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THE ROLE OF REMITTANCES IN

LEVERAGING SUSTAINABLE DEVELOPMENT

IN LATIN AMERICA AND THE CARIBBEAN

HEARING

BEFORE THE

SUBCOMMITTEE ON 

DOMESTIC AND INTERNATIONAL 

MONETARY POLICY, TRADE, AND TECHNOLOGY

OF THE

COMMITTEE ON FINANCIAL SERVICES

U.S. HOUSE OF REPRESENTATIVES

ONE HUNDRED TENTH CONGRESS

FIRST SESSION

MARCH 7, 2007

Printed for the use of the Committee on Financial Services

Serial No. 110–9

(

(II)

HOUSE COMMITTEE ON FINANCIAL SERVICES 

BARNEY FRANK, Massachusetts, Chairman

PAUL E. KANJORSKI, Pennsylvania 

MAXINE WATERS, California 

CAROLYN B. MALONEY, New York 

LUIS V. GUTIERREZ, Illinois 

NYDIA M. VELA ́ ZQUEZ, New York 

MELVIN L. WATT, North Carolina 

GARY L. ACKERMAN, New York 

JULIA CARSON, Indiana 

BRAD SHERMAN, California 

GREGORY W. MEEKS, New York 

DENNIS MOORE, Kansas 

MICHAEL E. CAPUANO, Massachusetts 

RUBE ́ N HINOJOSA, Texas 

WM. LACY CLAY, Missouri 

CAROLYN MCCARTHY, New York 

JOE BACA, California 

STEPHEN F. LYNCH, Massachusetts 

BRAD MILLER, North Carolina 

DAVID SCOTT, Georgia 

AL GREEN, Texas 

EMANUEL CLEAVER, Missouri 

MELISSA L. BEAN, Illinois 

GWEN MOORE, Wisconsin, 

LINCOLN DAVIS, Tennessee 

ALBIO SIRES, New Jersey 

PAUL W. HODES, New Hampshire 

KEITH ELLISON, Minnesota 

RON KLEIN, Florida 

TIM MAHONEY, Florida 

CHARLES A. WILSON, Ohio 

ED PERLMUTTER, Colorado 

CHRISTOPHER S. MURPHY, Connecticut 

JOE DONNELLY, Indiana 

ROBERT WEXLER, Florida 

JIM MARSHALL, Georgia 

DAN BOREN, Oklahoma 

SPENCER BACHUS, Alabama 

RICHARD H. BAKER, Louisiana 

DEBORAH PRYCE, Ohio 

MICHAEL N. CASTLE, Delaware 

PETER T. KING, New York 

EDWARD R. ROYCE, California 

FRANK D. LUCAS, Oklahoma 

RON PAUL, Texas 

PAUL E. GILLMOR, Ohio 

STEVEN C. LATOURETTE, Ohio 

DONALD A. MANZULLO, Illinois 

WALTER B. JONES, JR., North Carolina 

JUDY BIGGERT, Illinois 

CHRISTOPHER SHAYS, Connecticut 

GARY G. MILLER, California 

SHELLEY MOORE CAPITO, West Virginia 

TOM FEENEY, Florida 

JEB HENSARLING, Texas 

SCOTT GARRETT, New Jersey 

GINNY BROWN-WAITE, Florida 

J. GRESHAM BARRETT, South Carolina 

JIM GERLACH, Pennsylvania 

STEVAN PEARCE, New Mexico 

RANDY NEUGEBAUER, Texas 

TOM PRICE, Georgia 

GEOFF DAVIS, Kentucky 

PATRICK T. MCHENRY, North Carolina 

JOHN CAMPBELL, California 

ADAM PUTNAM, Florida 

MICHELE BACHMANN, Minnesota 

PETER J. ROSKAM, Illinois 

KENNY MARCHANT, Texas

JEANNE M. ROSLANOWICK, Staff Director and Chief Counsel 

(III)

SUBCOMMITTEE ON DOMESTIC AND INTERNATIONAL MONETARY POLICY, TRADE, AND

TECHNOLOGY

LUIS V. GUTIERREZ, Illinois, Chairman

CAROLYN B. MALONEY, New York 

MAXINE WATERS, California 

PAUL E. KANJORSKI, Pennsylvania 

BRAD SHERMAN, California 

GWEN MOORE, Wisconsin 

GREGORY W. MEEKS, New York 

DENNIS MOORE, Kansas 

WM. LACY CLAY, Missouri 

KEITH ELLISON, Minnesota 

CHARLES A. WILSON, Ohio 

ROBERT WEXLER, Florida 

JIM MARSHALL, Georgia 

DAN BOREN, Oklahoma 

RON PAUL, Texas 

MICHAEL N. CASTLE, Delaware 

FRANK D. LUCAS, Oklahoma 

STEVEN C. LATOURETTE, Ohio 

DONALD A. MANZULLO, Illinois 

WALTER B. JONES, JR., North Carolina 

JEB HENSARLING, Texas 

TOM PRICE, Georgia 

PATRICK T. MCHENRY, North Carolina 

MICHELE BACHMANN, Minnesota 

PETER J. ROSKAM, Illinois 

(V)

C O N T E N T S 

Page 

Hearing held on: 

March 7, 2007 ................................................................................................... 1

Appendix: 

March 7, 2007 ................................................................................................... 21

WITNESSES 

WEDNESDAY, MARCH 7, 2007

Albino, Nitza Segui, CEO, International Migrants’ Development Fund ............. 9

Bendixen, Sergio, President, Bendixen & Associates ........................................... 4

McNamer, Bruce, President & CEO, TechnoServe ............................................... 11

Orozco, Manuel, Remittances and Development Program, Inter-American Dialogue ...................................................................................................................... 6

Rhyne, Dr. Elisabeth, Senior Vice President, ACCION International ................ 7

APPENDIX 

Prepared statements: 

Waters, Hon. Maxine ........................................................................................ 22

Albino, Nitza Segui ........................................................................................... 26

Bendixen, Sergio ............................................................................................... 30

McNamer, Bruce ............................................................................................... 51

Orozco, Manuel ................................................................................................. 56

Rhyne, Dr. Elisabeth ........................................................................................ 78

(1)

THE ROLE OF REMITTANCES IN 

LEVERAGING SUSTAINABLE DEVELOPMENT 

IN LATIN AMERICA AND THE CARIBBEAN 

Wednesday, March 7, 2007

U.S. HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON DOMESTIC AND

INTERNATIONAL MONETARY POLICY, 

TRADE, AND TECHNOLOGY, 

COMMITTEE ON FINANCIAL SERVICES, 

Washington, D.C. 

The subcommittee met, pursuant to notice, at 2:15 p.m., in room 

2128, Rayburn House Office Building, Hon. Luis Gutierrez [chairman of the subcommittee] presiding. 

Present: Representatives Gutierrez, Maloney, Moore, Clay, 

Hinojosa; Paul, Jones, and Roskam. 

Chairman GUTIERREZ. Good afternoon. The Subcommittee on Domestic and International Monetary Policy, Trade, and Technology 

of the Committee on Financial Services will come to order. 

Today’s hearing is entitled, ‘‘The Role of Remittances in 

Leveraging Sustainable Development in Latin America and the 

Caribbean.’’ In this hearing, the subcommittee will examine the increasing sums of remittances flowing into Latin America and the 

Caribbean from the United States and around the world, and explore how these remittances can be leveraged by individuals, communities, banks, credit unions, international institutions, government, and NGO’s, and used for long-term development opportunities in the region. 

Per the committee rules, we have agreed to limit opening statements to 5 minutes per side, but with no objection, all members 

may submit written statements for the record. We are expecting 

Floor votes around 3 p.m., at which time we will probably have to 

take a short recess, so I want to move as quickly as possible to our 

witness testimony. 

And with that, I now recognize myself for 5 minutes for an opening statement. 

This hearing has been a long time coming. It is the first hearing 

on the issue of remittances in the House Financial Services Committee since 2003. Since then, remittances in Latin America have 

increased from $38 billion to a staggering $60 billion. And this is 

the first hearing, that I am aware of, to focus solely on the issue 

of remittances for sustainable development. I believe the focus of 

this hearing is appropriate, because of the sheer volume of remitVerDate 0ct 09 2002 17:57 Jun 05, 2007 Jkt 035401 PO 00000 Frm 00007 Fmt 6633 Sfmt 6633 K:\DOCS\35401.TXT HFIN PsN: TERRIE
2

tances flowing to Latin America and the Caribbean, especially 

when compared to official aid and direct investment. 

This will be the first in a series of hearings on remittances. This 

spring, our subcommittee will hold another hearing to focus on the 

sending side of remittances, and the regulatory issues that are associated with the process. 

But today our distinguished panel is here to discuss the use of 

remittances by recipients for developmental purposes. As I said, remittances sent to Latin America and the Caribbean from all parts 

of the world were estimated to be at more than $60 billion in 2006. 

This amount surpasses both the official development assistance 

and foreign direct investment to the region. 

Seventy-five percent of forty-five billion of the remittances sent 

to these regions originated in the United States. Total remittances 

now represent 5 times the amount of official development assistance to Latin America and the Caribbean. 

The timing and importance of this hearing is punctuated by 

President Bush’s imminent 6-day trip to Latin America. Coinciding 

with this trip, the President is calling for increased trade with the 

region and a promise of more aid. Earlier this week, he stated that 

since he took office, the President of the United States has doubled 

the amount of assistance to Latin America to a total of $1.6 billion 

last year—$1.6 billion versus $45 billion—which is more likely to 

spur sustainable development. 

The reality is that we are behind the curve when it comes to 

leveraging remittances for sustainable economic development, and 

I believe that the remittances issue should be part of the dialogue 

when it comes to trade issues and development in Latin America 

and the Caribbean. 

The majority of remittances are sent to improve the economic 

well-being of households in the recipient nation. Studies suggest 

that about 80 percent of remittances are used to pay for everyday 

needs of the recipients. That still leaves as much as 20 percent of 

savings—20 percent savings and investment. For Latin America in 

2006, 20 percent represents $20 billion—still far more than the 

total official aid to the region. 

The challenge that remains is how to leverage remittances sent 

to Latin America and the Caribbean in a way that will help develop the economies of the recipient nations. 

We have a top-notch panel, which I will be introducing shortly, 

and I look forward to a vibrant discussion. But before I close, I 

would like to talk a little bit about the tradition of remittances. 

There is a long history and tradition of sending money to friends 

and loved ones in other countries, a tradition that is not unique to 

the United States. Migrant workers contributed heavily to their 

home country’s GDP in Spain, Italy, and Ireland as early as the 

19th century. 

In 1901, Italy was the first country in the world to enact a law 

to protect remittances, and in 1960, Spain was the first country to 

sign an international treaty to lower the cost of remittances received. 

The debates on this issue are also not new. My staff found a book 

published in 1856 that dedicated an entire chapter to objecting to 

remittances. At which group was the author’s anger directed? The 

3

Irish; it seems that the hard-working Irish living in America sent 

$8 million in remittances back to Ireland in 1854. At this point, I 

recognize the ranking member, Dr. Paul, for his opening statement. 

Dr. PAUL. Thank you, Mr. Chairman. As you pointed out, this is 

an issue that has been around for a long time, but it has come to 

the forefront more recently, because there is a lot of concern about 

immigration, and whether our immigrants are legal or illegal. 

I believe that when markets are free, and immigrants are legal, 

this is a non-issue. It’s an economic transaction that is done voluntarily, and it should benefit everybody concerned. Today, conditions 

are a little bit different, and people are more concerned about the 

illegality of some of our immigrants. 

There is an incentive for illegal immigrants—or immigrants—to 

bring their families to this country if they are not able to receive 

a remittance. In many ways, if people are concerned about illegal 

immigration, they really ought to encourage remittances, instead of 

encouraging the immigrants to bring their families in. 

Just as other incentives encourage families to come in, if they are 

guaranteed amnesty or guaranteed welfare benefits, it makes it 

much easier to say, ‘‘Bring the families along,’’ rather than saying, 

‘‘Somebody is here legally and working, they should be permitted 

to send their money to whomever or to wherever they want.’’ 

The other concern I have for those who do worry about this—and 

I think rightfully so—is the idea that once you start to regulate, 

or put on controls, you can’t do it on just those you don’t want to 

participate. You have to put the regulations on everybody. It’s sort 

of like gun control. And as a conservative, we want to control illegal use of guns, we don’t want to take away the legal use of guns. 

But if we want to control certain individuals from sending remittances to some countries, we really have to regulate everybody, and 

everybody has to be regulated, and everybody has to make these 

reports. So, in an effort for those to tinker with these laws and 

make changes, I think I would urge caution that we never take 

away the freedom of choice and the freedoms that all Americans 

enjoy, and that we shouldn’t tamper with. 

With that, Mr. Chairman, I yield back my time. 

Chairman GUTIERREZ. Thank you, Dr. Ron Paul, for your very insightful comments. I would like now, if the staff could please lower 

the screen? 

I am going to introduce the witnesses, while they take care of the 

technical issues. We have an excellent panel of witnesses today, all 

of whom are experts in the areas of remittances, or microfinance. 

Our first witness is Mr. Sergio Bendixen, president of Bendixen 

& Associates, and a widely recognized Hispanic public opinion researcher. 

Our second witness is Dr. Manuel Orozco of the remittances and 

development program at Inter-American Dialogue. 

Our third witness is Dr. Elisabeth Rhyne, senior vice president 

of ACCION International, where she focuses on remittances and 

microfinance issues. 

Our fourth witness is Ms. Nitza Segui Albino, founder and CEO 

of the International Migrants’ Development Fund. 

4

And, finally, we have Mr. Bruce McNamer, president and CEO 

of TechnoServe, a company that focuses on microfinance and development around the world. 

And so I recognize Mr. Sergio Bendixen for 5 minutes. 

STATEMENT OF SERGIO BENDIXEN, PRESIDENT, BENDIXEN & 

ASSOCIATES 

Mr. BENDIXEN. Thank you so much, Mr. Chairman. It is an honor 

to be here. I have referred to the remittances as a river of gold that 

flows from the north, from the United States, from Europe, and 

from Japan, to Latin America, because of the sheer volume of 

money that goes down south. 

But I am now beginning to speak about remittances as maybe 

the most important economic engine for Latin America in this new 

century, because there is now clear evidence that the remittances 

that are received in Latin America are allowing people to have access to mortgages, to have access to small business loans, and to 

have access to investment products that will allow for the economic 

development of Latin America. 

I speak about the subject with a great deal of confidence, because 

the Inter-American Development Bank has given me the privilege 

of studying the remittance flows from the United States, Japan, 

and Europe to Latin America in surveys done in approximately 23 

countries. We have interviewed more than 60,000 people who either send or receive remittances. I am going to share with you—

and I am very glad to see the Power Point presentation working—

some of the basic facts and figures that we have learned over the 

last few years. 

First of all, let me remind—I don’t think I need to remind you, 

Mr. Chairman, but for those who may not be so familiar with the 

process of remittances, we are talking about a process that involves 

the poorest of the poor. As you can see from this graphic, 75 percent of the Latin American remittances that send remittances 

home on a regular basis live on less than $30,000 a year. They are 

the working poor. And many of them live on the edge of the poverty 

line. 

And as you can see from this graphic, the percentage of Latin 

American immigrants that send money home has increased over 

the last 5 years. In a survey conducted nationally in 2001, 59 percent of Latin American immigrants were sending money home. 

That number is now up to 73 percent. And maybe the exactness of 

the number is not important, but definitely the trend is up. Remittances will continue to increase over the next few years. The reasons why, we can discuss at another meeting, because there are 

many. 

But there is no doubt that remittances are increasing. There are 

now 12.6 million Latin American immigrants sending money home 

on a regular basis. They are sending money every month, at approximately $300 per remittance, for a total of $3,600 per year. If 

you do the math, we’re talking about—and you referred to it—$45 

billion sent from the United States to Latin America during 2006. 

And if you add the approximately $10 billion sent from Europe, 

mostly Spain, Portugal, Italy, and France to Latin America, and 

the $3 billion or $4 billion from Japan, and the $1 billion or $2 bilVerDate 0ct 09 2002 17:57 Jun 05, 2007 Jkt 035401 PO 00000 Frm 00010 Fmt 6633 Sfmt 6633 K:\DOCS\35401.TXT HFIN PsN: TERRIE
5

lion from Canada, you have $60 billion arriving in Latin America 

during the past year. That is $200 million every day, of every week, 

of every month of the year; truly a river of gold. 

Let’s put that $60 billion in context of what else—what kind of 

other money arrives in Latin America. When you total up the 

amount of money in foreign direct investment—the amount of 

money that Wal-Mart, that Toyota—we’ve been hearing lately 

about all the money the Chinese have been putting into Latin 

America—that adds up to only $45 billion. 

And when you look at the money that is put into Latin America 

as official development assistance—that’s the World Bank, the IDB, 

the IMF, the money that we give as part of our aid program—we’re 

talking about $6 billion. 

So, in comparison, as you mentioned in your opening statement, 

there is no doubt that remittances are now the largest source of 

capital that can benefit Latin America to economically develop. 

There is another great advantage of remittances that not everybody understands. This money does not go to the government. This 

money does not go to the big financial institutions. This money 

does not go to business interests. The remittances are a mechanism 

to redistribute wealth; they go directly to the people. 

As you can see in this graphic from our study in Mexico, 30 percent of the money received in Mexico goes to the poor; another 57 

percent, the yellow and the blue bars, goes to people who are working Mexicans; and 13 percent goes to the middle class. This is 

money that goes directly into people’s pockets, and gives them the 

freedom and the choice to decide what to do with it. 

As I mentioned at the beginning of my presentation, there is now 

evidence, clear evidence—scientific evidence, I believe—that remittances are beginning to be used to leverage access to investment 

products. 

Back in 2003, in a poll conducted in Mexico, we found that about 

20 percent of remittances were being used to open up a savings account to finance the university education of young people, to get a 

loan to open up a small business, to maybe build a house, or to get 

a construction loan. In a poll recently completed late last year— 

Chairman GUTIERREZ. You have 30 seconds. The little red light 

turned. You know, I will stay here all afternoon, but— 

Mr. BENDIXEN. That number was up to 40 percent. 

Now, what do I recommend to the committee? I think that the 

most important thing that I can say to you is to make it as easy 

as you possibly can for remittance senders to have access to a bank 

account. 

The FDIC pilot program in the City of Chicago for financial literacy has had great results in the City, and I think if it’s taken 

nationally, if we can get more remittance recipients and senders to 

understand the value of having a relationship with a financial institution, the more that these remittances are going to allow these 

countries to be able to progress economically, as people begin to use 

the money, not just for consumption, not just for poverty alleviation, but for economic development. Thank you. 

[The prepared statement of Mr. Bendixen can be found on page 

30 of the appendix.] 

6

Chairman GUTIERREZ. We will make sure we have them in our 

field hearing in Chicago. Thank you. 

Mr. Orozco, please? 

STATEMENT OF MANUEL OROZCO, REMITTANCES AND 

DEVELOPMENT PROGRAM, INTER-AMERICAN DIALOGUE 

Mr. OROZCO. Good afternoon. Thank you very much for inviting 

me to share with you some of the knowledge we have accumulated 

over time about the impact of remittances on development. I am 

going to focus most of my remarks on the policy opportunities to 

leverage these funds. 

My colleague sitting here, Mr. Gutierrez, has talked about the 

impact that the flows have. In practical terms, the impacts are 

both social and economic. At the social level, it has an effect on 

poverty reduction. One way to think about it is the following way—

the flow of remittances that people receive are, most of the time, 

30 percent above per capita income in most of these countries. 

So, for example, take a country like Nicaragua. Per capita income is $1,000. People are receiving about $2,000 in remittances. And if 

you look at another country, for example, Haiti—we just came back 

from Haiti, from presenting a study that we did there—the average 

amount sent is $150 a month. And the per capita income in that 

country is $600 a year. 

So, you can see how poverty reduction is really one of the effects 

that comes from remittances. More importantly, is also the economic effect that this has, and that is that there is a—not only the 

flow that goes for the—to take care of the basic needs of the population, but also a flow that has an effect on the daily activities 

through savings. 

In many of these countries—basically, in Central America and 

Caribbean countries, the flow of money that is saved by migrants, 

who have a higher propensity to save than people who do not receive remittances, may be as high as 50 percent of gross domestic 

savings in the whole country. So remittances are not only responsible for consumption, but also, they really help to increase the savings ratio of the country, and in turn, increase the capacity to provide financing for investment in the home country. 

All of these issues have a short-term and immediate-term effect 

in keeping people out of poverty. The policy challenge, from the development context, is how to get people out of poverty, given this 

reality. 

Last year, as you mentioned, $62 billion went to Latin America, 

predominantly from the United States. We have identified a number of policy opportunities and solutions, some of them based on actual experience and other ones on observation of other cases. 

I have submitted to you the testimony and material that contains 

it, but I am going to elaborate on some of them. One of them is 

strategies to improve competition and cost reduction. 

Specifically, one of those strategies deals with adopting the automated clearinghouse system called ‘‘Directo a Mexico.’’ It’s a system 

that costs $.67, and it consists of making transactions from bank 

accounts in the United States to a bank account in Mexico. 

Another strategy is to introduce debit cards into the country. It 

improves security of transfers on the sending and the receiving 

7

side, but more importantly, it reduces the amount of cash in the 

street, and therefore, it increases the opportunity to have savings 

in the cards. 

The cost of transactions has declined, but you still can do more 

on that. And the competition in the money transfer systems right 

now is there is this disposition to get engaged in this type of activity. 

Another recommendation is to accelerate financial intermediation 

projects with credit unions and microfinance institutions. These institutions are predominantly in areas where a significant flow of 

the remittances go. And yet, there is not other financial access. The 

impact that you can have is quite considerable. 

In practical terms, funding projects that deal with financial product design, for example, can have an effect of transforming that remittance recipient client into a financial client with the proceeds, 

with credits, etc. And whenever this has happened, there has been 

a significant transformation rate. One out of three people end up 

having bank accounts as a result of having these relationships. 

The third recommendation is to engage banking, depository institutions, more actively into the banking remittance recipients, in 

particular. Right now, 60 percent of remittances are withdrawn 

from banking institutions, yet only 20 percent of people have bank 

accounts. 

And I think we need to promote a community reinvestment act 

in Latin America in a way that you require that the banks that are 

providing this financial service also provide the range of other financial services, from risk mitigation to savings and credit. 

In Central America, for example, at least 10 to 20 percent of the 

revenue that banking institutions have earned from the overall 

transactions that come from remittance transfers. 

Chairman GUTIERREZ. Mr. Orozco, if you could, summarize 

quickly your comments so that—your 5 minutes are up. 

Mr. OROZCO. My 5 minutes are up. 

Chairman GUTIERREZ. I am— 

Mr. OROZCO. And, finally, I think, looking at remittance literacy, 

it’s another area that I think is very important. The central banks 

of these countries really do not have tools to provide financial or 

remittance literacy to their communities, to their societies, and 

that is really an easy area to work on, from the U.S. perspective. 

Thank you. 

[The prepared statement of Mr. Orozco can be found on page 56 

of the appenidx.] 

Chairman GUTIERREZ. Thank you. 

Now we have Dr. Rhyne. Please, for 5 minutes. 

STATEMENT OF ELISABETH RHYNE, SENIOR VICE PRESIDENT, 

ACCION INTERNATIONAL 

Ms. RHYNE. Mr. Chairman, thank you so much for inviting us 

here. We are always delighted to share with you the work that 

ACCION International is doing. 

Let me just tell you who ACCION is, and why we are here. We 

are a U.S. non-profit founded in 1961, working in microfinance. We 

work through banks and microfinance institutions, primarily in 

Latin America, to provide financial services to low-income people in 

8

23 countries. We reach more than 2,000,000 clients, with a total 

portfolio of loans of $2.4 billion. 

Since 2002, we have been working on the remittances issue, and 

trying to get a handle on it. And our perspective on that issue is 

mainly drawn from our partner institutions, who are financial institutions in Latin America, and therefore, it’s mainly on the receiving side. 

We have worked with banks such as Citibank and microfinance 

institutions such as Banco Solidario of Ecuador, to develop products that leverage the economic impact of the remittances on the 

receiving end. 

We agree with the previous presenters, that remittances, by their 

nature, do contribute to economic development. It is difficult to leverage that in a specific way, because these are small, private—and 

as Mr. Paul said—voluntary transactions. So, with policy and legislation, it is difficult to affect that contribution. We believe that the 

best policy stance towards remittance is one that supports the 

senders and the receivers to achieve their own goals. And that is 

the effort towards which we have been working. 

The market research that we have done challenges the traditional perception of migration as a one-way process. Today’s immigrant hasn’t abandoned her home country, but is living a life that 

integrates both the United States and the country of origin. This 

could be seen by the persistence of remittance flows which continue 

for as much as a decade or more after the immigrant leaves. That 

continued involvement is supported by communications technology, 

transformation, and the ability to move money from one country to 

another. 

On the sending side, ACCION has identified that there is really 

a remittances life cycle that influences the size, frequency, and potential use of remittance flows. People arrive, and they get themselves established. Their incomes are low at the beginning, then 

they kind of hit a middle period where their incomes are higher, 

they’re more established, and they’re still very closely connected to 

their home countries. 

During this period, which we kind of think of as a 2- to 5-year 

period after they arrive in the United States, is a time when they 

are most interested in making—in having their remittance flows 

used for investment and asset building back home. 

As they have been in the United States longer, they tend to shift 

perspective a bit more, and make more of their investments here 

in the United States, but they continue to send the remittances 

back home. 

On the receiving end, there is a different sort of perspective, and 

I think that’s captured by looking at the way that remittances are 

used. Some of the statistics we have already seen. Everyday needs 

constitute the major use of remittances, but there is a substantial 

fraction that are going for health, for education, and for savings 

and investments, including real estate. 

We are interested in helping people to have more ability to put 

the remittances into those latter categories. But a fundamental 

problem is that many of the remittances—receiving families don’t 

have access to financial products and services that can allow them 

to make these kinds of investments. They are unbanked. The IDB 

9

research puts the percentage of recipients lacking a bank account 

at 90 percent, which is extremely high. 

So, what we have been trying to do—we have been trying to 

achieve two objectives. One is to increase the participation of banks 

at both ends of the remittances industry, to encourage the access 

of senders, and especially the access of receivers, to a broader array 

of financial services. 

We have also been trying to develop remittance-linked products 

that will assist the customers in meeting their long-term financial 

goals. 

Now, where we stand in trying to do that is we are first confronted with the fact that 70 percent of remittances are cash to 

cash, and go through money transfer companies. We have been 

working in the past couple of years on projects involving moving 

these flows towards bank accounts. Because when flows are associated with bank accounts, the senders have more options for how to 

manage the money they receive. It’s more secure, it’s often cheaper, 

and they gain an access to a broader array of financial services. 

For example, we have been working with Citibank and Banco 

Solidario in Ecuador, to implement a bank-to-bank remittance services. Now, we have encountered a lot of challenges in this. Many 

of them are challenges because it’s a new industry. The bank staff 

on the sending side are unfamiliar with the customer base. 

Chairman GUTIERREZ. Dr. Rhyne? 

Ms. RHYNE. They find it expensive to serve these customers— 

Chairman GUTIERREZ. I’m sorry, Dr. Rhyne? If you would— 

Ms. RHYNE. My 5 minutes are up already? 

Chairman GUTIERREZ. Yes. 

Ms. RHYNE. Okay. 

Chairman GUTIERREZ. It goes quickly here. 

Ms. RHYNE. It sure does. 

Chairman GUTIERREZ. We would like to ask questions, too. 

Ms. RHYNE. Let me say two things, then. One is the products 

that we have found that matter the most for receiving families—

savings accounts, home improvement loans, and insurance products—we would like to be able to offer those transnationally, but 

find that there are many policy barriers that stand in the way. 

And in terms of policy recommendations, I would support the 

broad recommendations that Manuel Orozco just mentioned, promoting industry structures that allow for the smooth movement of 

funds, a competitive setting for the industry as a whole, for the removal of the barriers of access of senders to banking services, supporting the expansion of financial services to recipient families, 

which is ACCION’s main business, and increasing the financial literacy of senders and receivers. Thank you. 

[The prepared statement of Dr. Rhyne can be found on page 78 

of the appendix.] 

Chairman GUTIERREZ. Thank you, Doctor. 

Ms. Albino, please? 

STATEMENT OF NITZA SEGUI ALBINO, CEO, INTERNATIONAL 

MIGRANTS’ DEVELOPMENT FUND 

Ms. ALBINO. Chairman Gutierrez, and members of the subcommittee, thank you for the opportunity to be here. 

10

Before I continue with my testimony, I would like to provide you 

with a brief background of the International Migrants’ Development Fund, FIDMi. FIDMi is a young, independent, not-for-profit 

organization based in Washington, D.C., whose mission is to contribute to poverty reduction in trans-national communities through 

their engagement in the formal financial system. 

FIDMi was founded in 2002 by a multidisciplinary group of community leaders, international and community professionals, development professionals, and finance experts concerned with the excessive cost of money transfer services, leverage remittances to improve the quality of living of immigrants and their families abroad, 

and creating a viable model for their insertion in the formal financial system. 

FIDMi’s development model consists of one-stop affordable financial services, in partnership with Lafayette Federal Credit Union 

and other financial institutions in Central America, culturally appropriate, low-literacy, advocacy and community reinvestment, particularly capitalizing on the income generated as a result of our remittances program. 

Others have spoken about research, and so I am going to skip all 

of that, and I am going directly to some of our lessons learned. One 

of FIDMi’s core programs is Semillas, ‘‘seeds,’’ an education program that focuses on financial literacy. FIDMi—this program’s 

main objective is to increase immigrants’ capacity to understand 

and to engage in the formal financial system. 

This is particularly important, since large percentages of Latino 

immigrants—almost 50 percent—do not use the services of formal 

financial institutions, and did not have access to these institutions 

while living in their countries of origin. In many Latin American 

countries, according to a study published by Dr. Orozco, 2 in 10, 

in many countries, have bank accounts. 

A workshop session of our education curriculum discusses with 

program participants the impact of remittances at—as individuals, 

members of a family, and their countries of origin. Through these 

workshop sessions, our staff has been able to gather the following 

data. The vast majority of program participants—mostly women—

send money to pay for health, education, and food expenses, to pay 

for all debts, and to pay the cost of investments such as mortgage 

loans, and small businesses. 

Immigrant practices show that remittances is an important factor for development. Through investing in education, health, nutrition, and business development, the quality of life for their families 

and children left behind significantly improves. 

Our concern is raised by the following question. What strategies 

can be leveraged so Latin American and Caribbean families consider migration as an option, and not a way out of their countries? 

Please allow me to share a few areas in which remittances can 

be leveraged: provide incentives to financial institutions to create 

services and products that can be accessed by poor, rural, and 

urban marginalized recipients of remittances; stimulate financial 

institutions receptors of remittances to partner with the third sector to provide basic financial literacy in rural and marginalized 

communities, including in communities of indigenous and African 

backgrounds; and engaging financial institutions and not-for-profit 

11

organizations to provide financial education in primary and secondary schools. 

Education programs should be accompanied by allowing youngsters who receive remittances to open savings accounts. Fomenting 

programs that provide microcredit for women who are remittances 

recipients. Microcredit for women will have a multiplied effect, 

since they will help increase health, education, and nutrition variables, for example, and are excellent money managers. 

Encouragement of an environment in which a wide range of financial institutions, including credit unions, promote their services 

in immigrant communities, leading immigrants to have access to 

credit and loans for investments in micro and small businesses, 

and mortgage loans, for example, that could be paid in the form of 

remittance or directly into their accounts in financial institutions 

abroad. 

Encourage and get to commit money transfer agencies, particularly the largest companies, to dedicate at least one percent of their 

income in supporting sustainable projects, particularly credit and 

savings programs, or small or medium-scale impact, not through 

largest banks. This program should be tied to financial money 

management education. 

Encourage a climate in which immigrants interested in returning 

home can open savings accounts in financial institutions in the 

United States. A portion of monies that are saved will be matched 

at a three-for-one for micro and small businesses in their community of origin. Programs must be tied to business education program. 

Discourage state of the union to tax immigrants to send money 

to their countries of origin, since they, immigrants, are— 

Chairman GUTIERREZ. Sorry, your time is up, thank you. 

Ms. ALBINO.—continuing to mitigate poverty in their communities of origin. 

And lastly, widening the funding stream for innovative programs 

and projects that—lead by not-for-profit organizations in the 

United States that reach out to immigrants who are interested in 

investing in their home communities. Thank you, very much. 

[The prepared statement of Ms. Albino can be found on page 26 

of the appendix.] 

Chairman GUTIERREZ. Thank you. 

Mr. McNamer, please? 

STATEMENT OF BRUCE MCNAMER, PRESIDENT & CEO, 

TECHNOSERVE 

Mr. MCNAMER. Mr. Chairman, and members of the subcommittee, thank you for the opportunity to testify before the subcommittee to share our views on the potential for remittances to 

unlock economic growth for the world’s poor. 

Almost 40 years ago, when a Connecticut entrepreneur named 

Ed Bullard created TechnoServe to apply private sector solutions to 

poverty in the developing world, he could not have foreseen the 

enormous potential power of these new capital flows as a tool for 

fighting poverty. Since then, TechnoServe has evolved to focus on 

building thriving businesses and industries as a catalyst for poverty-reducing economic growth, with a particular focus on the rural 

12

economy, where 70 percent of the world’s poor reside. We operate 

in 15 countries worldwide, with a global staff of 400, mostly with 

backgrounds in the private sector. 

Mr. Chairman, remittance flows are a critical issue in relations 

between the United States and the developing world, particularly 

with the nations of Latin America. The roughly 40 million Latinos 

living in this country sent a significant amount of capital to Latin 

America, roughly $60 billion last year. Remittances are an important source of capital. They now comprise more than official development assistance and foreign direct investment, combined, to 

Latin America. 

But while remittances represent enormous potential to create 

economic development in poor regions of Latin America, this potential has not yet been realized. While remittances help to feed families and educate children and meet other important basic needs, 

overall they have not been used for business start-up or growth—

important catalysts for broad-based economic development. 

The Inter-American Development Bank reports that less than 10 

percent of those receiving remittances have a savings account. Only 

about one percent of remittance flows have been used to start a 

business. This translated into significant lost opportunities to invest in productive economic activity in real, thriving businesses. 

And it is such businesses that offer the jobs and the income that 

have the potential to sustainably lift people out of poverty. 

How, then, to harvest the potential for these flows to jump-start 

private sector growth? How do we answer the question posed by 

this subcommittee on leveraging remittances for sustainable development? 

We would submit that in order to do so we need to think about 

this in a more holistic sense. And to think about capital intermediation here, on both the supply and demand side. Several factors 

need to be in place to enable and support the development of thriving enterprises. On the supply side, capital is certainly critical, and 

remittances are potentially a source of such capital, provided the 

right investment vehicles and incentives can be put in place. 

However, capital alone is necessary but not sufficient. On the demand side, you need viable business opportunities and entrepreneurs in which to invest. And the mere fact of capital will not 

guarantee that this happens. This is not a case of ‘‘build it and 

they will come.’’ 

And, in fact, what we have here is neither supply nor demand. 

Remittances are not pooled for capital investment, and there are 

too few viable undertakings in which to invest—a classic chicken/

egg quandary: no businesses, little incentive for capital formation; 

no capital formation, no opportunities for business growth. 

So, what do we do? Well, we work on both. How do we facilitate 

the flow of remittances toward the flow of investment? That is, how 

do we work on the supply side? Critical to doing so is providing the 

right institution and policy framework for capital formation. And 

the simplest and most effective means for doing so is encouraging 

and aggregating remittances into savings accounts. To this end, we 

recommend a broadening of emphasis, particularly in the microfinance field, from microloans to providing savings accounts. This 

requires a range of new products and services, and a strengthening 

13

of institutions to provide them. And, in fact, there are a number 

of NGO’s and others, including people at this table, who are currently doing just this. 

From this base, you can start to think, then, about more systematically capturing remittance flows directly into savings accounts, 

and perhaps from there into more sophisticated services. For example, strengthen local institutions as agents for the provision of loan 

guarantees from individuals or home town associations in the 

United States to investments in Latin America. 

Beyond this—and, again, still on the supply side—there may be 

other opportunities for capital formation. Tax incentives for the creation of pooled investment vehicles in the United States could create a means for U.S.-based citizens of other nations to invest in 

businesses in their home countries. There are existing examples of 

successful funds in Latin America, based on remittance flows. More 

such products need to be developed to catalyze investments for 

business start-up and growth. 

But again, availability of capital and market access alone are not 

enough. Would-be investors need productive enterprises in which to 

invest their capital. Without a growing pipeline of entrepreneurs 

developing viable competitive businesses, there is little opportunity 

to channel remittances away from household consumption into 

business investment. 

So, we must increase the focus on the demand side of the business creation equation, to providing business building skills and 

know-how, information, technology, business support services, and 

the facilitation of market linkages. Development assistance funds 

like those administered by USAID and IADB have an important 

catalytic role in providing those components, supporting entrepreneurship development programs, bringing in private sector actors 

and creating market linkages, and working to build international 

trading capacity. 

Our own experience shows that providing this programmatic support for business formation and growth, focused interventions, can 

spear dynamic new businesses and real sustainable growth. 

As just one short example, with the support of USAID and other 

partners, TechnoServe has run business plan competitions throughout Central America. In El Salvador, in the past 3 years alone, 

these competitions have helped entrepreneurs create over 160 companies, generating over $30 million in revenues, and creating over 

1,000 jobs. The entrepreneurial spirit is alive and well in the region. What it needed is the catalyst to unleash and power it. 

Development assistance channeled to these types of entrepreneurship, development, and trade capacity-building activities has a 

vital role to play. But again, this is a two-sided equation. Get the 

supply and get the demand. And in that context, remittances play 

a potentially critical role. Thank you. 

[The prepared statement of Mr. McNamer can be found on page 

51 of the appendix.] 

Chairman GUTIERREZ. Thank you. I recognize myself for 5 minutes. 

Mr. Orozco, and Mr. Bendixen, this question is for both of you. 

With all of your combined experience on the ground in Latin America and the Caribbean, and experience with the Inter-American DeVerDate 0ct 09 2002 17:57 Jun 05, 2007 Jkt 035401 PO 00000 Frm 00019 Fmt 6633 Sfmt 6633 K:\DOCS\35401.TXT HFIN PsN: TERRIE
14

velopment Bank, what direction could we give to the International 

Development Bank, through legislation or otherwise, that would 

assist the Bank in encouraging the nations of Latin America and 

the Caribbean to focus on this issue, and to start to harness remittances for developmental purposes? Mr. Orozco, would you care to 

go first? 

Mr. OROZCO. I think the primary direction is to establish a collaborative agreement between the United States and these countries, where there is an element of cross-conditionality. You provide 

technical assistance to increase financial access to people who receive remittances, to increase the savings ratio in the country, in 

the communities. In exchange for that support, economic performance of these countries needs to be demonstrated. 

I think the issue of increasing investment portfolios is very important. I don’t think that everybody can be an entrepreneur. But 

you can enable the environment to offer the opportunities for people who can have the chance to do so, to have access to financial 

resources. 

And there are plenty of institutions that can do that. The InterAmerican Development Bank, so far, has provided $70 million in 

funds with remittances. And the return of that investment has 

been that one out of three people are getting financial access who—

of those people who withdraw money at the microfinance institution. This is an important success, when you think especially in 

terms of the millions of people who are receiving remittances. 

So, we need to expand that through USAID, through OPIC—

OPIC is in a strategic position, the Overseas Private Investment 

Corporation, to do so. They have the funding. Thank you. 

Chairman GUTIERREZ. Mr. Bendixen? 

Mr. BENDIXEN. Mr. Chairman, I am biased. But the message I 

would send to the IDB is keep doing the great work that you have 

been doing. The Inter-American Development Bank has focused a 

light on this whole process. It was instrumental in bringing the 

cost of sending money to Latin America down substantially. It is 

now taking a leading role in making sure that government and 

business and financial institutions and the people themselves know 

that there are financial opportunities, that this money can be leveraged for the well-being of their families and of their countries. 

And I would also make this point. I think that the great thing 

about remittances is that the government just doesn’t really need 

to get all that involved. The process is already working, even 

though a couple of the witnesses might not agree with my figures, 

the latest research done by the IDB shows that there is now 40 

percent of the money sent in remittances in some countries, like 

Mexico and Brazil and Peru, that is available for economic development. 

Remittance companies have done a great job in getting the 

money there quickly and getting it there safely. And now they are 

beginning to offer mortgages, small business loans, and access to 

capital. 

I think that, in a way, just allows the process to continue, makes 

sure that there is a light on it, so that everybody is well informed, 

and makes sure that the data is good. There is so much money 

15

there, that if we just leave it alone and allow private enterprise to 

do its work, it will lead to tremendous things in Latin America. 

Chairman GUTIERREZ. Thank you. We will continue to work—I 

don’t know who would like to respond to this question, but 

maybe—there is a thought that says, ‘‘Well, you know, all of this 

money, all these billions of dollars leave the United States of America and go—and aren’t spent here. So you don’t buy cars here, you 

don’t buy clothing here, you don’t create economic development 

here with the capital. You don’t invest, and so that money is just 

sent away, $60 billion’’—well, $35 billion from the United States. 

How—Ms. Albino, how would you respond to that? 

Ms. ALBINO. I would say, first of all, that probably 60 to 70 percent—I read a figure that is around 80 percent of the money stays 

here. And one of the problems that we find is that immigrants do 

not have access to the formal financial system, so they use other 

means to distribute their money, or to use their money, or, to hide 

it in their mattresses, so to speak. 

And opening the opportunities for immigrants to save here, investments can be done in here as well. You know, a lot of immigrants are here to stay. So their dreams to build capacity here, to 

have better conditions of living in the United States is also a very 

important aspect of it. 

Chairman GUTIERREZ. Thank you very much. Dr. Ron Paul, the 

gentleman from Texas, is recognized for 5 minutes. 

Dr. PAUL. Thank you, Mr. Chairman. I want to follow up on the 

chairman’s comments about where this money goes, and what good 

it might do or not do. 

I was pleased to hear Mr. McNamer emphasize the private approach to solving poverty, and that, of course, is what I have always emphasized. I am not a fan of foreign aid. I don’t see foreign 

aid as being voluntary. I see that as extracting funds from poor 

people here, sometimes, and sending it to governments elsewhere. 

And I certainly favor market decisions over bureaucratic decisions. 

So, this idea that there are remittances that go into these countries, I think, is actually a good alternative to foreign aid. If you’re 

not a supporter of foreign aid and you still want to help, you don’t 

want to do anything to interfere with this, because there is really—

the way I see it—no dark hole. 

They get the money, and some of it will come back here, and they 

will buy American products. And the other thing that might happen is they might buy a Treasury bill, some of that money might 

end up buying a Treasury bill, which serves our interest. 

I guess the closest thing to a dark hole would be if the money 

is cash and it goes into the underground economy, but even that 

is not a negative for us, because that is literally an interest-free 

loan. I mean, they could have put it into a Treasury bill and earned 

interest, but they just take the cash. 

It might not be good for us in the long run, because it encourages 

us to inflate—that is, create money to buy goods and services and 

pay these bills—and we literally get the benefit, temporarily, of exporting our inflation. So when these funds leave our country and 

maybe sit there, it’s not a disadvantage. I don’t see many disadvantages for allowing remittances to occur. 

16

And I don’t have a precise question, but I would just like to get 

Mr. McNamer maybe to follow up on this, and maybe give me an 

idea about how these funds would be broken down. Is the amount 

that goes into the underground economy minuscule, and do some 

of these dollars end up buying Treasury bills? And just how do you 

see these dollars playing out in the marketplace? 

Mr. MCNAMER. Well, I have to start with the disclaimer that I 

am not here as the remittance expert. I sort of operate more on the 

business development side. But just a couple of comments. 

Agreeing wholeheartedly with what you have said, and pointing 

out in addition, a lot of these monies cannot—if they are productively invested in businesses—generate a set of service and products that can actually become part of the trade flows between our 

countries, and then thereby actually offering American citizens a 

broader set of cheaper goods and services from other countries. So 

it actually does come back to this country. 

And I couldn’t agree more that these are private individuals 

transacting privately, making private decisions about where they 

want to allocate their monies. As to kind of the level and amounts 

of, you know, where these variance remittances go, I have to sort 

of disclaim any real precise knowledge of that. 

Dr. PAUL. Dr. Rhyne? 

Ms. RHYNE. Thank you. I wanted to comment on the issue about 

whether remittances are a substitute for foreign aid. I think that 

foreign aid is aimed at different purposes, it’s aimed at achieving 

structural change in the countries. 

And if you look at the history of USAID and its support for 

microfinance over the years, one of the reasons that we’re even 

talking about the progress that has already been made in helping 

recipients gain access to financial services in the home countries is 

because of the investments that USAID has made over the years 

in microfinance that helped create some of those institutions. 

Chairman GUTIERREZ. Thank you. 

Mr. BENDIXEN. Just quickly, Congressman, because foreign aid is 

not in the same order of magnitude as remittances, let me read you 

the figures for Mexico. Mexico, in 2006, received $35 billion in oil 

revenues, $25 billion in remittances, $17 billion in foreign direct investment, $14 billion in tourism, and when it comes to all the aid, 

$110 million. So you’re comparing $25 billion to $110 million. It’s 

not even a part of the same conversation, in all honesty. 

Dr. PAUL. I would say maybe that’s a proper proportion. I yield 

back. 

Chairman GUTIERREZ. Thank you. Thank you, Dr. Paul. I yield 

to the gentleman from Missouri, Mr. Clay. 

Mr. CLAY. Thank you, Mr. Chairman, and thank you for holding 

such an interesting hearing. 

Ms. Albino, in your testimony, you mentioned the importance of 

providing financial literacy to all, especially in Latin America, and 

including those of indigenous and African heritage. Please discuss 

some of the unique obstacles faced by these groups when it comes 

to financial literacy and financial issues in general. 

Ms. ALBINO. Well, we know that indigenous and African descendants are the poorest in the region. So, the point is that if we provide financial literacy and opportunities for business development, 

17

there might be another angle in which our communities can be better off. 

Mr. CLAY. So that would be a way to kind of attack poverty in— 

Ms. ALBINO. Of course. And Mr. Orozco can tell you more, and 

probably Ms. Rhyne and— 

Mr. CLAY. I was getting to Ms. Rhyne. Thank you so much. 

Ms. ALBINO. And Mr. Bendixen, for instance, on Honduras and 

in Central America, the experiences with remittances. 

Mr. CLAY. Okay, thank you. Perhaps Dr. Rhyne or Mr. Bendixen 

would like to address the question. 

Ms. RHYNE. Quickly, to comment on some of the goals of the financial literacy work that we do—one, is we want people to be able 

to think about what their life financial goals are, how to set them, 

and how to plan and go about achieving them. 

Two, is to understand what the available options are for themselves, as consumers of financial services, to understand how financial services work. 

And, three, how to be a smart consumer, to tell the difference between a good set of services that are being offered, and one that 

is not being offered on proper terms. 

Mr. CLAY. Thank you for that. Mr. Bendixen? 

Mr. BENDIXEN. Again, a set of figures—five million out of six million Latin Americans go to a bank to pick up their remittance. 

Their relative in Europe or the United States or Japan sends it 

through a remittance company, but they go pick it up at a bank, 

50 or 60 percent. About 10 percent have a bank account. They’re 

showing up at the bank every month. 

Mr. CLAY. They might as well stop in and open an account. 

Mr. BENDIXEN. They are picking up $200 or $300 every month, 

and the bank doesn’t offer them a savings account, a checking account, nothing. And when you look at Haitians, and when you look 

at the black people in Latin America, it’s even lower. 

So, there is a rejection, almost, from the banking institutions in 

Latin America to let the regular people into the system. Now, 

that’s something that is changing, and it’s changing fast. But I 

want to point out that right now a lot more could be done by the 

banks. The remittance companies are the champs here. 

Mr. CLAY. Thank you. 

Mr. BENDIXEN. They let everybody participate. The banks— 

Mr. CLAY. Thank you for that response, Mr. Bendixen. Dr. 

Rhyne, let me ask you, in your written testimony you mentioned 

that ACCION has helped banks and microfinance institutions set 

up remittance services through partnerships with money transfer 

companies and bank-to-bank services through Citibank and others. 

In what countries is this taking place, and how successful has it 

been? And is it something that ACCION intends to replicate in 

other areas of the region? 

Ms. RHYNE. It is—we have worked in five or six countries. We 

are working in Mexico, we have worked in Ecuador, Peru, Bolivia, 

Haiti—am I forgetting—we are working now in Nicaragua. 

We have been, I think, successful in helping our institutions, who 

are small financial institutions, gain access to the remittance industry on the receiving end, to become distributors of remittances. 

18

And I think it’s—we have faced a harder challenge on the side of 

developing the cross-sell financial products. 

So, we are encountering more barriers to putting these funds into 

loans and mortgages, but we are able to bank the customers and 

offer them savings accounts. 

Mr. CLAY. Okay. Thank you. And my final question is to Ms Albino. In your testimony, you mention encouraging the large money 

services businesses to dedicate one percent of their income to support sustainable development projects. That’s an interesting idea. 

My first question is, have you suggested this to the industry? 

Ms. ALBINO. In the past, I worked for a multi-lateral organization, the International Organization for Migration. We developed a 

program with various countries, primarily Caribbean countries, 

and we approached Western Union—that was in the past; there 

have been changes since then—and MoneyGram, so they could devote at least one percent of the income, or the profits they generate. And of course, at the time, there was no interest. 

There has been a lot of changes in the industry, which we have 

to recognize. However, there is a lot more to be done in that direction. 

Mr. CLAY. My time is up. Thank you all for your responses. 

Chairman GUTIERREZ. Thank you, Mr. Clay. And to my good 

friend from Texas, a gentleman that has shown great interest in 

this issue and has been very helpful, Mr. Hinojosa. 

Mr. HINOJOSA. Thank you. I have enjoyed all of the presenters. 

I think they have interesting information, and particularly 

Bendixen’s Power Point presentation, and how important these remittances are throughout the world, and particularly those that 

have over $1 billion in remittances, based on that map that I saw. 

But I think of most interest to me were some of the points that 

were made by Dr. Rhyne and Ms. Albino, the reason being that you 

seem to be addressing how microloans can help people if they had 

the financial literacy to invest it or to start up small microentrepreneurship businesses. 

And most Congressmen like myself who have regions and pockets 

throughout our Congressional district where there is great poverty, 

where there is high unemployment, they are—they have a similarity to these countries that you all talked about, the difference 

being that they don’t have $500 or $1,000 annual income, like some 

of these countries do. And yet, they don’t seem to come out of that 

hole where there is so much poverty and many are second, third, 

fourth generation of immigrants—forgive me, not immigrants, but 

migrants, going to harvest crops and coming back. So, it’s interesting that you all come up with some ideas. 

And so, I will start with my first question to Ms. Albino. You 

mentioned ways to leverage the remittances. What have you found 

has worked best in the areas that you have studied, and why would 

they be successful and other areas unsuccessful? 

Ms. ALBINO. You mentioned financial literacy and some of the 

barriers that some of your constituents have. One of the interesting 

lessons that we learned last year when we launched a program is 

that we were conducting and facilitating financial literacy courses 

to our members and clients. However, we didn’t have a very rich—

19

they couldn’t address opening bank accounts or accessing financial 

products. 

And what we did, in order to come up with a solution, was to engage in a relationship with a financial institution, with a credit 

union. Through the credit union now, we not only do financial literacy and money management courses for individual counseling, 

what we do also is to engage them in the process. We engage them 

in the financial institution that provides them with an adequate 

product that they can use. 

There are no maintenance fees. In some of the products—for instance in checking accounts or savings accounts—there is no cap. 

So you can—with their membership, you can put $5 or $10 a 

month into your account, and you can keep your account, and no 

charges will be made, for instance. 

So, microcredit is also another vehicle in which we found that 

some of our clients could benefit, so that they can better their lives. 

Mr. HINOJOSA. Dr. Rhyne? 

Ms. RHYNE. Yes, our primary business is offering financial services, and in particular, working capital loans for microbusinesses. 

And we do that both in the United States and in Latin America 

and around—in other countries, as well. 

One of the issues is the percentage of receivers of remittances 

who are already microentrepreneurs, or in a position to become 

microentrepreneurs, varies. In Nicaragua, for example, we found 

that was a third, so that’s a very substantial fraction to work with, 

in terms of offering them loans. 

What we want to do is to make sure that—and we’re working on 

the sort of underwriting methodologies to do this—is how can 

somebody who is receiving a remittance payment get credit for 

that—in terms of his capacity to borrow? So, if you’re receiving the 

money on a regular basis, that is—it becomes part of your income, 

but it’s very hard to establish that kind of, you know, banking 

framework as something you should be getting credit for, and 

therefore, saying you can borrow this money. But we’re working on 

methodologies to do just that. 

Mr. HINOJOSA. One question to you. With Citigroup being in 

Mexico, as successful as they are worldwide, it seems to me that 

they would be the ones to set the example to other bankers, receiving those remittances and to open up accounts to take the 

unbanked and open up accounts. Is that happening? 

Ms. RHYNE. Yes, it is happening. It is—you have to think of 

Citibank as a very large bureaucracy. You have groups within 

those institutions who are very interested in making that happen, 

but you have a lot of inertia; it is like turning around the QE II. 

So, yes, they are successful, but they do have to overcome embedded kind of interest in not being—or lack of interest in this market 

segment. 

Mr. HINOJOSA. I yield back. 

Chairman GUTIERREZ. Thank you, very much. Are there any further questions of members of the committee? 

I ask unanimous consent that all members have 5 days to revise 

and extend their remarks. I would like to say thank you to Mr. 

McNamer, Ms. Albino, Dr. Rhyne, and Dr. Orozco. I would like to 

give a special thanks to Mr. Bendixen for his work on the causes 

20

of better understanding our community, others—you are helping 

me understand our community. Imagine, if I have to try to understand them, imagine the ignorance that exists outside. 

And I think that, as the President goes to Latin America, 

maybe—according to this panel—it’s pretty clear that foreign aid is 

good, maybe, economic development is good, but it seems to me he 

better focus on remittances. Thank you so, so much. 

[Whereupon, at 3:12 p.m., the hearing was adjourned.] 

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A P P E N D I X

March 7, 2007

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