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International Remittances

International Remittances

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Published by akther_ais

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Published by: akther_ais on Mar 18, 2012
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05/13/2014

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International Remittances
Business Process OutsourcingConsultingSystem IntegrationUniversal Banking Solution
 
“Remittance is the act of transmitting money to adistant location to fulfill an obligation”Migrant-sending country:This Knowledge Paper makes an effort toelucidate the concept of remittances in theinternational context and is focused on theremittances sent by emigrants to their familiesback home, for domestic consumption andinvestment. The paper highlights the significanceof International Remittances to the globaleconomy, details existing business models, andexamines emerging trends as well as challengesfaced by an industry which is to poised to play abigger role in the globalization process.In this globalizing world, migration of peoplefrom one country to another for employmentopportunities has become a commonphenomenon. Dominant migration corridors havebeen formed between various countries/regions.This is primarily due to the socio-economicconditions prevailing in the migrants’ countriesof origin and destination. A few examples:Lack of job opportunityLower wage ratesSocial insecurityPolitical instabilityExtreme geographical conditionsRemittances OverviewMigrant-receiving country: Availability of employmentFriendly migration policiesShortage of skilled resourcesFinancial liberalizationAbundance of natural resources A few examples of such corridors (sender country-receiving country) are
Mexico-US,South Asia-UAE
and
India-US.
This section highlights the magnitude and impactof increased migration on the world economy.The World Bank estimates that remittancesin 2009 totaled $420 billion - out of which$317 billion went to developing countries - andinvolved some 192 million migrants or 3.0% of the world population.Figures 1 and 2 respectively depict the remittancesof top remittance sending and receiving countriesfor 3 consecutive years.Figure 3 expresses the quantum of this incomingmoney as a percentage of GDP thereby indicatingits significance to the destination country’s overalldevelopment. (Source: World Bank website)Impact on Global Economy
International Remittances
Figure 1 Top Remittance-Sending Countries (figures in US $ million)
 
Operating Models in the Remittance BusinessConventional Banking Model An International Remittance business may followthe conventional banking model or any of thenon-banking models.In this model, an end-to-end remittance transactioninvolves the following parties:
Remitter’s Bank -
the bank where theremitter has an account that is debited for transferring money to the beneficiary
Beneficiary’s Bank -
the bank wherethe beneficiary of the remittance has anaccount that is credited for the remittancemoney received
Correspondent Bank
(only in cases wherethe above-mentioned entities do not havea direct business tie-up) - an intermediarybank which has associated with variousbanks globally, through which remittancetransactions are routedFigure 4 illustrates the
Nostro-based
setup,wherein the Beneficiary Bank has an accountwith the Correspondent Bank, while Figure 5shows the generic process involved in a remittancetransaction based on a Nostro account model.
International Remittances
Figure 2 Top Remittance-Receiving Countries (figures in US $ million)Figure 3 Remittances as a Percentage of GDPFigure 4 Nostro-based setup

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