Microfinance Institutions (MFIs) on the Remittances Market: Money Transfer Activity and Savings Mobilisation

This paper empirically measures the impact of money transfer activity on MFIs' savings mobilization. Savings help the economy and the clients in terms of improving their conditions. From the MFIs' perspective, savings mobilization helps reduce dependence on external funding.The paper analyzes opportunities for MFIs to transform remittance receivers into clients. It builds a variable of interest (a dummy for the money transfer activity) based on the Mixmarket website for Latin America and the Caribbean, East Asia and the Pacific region, South Asia and Africa. The paper looks at the relative importance of savings in the liabilities of 114 MFIs in its 2006 sample.Study results demonstrate that money transfer activity has an impact on the amount of savings collected from the public, and that MFIs involved in the remittances market have a significantly higher level of savings than others. It is, however, not clear whether money transfer activity contributes to increasing savings because it attracts new clients that save small amounts, or because the existing clients save thanks to the availability of remittances-linked products.