UNCDF: 2019-2022, Remittances for Development

To transform the policy, regulatory, and innovation landscapes that meet the evolving, and unmet, financial needs of migrants and their families, UNCDF has pursued efforts across four workstreams enabling policy and regulations, open digital payment ecosystem, inclusive innovation, and empowered customers in close engagement with partners in the public and private sectors at the global level (multilaterals, standard-setting bodies, and global money transfer operators), regional level (regional economic communities and monetary unions) and country level (line ministries, regulators and financial institutions) to address constraints at the ecosystem, institution, and product levels. EXAMPLES OF RESULTS ACHIEVED The completion report for this project shows that progress has been made through the engagement with public and private sector partners and shows the early fruits of the integrated, holistic market development approach of the programme. The support received during this first phase of the collaboration between Sida and UNCDF has stimulated significant progress towards leveraging innovative policy, regulatory and industry approaches at the country and regional levels towards economic integration, and private sector-led innovation. Under the project an in-depth analysis of the state of policy, regulatory, innovation, and the investment environment has been carried out through twenty-two country monitors (migrant money monitors) for Angola, Burundi, Cameroon, Chad, Central African Republic, Djibouti, DRC, Ethiopia, Equatorial Guinea, Gabon, Kenya, Republic of Congo, Rwanda, Sao Tome and Principe, Somalia, South Sudan, Sudan, Uganda, Senegal, Nepal, Bangladesh, and Myanmar. Payment infrastructure assessment reports and policy diagnostic reports for seven of the Intergovernmental Authority on Development (IGAD) members countries were prepared. Five of which were published, and two are still in progress based on requisite approvals from respective central banks. Eleven payment and financial market infrastructure assessment reports of the Economic Community of Central African States (ECCAS) Member States are also prepared. Seven are finalized for publication while five are currently being prepared. Regional assessments for harmonization of remittance policies and regulations for both IGAD and ECCAS have also been prepared. These reports are the result of extensive consultations with the regional economic communities (IGAD and ECCAS), monetary unions, i.e., the Union Economique et Monétaire Ouest Africaine (UEMOA) and the Central African Economic and Monetary Community (CEMAC), and national central banks and line ministries. This resulted in key milestones being achieved during the first phase of Sidas support, including the signature of a Letter of Agreement (LoA) with IGAD and the proposed regional harmonization roadmap for remittances being endorsed in October 2022. Discussions are ongoing with central banks to operationalize the roadmap in each country after the meeting of IGAD Central Bank Governors convened in May 2023. A Memorandum of Understanding (MoU) has been signed with ECCAS and consultations across nine out of eleven countries have been completed, with the support of the commission department of Common Market, Economic, Monetary and Financial Affairs and ECCAS Member States strong interest to improve the regulatory framework for remittances both at the country and regional levels. The validation of the regional harmonization roadmap for remittances in the ECCAS region by Member States is planned for the end of 2023, under the convening of the ECCAS president. Additionally, a Technical Assistance Agreement has been signed with the Banque des États de lAfrique (BEAC) of the CEMAC, with ongoing engagement and capacity building activities, on enabling policy and regulations, remittance data and statistics, and regional financial inclusion. With Banque Centrale des Etats de lAfrique de lOuest of the West African Economic and Monetary Union (BCEAO/WAEMU), a Technical Assistance Agreement has been signed, with ongoing engagement and capacity building activities, on enabling policy and regulations, remittance data and statistics, and regional financial inclusion. UNCDF chairs the regional financial inclusion strategy roundtable with AFD and assists BCEAO on key projects including the feasibility study for setting up a unique ID for financial services users in WAEMU. This functional digital ID is key to accurately computing financial inclusion data within and across WAEMU countries, providing the financial service providers faster and distant know-your-costumer (KYC) possibilities, but also enabling intra-regional migrants faster access to and better usage of financial services including digital remittances. The study is completed and BCEAO is validating the outcome with WAEMU member countries. At the country level, for example, efforts with the National Bank of Ethiopia (NBE) continue to contribute to improving the regulatory environment and financial market infrastructure. Several technical assistance initiatives are ongoing, focusing on, in particular, Core Banking System (CBS) replacement and Automated Cheque Truncation (ACT) System, the operationalization of the open market operations and standing facilities directive, and the implementation of the central securities depository. The extensive efforts with the Regional Economic Communities (RECs), and respective Member States and central banks, led to twenty-one reforms being initiated and eleven that are being adopted and implemented. These reforms encompass both the IGAD and ECCAS countries and focus on a wide range of dimensions, including legal and regulatory framework, national payment systems, consumer protection, and market aspects. A key example of change at the policy level affecting the private sector and ultimately benefitting migrants and their families is the directive issued by NBE, Establishment and Operation of Foreign Currency Saving Account for Residents of Ethiopia, Non-Resident Ethiopians, and Non-Residents of Ethiopian Origin Directive. It led to four new financial products foreign deposits accounts to be offered by financial institutions in Ethiopia. Foreign currency deposits were made available through 42,458 accounts across twenty banks (out of twenty-six banks that are allowed to provide the service). Another area of prioritization during the first phase of the project has been on improving formal and informal remittance data collection and analysis. Accurate remittance data both formal and informal, can positively impact the components of remittance-dependent countries sovereign credit ratings, such as the balance of payments (current account), economy size, economic growth, and external finance flows. Three initiatives are focusing on these key aspects. To tackle the issue of regulators' limited capacity to monitor remittance flows, UNCDF is implementing an initiative aimed at enhancing knowledge and insights regarding how central banks and National Statistics Offices gather, analyse, and share remittance data. The objective of this initiative is to raise awareness among central banks and financial regulators (in countries that receive international remittances) about the significance of transaction-level, supply-side data. Such data can offer valuable insights into understanding international remittances and their potential impact on policymaking, market growth, financial inclusion, and regulatory effectiveness. Consultations were conducted with seventy-two central banks across geographies, and several tools targeting regulators for improving transaction-level remittance data collection and analysis have been prepared, published, and disseminated to guide central banks in the design and implementation of a remittance reporting and analysis system to collect remittance flows. To improve remittance data, a specific initiative is looking into informal remittance flows. Informal remittance channels remain unaccounted for in official statistics, and this is particularly evident in numerous African economies where there is no mechanism to monitor and include unofficial remittances. These informal flows have the potential to increase recorded remittance figures by at least 50 percent. An extensive consultation is being undertaken for seventeen central banks based on a targeted questionnaire to determine methodologies central banks use to estimate informal remittances. UNCDF employs a mixed methods approach in developing tools to estimate informal remittances: the quantitative approach involves developing an estimation model for estimating informal remittance flows, and UNCDF has developed an Informal Remittances Toolkit for the estimation, which is currently going through a peer review process. While the qualitative method entails development of a survey strategy and questionnaire that central banks can employ to gain a better understanding of informal remittance flows and channels. With a strong link to the two initiatives described previously, the Sovereign Credit Ratings and Remittances project has registered progress during Phase I. Insufficient data on informal remittances has a detrimental impact on the availability of economic information, thereby hindering effective monetary policy decision-making and impeding the targeted allocation of remittances to productive sectors of the economy, including investment, entrepreneurship, real estate, and microcredit initiatives, among others. By capturing data on informal remittances and improving the accuracy of overall remittance data, it is possible to positively influence various factors that determine sovereign credit ratings of countries dependent on remittances. These factors include the balance of payments (current account), size of the economy, economic growth, and external financial inflows. Initial consultations have been held with academia, key credit rating agencies (Moodys, Fitch, Standard and Poor), UNDESA, and LDC government counterparts (Nepal, Djibouti, Ethiopia, Bangladesh). Additionally, the first research output on LDC Remittances, Debt, and Interlinkages with Credit Ratings has been completed and is under review. Even though remittances play a crucial role in advancing the Sustainable Development Goals, numerous challenges still hinder their full realization. One significant challenge is the absence of interoperable payment systems or interoperability schemes in both the sending and receiving countries. UNCDF is leading efforts to establish an Open Regulated Global Payments Inter-Network dedicated to facilitating low-value international remittances. A first output of the project is an exploratory paper published in 2022, based on more than 50 consultations with key stakeholders. This paper explores options for the future of international remittances: an open, regulated global payments inter-network specifically designed for low-value international remittances that address the needs of migrants around the world, with a particular emphasis on women migrants. To conclude, the project has supported institutional commitments from the Regional Economic Communities/Commissions, Monetary Unions, and National Governments/Central Banks. Collectively, these efforts have established a forward momentum of tailored technical assistance and capacity building with local and regional institutions to facilitate the regional harmonization outcomes. Sida is currently supporting UNCDFs implementation of a second phase of the Remittance for Development programme which builds this momentum and the achievements during the now completed first phase. OUTCOMES IN RELATION TO PROJECT TARGETS The first phase of the Remittance for Development project through UNCDF lay the groundwork for the now ongoing second phase of the programme. The first phase resulted in significant learning about the sub-regional and national policy and regulatory context as well as about the profile and behaviour of the remittance and financial service providers and about male and female customers. The results under the workstream Research and Knowledge Sharing were surpassed by a large margin. Also, under the workstream Enabling Policy and Regulation, the targets were mostly surpassed. Significant underachievement was recorded when it comes to the indicators on the number of new users of digital remittance services and of remittance linked financial services. Nor did the Workstream Empowered Customers achieve expected results. For the two partners that were expected to provide digital financial literacy campaigns and training for users and potential users, there were delays in the regulatory approvals which did not allow time to start implementation of the activities under the workstream within the activity period of the project. In conclusion, the results were mixed in relation to targets set with both significant overperformance as well as underperformance. On the balance, the assessment is nevertheless that the outcome of phase one was satisfactory. The research and learning and the progress on under Enabling Policy and Regulation workstream have paved the way for implementation and for more downstream results during the second phase of the project.

The overall objective of the intervention is to contribute to regional harmonization of remittances policies and availability of affordable, accessible, reliable, and tailored digital remittances and financial products to migrants towards their economic inclusion, financial resilience, and reduced inequality. Identifying, adapting and enabling access to digital innovation and technology solutions for migrants and their families at countries of origin to impact their livelihoods and facilitate sustained escapes out of poverty. The expected results are at sector, client and stakeholders levels. Client level • Migrants and their families access to digital remittances and financial services increased. • Ability, knowledge, skills and behavior of migrants to access and use digital remittances and financial services improved. Stakeholders level • Inclusive policies and regulations that enable access and usage of digital remittances' services, acknowledged, accepted, adopted and implemented.• Digital infrastructure strengthened and interoperability promoted. • Available accessible, affordable, reliable and appropriate digital remittances' services piloted. • Inclusive and innovative business model and remittances linked financial services tested.• New business model and delivery channel for building digital capabilities and skills of migrants and beneficiaries piloted. Sector level • Remittances and financial service providers benefits from diversified revenues cross-selling opportunity and improved sustainability.• Digital ecosystem with more investment competition and innovations expanded to wider communities. The programme activities are categorized into four work streams. • Work stream one focus on Enabling Policy and Regulations. It is to take steps towards conducive remittances policies and regulations and promote access and usage of digital remittances and financial services.• Work stream two is about Opening Digital Payment. Migrants and beneficiaries have improved access to and increasingly use digital remittances channels to send and receive remittances.• Work stream three focuses on Inclusive Innovation. This work stream is to promote new business models and technologies for delivering remittances and financial services.• Finally, work stream four focuses on Customer Empowerment. It is to increase financial literacy of migrants and their families and required support to get knowledge and skill on digital remittances and financial services.