Costs, Economic Identity and Banking the Unbanked

This paper studies the international transfer of remittances by Latinos, reasons for their limited access to banking institutions and the innovative strategies adopted by the banks.

The paper stresses that it is important to provide basic means to enable Latino communities to be better informed customers, to insert themselves into banking institutions and enjoy a range of financial services since:

• Limited access to banking institutions makes remittance costly;
• Many remittance-sending Latino households remain outside of formal financial streams, partly because they lack economic identity;
• The lack of economic identity increases the cost of economic transactions.

The paper clarifies that encouraging immigrants to send remittances through banks has significant advantages:

• It increases the opportunities to bank many unbanked Latinos;
• Sending remittances through banks offers a more competitive rate;
• Banks gain significant financial benefits;
• A banking relationship develops; credit history gets established, increasing lending for housing, health and other investments.

The paper elaborates that the participation of banks in offering remittance transfers has involved adopting innovative outreach strategies such as the adoption of the consular identification card that:

• Provides basic information certifying that the person is an immigrant of Mexican nationality;
• Enables an immigrant to have a recognized economic identity, facilitating interaction with certain institutions;
• Increases overall community safety;
• Serves as a means of identifying people boarding planes or entering buildings, money senders;
• Allows an individual labourer to have fair access to the market economy and to avoid abuse by financial predators.