Remittances in Jamaica
Remittances to Jamaica are primarily used for household expenses by the poorest quintile of the Jamaican population[1]. The World Bank states that Jamaica received over US $2.4 billion in personal remittances in 2017, which represents an average of 3% growth over the past ten (10) years (removing any outliers). Figure 1 below shows the trend in Jamaica’s personal remittances in today’s US Dollars from 1990 - 2017.
Additionally,
although the growth in personal remittances is small, it remains a significant
contributing factor to Jamaica’s economy, as remittances represented 16.6% of
Gross Domestic Product (GDP) in 2017, as seen in Figure 2.
Figure 1:
Value of Remittances to Jamaica
Source: https://www.gapminder.org/data/ [World Bank staff estimates based on IMF balance of payments data and World Bank OECD GDP estimates]
Source: https://www.gapminder.org/data/ [World Bank staff estimates based on IMF balance of payments data and World Bank OECD GDP estimates]
Figure 2:
Remittances to Jamaica as a % of GDP
Source: https://www.gapminder.org/data/ [World Bank staff estimates based on IMF balance of payments data and World Bank OECD GDP estimates]
Source: https://www.gapminder.org/data/ [World Bank staff estimates based on IMF balance of payments data and World Bank OECD GDP estimates]
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The
latest data from the Bank of Jamaica (Aug 2018) indicates that a majority (63.7%)
of the remittances to Jamaica are from the United States. Figure 3 depicts the
proportion of remittances from the source countries as of Aug 2018.
Over
the last five years, on average, the remittances from Cayman grew 5%, both the
US and the UK grew by 4% and Canada grew by 3% each year. Figure 3 below shows the proportion of
remittances to Jamaica from the source countries over the last six years.
Figure 3: Share of Remittance Inflows from Source Countries Source: Bank of Jamaica
Figure 4:
Proportion of Remittances to Jamaica by country,
Source: Bilateral Remittance Estimates using Migrant Stocks, Host Country Incomes, and Origin Country Incomes (millions of US$) (2013, 2014, 2015, 2016, 2017 and 2018 Versions) www.worldbank.com
Source: Bilateral Remittance Estimates using Migrant Stocks, Host Country Incomes, and Origin Country Incomes (millions of US$) (2013, 2014, 2015, 2016, 2017 and 2018 Versions) www.worldbank.com
Remittances in the Caribbean
As previously indicated, Jamaica is
ranked 2nd in the Caribbean behind Haiti and 4th in Latin
America and the Caribbean in remittances as a percentage of GDP. The World Bank
states that remittance flows into Latin America and the
Caribbean grew 8.7 percent in 2017, reaching another record high of nearly
$80 billion. Also, remittance flows into the region grew by about 9.3 percent
in 2018 to reach $87 billion, led by Mexico and Central American countries. This
exceeded the World Bank’s forecasted growth and was almost as large as the
export growth for the region in the same year.
The primary attributing factors for the increase
include stronger growth in the United States economy/ labour markets and
tighter enforcement of U.S. immigration rules which may have impacted
remittances as migrants remitted savings in anticipation of shorter stays in
the United States[2]. Latin America and the Caribbean is the region with the highest growth in
remittances received globally. Pew Research also stated that “The increase in
remittances to the region is primarily due to general improved labor market
conditions in the U.S., which has helped boost Latin American migrants’
capacity to send money home.” They indicate that this improvement was
especially evident in sectors such as information, construction and
manufacturing, industries in which many Latin American immigrants work[3].
Location of Licensed Remittance Companies in Jamaica
The Bank of Jamaica
lists the entities in the table below as licenced remittance companies in
Jamaica. The table also indicates the number of agents by Parish as of November
2018[4].
Note that one agent location may provide remittances for more than one licensed
remittance company. As such, there are 453 remittances agents in Jamaica providing
services for seven (7) named remitters as seen in the table below.
Table 1:Number of Agents in Jamaica by Parish and by Remittance Company
The major players in the Jamaican market include GK Money Services,
Lasco Financial and VMBS Money Transfer, which are licensed representatives of
either Western Union, MoneyGram or other global partners.
The Future of Remittances
Payments
across the globe are expected to increase, primarily in developing countries,
which see growth of up to 11% compared to the global average of 3-4%.
Continued
migration is expected to be a major contributing factor to the increase
remittances to the Latin America/ Caribbean region. It is anticipated that
Jamaica will continue its trend of net outward migration, but at a decreased
rate, as seen in the World Bank data in the table below. The rate of permanent
emigration to the US is expected to decrease, emigration to Canada is expected
to marginally increase among the highly skilled groups and the UK will remain
negligible as a destination for Jamaicans; however, economic activity in the US
is expected to increase and is anticipated to be weaker in Europe. An overview
of Jamaica’s brain drain phenomenon according this IMF Working paper can be seen in the figure below.
Figure 5:
Brain Drain in Jamaica
Source: IMF
Working Paper: Migration and Remittances in Latin America and the Caribbean:
Engines of Growth and Macroeconomic Stabilizers? https://www.imf.org/en/Publications/WP/Issues/2017/06/29/Migration-and-Remittances-in-Latin-America-and-the-Caribbean-Engines-of-Growth-and-44956
In
Jamaica, remittances grew by 4% in 2017 and 3% each year on average over the
past 10 years. As outward migration continues to increase, consequently, so
will remittances.
Remittances
are expected to grow globally by 4.1% in 2018, but the uncertainty in the
outlook for the future includes the following:
- Policy uncertainty and geopolitical risk
- Increased restrictions on trade
- Uncertainty surrounding lack of solutions to de-risking practices of correspondent banks
- Vulnerability to the downside risk of anti-immigration sentiments
- Restrictive migration policies
- Considerations being made for taxing outbound remittances[4]
Alternative Remittance Models
Top
Remittance companies are finding more way to diversify their incomes, with the
challenges being faced by the traditional brick-and-mortar remittance business. Alternative remittance models in the global marketplace include the following:
Mobile wallets
Prepaid gift cards
Cryptocurrency and blockchain transfer
Social network remittances (P2P)
These
technology-driven solutions present a competitive threat to larger market
players such as Western Union and MoneyGram, due to their convenience factor and
lower transfer costs.
Digital Remittances
Digital payments will be a significant driver in the growth of remittances. It is anticipated that the ratio of digital to non-digital remittances globally will be even by 2022. Digital remittances currently reflect about 30% of global remittances according to analysis done by Business Insider, as seen in the figure below.
Figure 6:
Forecast of Global Remittance Volumes
Source: Business Insider[5]
Source: Business Insider[5]
The largest digital remitters still offer a combination of
options with either cash pick-up, direct to bank transfers, mobile top-up or
mobile transfers.
Blockchain Transfer
High-tech advances in blockchain
transfer are modernizing the way remittances are transferred. Blockchain is a
decentralized digital ledger that can store a continuous record of
transactions. A decentralized system means that the database is spread out over
multiple computer nodes, making the infrastructure difficult to hack. Despite
this, stricter growing AML/CTF regulations and banks’ general unwillingness to
work in “risky sectors”’ threaten the survival of this industry.
Mobile Money Remittances
Mobile
money usage is rapidly gaining traction globally. In Jamaica, the number of
mobile cellular subscriptions for 2017 stood at 107 per 100 individuals[6].
Mobile money eliminates the need for one to travel to a retail location and
money is remitted almost instantaneously. A timeline of some key activities in
the development of mobile money in Jamaica is as follows:
- 2013 – Mobile Money approved in Jamaica
- August 2013 - JCUES develops Conec, which was pulled from the market in Dec 2017 due to low usage.
- August 2016 – NCB launches Quisk a mobile money account that facilitates the sending and receiving of money and pay via text messaging using no smartphone, internet access or downloading of applications[7].
- February 2017 – GraceKennedy launches GK MPay[8]. Subscribers primarily use it for phone credit rather than consumer purchases or bill payments. The product can be used for remittances, bill payments, peer-to-peer transactions and payments at retail outlets.
- May 2017 – WorldRemit and JMMB partner to launch online transfers
- July 2018 - Sagicor launches Swype - Mobile point of sale devices for businesses on the go.
One
of the greatest concerns with mobile money is the security surrounding the technology
and the seeming lack of trust in on the part of the consumer. Technologies like
machine learning and remote digital identity verification offer potentially
more efficient ways to both comply with various regulatory requirements that
characterize the payments industry and deliver better service to customers.
As regulations evolve, technology becomes more adaptable and trust in other payment systems rises, remittance will morph into a cadre of primarily digital formats that incorporate lower cost, faster transfers and larger integration with payment systems and banks across the globe.
As regulations evolve, technology becomes more adaptable and trust in other payment systems rises, remittance will morph into a cadre of primarily digital formats that incorporate lower cost, faster transfers and larger integration with payment systems and banks across the globe.
[1]Jamaica: Migration Profile 2017
https://www.pioj.gov.jm/Portals/0/Social_Sector/Summary%20-%202017%202018%20Migration%20Profile.pdf
[2]World Bank - https://www.worldbank.org/en/news/press-release/2018/04/23/record-high-remittances-to-low-and-middle-income-countries-in-2017
[3] Migrants from Latin America and the Caribbean sent a
record amount of money to their home countries in 2016 -http://www.pewresearch.org/fact-tank/2018/01/23/migrants-from-latin-america-and-the-caribbean-sent-a-record-amount-of-money-to-their-home-countries-in-2016/
[5] International money transfers hit $613 billion this year — here's what young, tech savvy users value most about them: https://www.businessinsider.com/the-digital-remittances-report-2018-12
[6] “Mobile cellular subscriptions (per 100 people)”. The World Bank. 2017. https://data.worldbank.org/indicator/IT.CEL.SETS.P2?end=2017&start=2017&view=bar
[7] “NCB launches into mobile money” http://www.jamaicaobserver.com/business/NCB-launches-into-mobile-money-_71148
[8] “GraceKennedy Gets Approval To Launch Mobile Money” http://jamaica-gleaner.com/article/business/20161223/gracekennedy-gets-approval-launch-mobile-money
Thank you for such an informative blog post! Figure out the global remittance
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