Promoting financial democracy
The third priority is the promotion of financial democracy: that is, a better knowledge of, and better access to, financial services (Terry and Wilson, 2005). By leveraging the financial potential of immigrants, financial democracy helps maximise the positive effect of remittances. It implies in particular lowering the costs of sending remittances, increasing the financial capacity of potential investors, and strengthening their entrepreneurial skills.
The G8 countries agreed, during the 2009 Summit in L'Aquila in Italy, on the "5x5 Objective", which is the reduction of the global average cost of transferring remittances by five percentage points (from 10% to 5%) in five years. Several European countries have opened public websites that compare the costs of sending remittances to help immigrants find the cheapest way to send money home.13 The underlying idea is that as long as information on the cost of sending remittances is difficult to obtain, money remitters do not have the incentive to lower transaction costs. By easing access to information, these websites promote competition between financial intermediaries, and hence a drop in the cost of sending money home and an increase in opportunities to invest in productive projects.
Strategies aimed at channelling remittances towards productive investment usually target the families that receive the money or migrants themselves, when they decide to return. Some countries such as Brazil, Ecuador and the Philippines or donors such as the Deutsche Gesellschaft fur Internationale Zusammenarbeit (GIZ) in Germany, offer technical, financial and legal assistance to would-be entrepreneurs, who in general do not have the specific training to create their own businesses. The Filipino government also offers subsidies to returnees to buy productive assets.
Another interesting experience in terms of productive investment is the organisation of housing fairs by several migrant-sending countries, such as Colombia, Honduras and Mexico. Such fairs take place in the countries of immigration, (for example, the United States and Spain), and gather migrant communities, property developers and banking institutions. They contribute to stimulating the housing sector by enabling migrants to invest in their origin countries.
Financial democracy also rests on financial education (Terry and Wilson, 2005). The Global Financial Education Programme (GFEP), for instance, through its module "Remittances: Make the Most of Them", seeks to make immigrants and recipient families aware of the importance of employing formal banking services. It also provides information about the remittances market. The purpose is to ensure that people are better acquainted with the relevant legislation, entities and services, and feel more confident with the financial system. Financial literacy helps both immigrants and remittance-receivers define financial goals, select appropriate products and plan for the future (GFEP, 2007). The GFEP has conducted several education campaigns in both migration-receiving (Germany, Italy and the Netherlands among them) and remittance-receiving countries (including Ecuador, Ghana, Mexico, the Philippines and Turkey).