 Microfinance Intl Corp. United States HQ in Washington, DC 9 MFIC-owned branches Bank and MTO partners Latin America/Worldwide Distribution in 85 countries Financing for MFIs Transnational products Overview For-profit led by 27-year Bank of Tokyo veteran MFI-to-MFI model Non-bank supervised by financial commissioners Specialized to serve bi- national families on both ends of remittance chain

7 Settlement Platform IT built off Cooperative Open Banking Information System (COBIS) used by 70 banks in 13 countries Consists of Internet technology and worldwide network Built our own settlement network of financial institutions

8 Alante Financial Transactional Services Money transfer Check cashing Bill pay, money orders Phone cards Help building credit history Loans and Insurance Unsecured term loans & credit lines; car loans Domestic and international mortgages/business loans Domestic and international health/life insurance products One-stop shop offering integrated, affordable, value-added services and products and professional, bi-lingual service


10 Money Transfer Pricing Transfer Amount $1 - $200 $201 - $1500 $ $2000 $ $3000 Alante Financial $6 – $7$9 – $10$13 – $15$18 – $20 Conventional MTOs 5% – 10% SWIFT$40

11 Distribution Latin America, North America, Asia, Europe, Africa, India MFIs & Banks Technology Built on banking software used by 70 Latin banks Secure web-based interfaces & real-time payout Unique Advantages Marketing & cross-sale support Extendable as a central processing platform for national and international networks of banks, credit unions, post offices Turn-key remittance platform for MFIs, banks, credit unions, money transmitters & postal networks Compliance Strong regulatory support and built-in compliance features System built post 9/11

12 MFI Market Entry Issues Marketing & Data Management Establishing marketing strategy Tracking conversion rate from cross-sales Business Model Representation offices in foreign country? Partner with large or small money transmitter? Work with multiple money transmitters? Scale & Profitability Ability to generate profitable transaction volume Financial capacity & careful liquidity management to handle remittance volumes and potential new loan disbursements Technology Efficient, secure, adaptable data transfer to institutions MIS Cost of adopting technology and training

13 Products for MFIs & Banks Transnational Services Market channel for MFIs to cross-sell loans and mortgages to remitters in U.S. Technical Assistance Support with marketing, compliance, training, product development Value-Added, Full-Service Partner to MFIs & Banks Co-Branches Co-branching opportunities with Alante Financial to expand products and services Loans Institutional loans for MFIs in our remittance network to support portfolio growth

14 For More Information / / Jennifer Isern, William Donges & Jeremy Smith, Guide to Making Money Transfers Work for Microfinance Institutions: A Technical Guide to Developing and Delivering Money Transfers (CGAP, December 2006) Manuel Orozco and Eve Hamilton, Remittances and MFI Intermediation: Issues and Lessons, July 2005

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