MICROCAPITAL BRIEF: Centre for Micro Finance of Institute for Financial and Management Research (IFMR) and College for Agricultural Banking of Reserve Bank of India (RBI) Publish Joint Study on Remittance Channels

The Centre for Micro Finance at the Institute for Financial and Management Research (IFMR), a think-tank established in India, and the Reserve Bank of India’s College for Agricultural Banking, a training college for the central bank of India, recently published a report on the trends in domestic money transfers by Indian migrant workers.

The researchers surveyed 274 migrant workers who regularly transfer money along four main migrant corridors in India in order to assess both formal and informal modes of transferring money. A variety of factors influence a migrant’s actual and preferred transfer channel, including costs, security, speed of delivery and proximity of service provider. The formal channels include banks and post offices while hawala couriers, cash couriers and friends comprise the informal channels. The majority of the respondent sample uses an informal transfer channel, which the authors argue suggests a demand for the increased implementation of branchless banking to increase access to low-cost transfer options.

The study was commissioned by the US-based Bill and Melinda Gates Foundation.

By Jacqueline Foelster, Research Associate

About Centre for Micro Finance (CMF): The mission of the center is to improve the accessibility and quality of financial services to the poor through research, dispersion of knowledge and evidence-based policy development for microfinance institutions (MFIs). CMF partners with MFIs, banks, training institutions and academic institutions to conduct research in four main areas: (1) impact evaluation of credit and savings products, (2) how to integrate microfinance with other development interventions, (3) insurance and innovative products, and (4) sector-wide and policy issues, such as regulation or the impact of competition. CMF’s MFI partners include The Activists for Social Alternatives (ASA), Bandhan, Spandana, SKS Microfinance, Sonata, Grameen Koota and others. CMF is housed in the Institute for Financial Management and Research (IFMR).

About Reserve Bank of India (RBI): Established in 1935, the Reserve Bank of India undertakes consolidated supervision of the financial sector comprising commercial banks, financial institutions and non-banking finance companies (NFBCs). The current focus of RBI is to supervise financial institutions, consolidate accounting standards, resolve legal issues in cases of banking fraud, monitor non-performing assets and supervise the rating model for the banking sector. In 1979, the National Bank for Agriculture and Rural Development (NABARD) was formed at the behest of RBI to provide regulatory oversight to regional rural banks (RRBs) and to promote the development of agricultural lenders: tasks that had been the responsibility of RBI. While all microfinance institutions (MFIs) and non-banking financial companies still operate under RBI regulations, the responsibility for inspecting nonprofit MFIs, agricultural lenders, RRBs, state cooperative banks, district central cooperative banks and state cooperative agricultural and rural development banks was transferred to NABARD. RBI maintains these responsibilities for for-profit MFIs. Although RBI was originally the parent organization of NABARD and until October 2010 held a 72.5 percent stake in the outfit, RBI has since largely divested from NABARD. As of October 2010, owns 1 percent of the bank. RBI consists of twenty-two regional offices as of March 2011.

About Bill and Melinda Gates Foundation: Based in the US, the Bill & Melinda Gates Foundation provides grants to organizations in approximately 100 countries around the world with the aim of enhancing health care, reducing poverty and expanding educational opportunities and access to information technology. As of September 2009, its endowment totaled USD 34 billion. The Bill & Melinda Gates Foundation’s Financial Services for the Poor initiative focuses on providing people with secure methods for saving. To support this initiative, the foundation works with financial organizations to increase access to technology (point of sales devices, automated teller machines, etc.) and forge partnerships between mobile phone companies, banks and microfinance institutions. It also supports the startup and growth of new banks in challenging markets.

Sources and resources:

[1] Centre for Micro Finance and College of Agricultural Banking, November 2010, “Putting Money in Motion: How Much do Migrants Pay for Domestic Transfers?”, http://ifmr.ac.in/cmf/publications/wp/2010/42_Putting_Money_in_Motion.pdf

MicroCapital Microfinance Universe Profile: Centre for Micro Finance (CMF), https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Centre+for+Micro+Finance+%28CMF%29

MicroCapital Microfinance Universe Profile: Reserve Bank of India (RBI), https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Reserve+Bank+of+India+%28RBI%29

MicroCapital Microfinance Universe Profile: Bill and Melinda Gates Foundation, https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Bill+and+Melinda+Gates+Foundation

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