Remittances and Microfinance in Latin America and the Caribbean: Steps Forward on a Long Road Ahead

  • Date Posted: February 22, 2011
  • Authors: Manuel Orozco
  • Organizations: Inter-American Dialogue
  • Document Types: Case Study or Vignette, Evaluation, Technical Report
  • Donor Type: US Agency for International Development

This report looks at the relationship between international remittances and microfinance, and presents the findings from a study on 166 microfinance and credit union institutions and an in-depth case study analysis of six of them. The objective of this report consists of learning whether microfinance institutions (MFIs) are paying remittances and if so, whether they are linking remittance transfers to other financial products. Previous research on this subject has been relatively limited, yet assumptions about the organic relationship between remittances and microfinance have been made. Through this report, we aim to go one step closer to identifying patterns in this relationship.

The main findings of this study show at least four features that characterize an MFI's operation in money transfers, namely:

  1. Financial position,  
  2. Branch spread,
  3. Rural presence, and
  4. MTO partnership.

A closer look at the specific case studies reveals that these factors are relative to the local conditions in which an MFI is located. Furthermore, participation (successful or not) is reflected in the institutional initiative to work in this market, the type of money transfer payment model adopted, commissions negotiated, as well as the intention of reaching remittance-receiving families in the respective communities. Findings show that institutions most exposed to the reality of migration will also be among the most active in operating money transfers and providing financial services.