MIGRATION: Dialing for Dollars

The amount of remittances sent abroad has skyrocketed in recent years, and is now estimated at more than 300 billion dollars annually, according to recent figures from the International Fund for Agricultural Development and the Inter-American Development Bank.

The U.S.-based company is teaming up with the GSM Association (GSMA), an international trade group of cell phone service providers, so service can be offered internationally.

Cell phone use in developing countries has quadrupled in the last decade. Africa, for example, has 225 million cellphone users, double what it had just two years ago, according to figures from the World Bank.

The rise of cell phone technology in developing countries is often cited as an example of the "leapfrog effect" -- going from almost no telecommunications infrastructure to having satellite-based communications systems.

Daniel Diaz, a Western Union spokesperson, told IPS, "The mobile phone programme creates a new consumer space."

"Migrants will benefit from this new service because the programme is characterised by a low principal and high frequency. The average amount of money Western Union customers sent home is 100 dollars. Because you can transfer money using your mobile phone, it's easier to send smaller amounts several times a month," he said.

In September, Western Union came under fire from immigrant groups who have long complained that wire-transfer firms set extortionate fees and exchange rates, and that the industry fails to reinvest in the very communities from which it profits.

It is not clear whether the new cell-phone system will address the issue of cheaper rates.

"This initiative will bring down the cost of lower-value and high-frequency mobile remittances considerably and also enable smaller amounts to be transferred in a fast and secure fashion, thereby benefiting millions of people in the developing world," noted Sunil Mittal, chairman and managing director of India's leading provider of telecommunications services, Bharti Airtel, which will be heading the new collaboration.

Diaz explained that "the system has a password protection; there is no difference from an average credit card. The system enables money transfers from mobile phone to mobile phone, cash to mobile phone and mobile phone to cash. In the third situation, the recipient has to pick up the money at an agent location."

"When money is received in a mobile wallet, the recipient receives a text message. Sending money from mobile phone to mobile phone however does require both sides to be a registered part of the service," he said.

Based on Western Union's 2007 second quarter earnings, India and China are the biggest recipient markets, he said, accounting for 69 and 28 percent of all transactions, respectively, and 40 percent of the company's total revenue.

According to researchers, the cost of sending money home often exceeds 20 percent.

Diaz stressed "it's important to know the fee is on the sender side. For instance, if you send 1,000 dollars to Mexico using Money in Minutes, you will be charged 14.99 dollars. If consumers choose to lower their costs, the money will be transferred the next day and they will be charged 9.99 dollars."

"But costs are dependent on countries and markets. The price of transferring money via mobile phones will be competitive, but I can't speculate on the exact prices of the new programme now," he added.

Although many of the estimated 150 million migrants living in industrialised countries only send between 100 and 300 dollars at a time, the annual sum of all transfers together is remarkable.

The money sent home by migrant workers is especially notable when contrasted with Official Development Assistance (ODA) given as aid to developing countries, which slumped last year for the first time since 1997 by 5.1 percent.

According to official figures of the Organisation for Economic Cooperation and Development (OECD), at 103.9 billion dollars in aid in 2006, ODA was roughly one-third of the amount migrant workers contributed to their home economies.

According to experts, the difference is even bigger due to underground remittances.

Western Union and the international trade group of cell phone service providers are planning to start their mobile service programme in April 2008.

(END/2007)