For example, if a migrant worker in the US wishes to transfer USD 500 to his family in Sri Lanka, he prefers to go to informal systems like Hawala and Undial because of the high charges and commissions in the formal banking sector. Under the informal money transfer systems, the dollars may stay in the US or get to Sri Lanka at a later time. The Hawala agent's representatives in Sri Lanka provide Sri Lankan rupees to the migrant's family speedily and at a relatively low cost. If dollars are retained with the Hawala agent in the US, Sri Lanka's banking sector lose the opportunity of using foreign currency and, therefore, the country does not gain any benefit from the worker remittance. If the Hawala agent sends dollars at a very later date to replenish the equivalent of Sri Lankan rupees, again there is an opportunity cost to the country as foreign currency is not available when needed. There is also a possibility of the Hawala agent sending dollars to Sri Lanka through an un-known courier service, but such dollars may not get to the banking sector at all. It is difficult to institutionalize remittances of illegal immigrants as such immigrants do not wish to identify themselves to the formal banking and financial institutions in the host country. Hawala and Undial systems are popular among illegal immigrants. It is, therefore, important for the remittance receiving countries, where possible, to compete with informal systems and divert remittances to the formal banking channels.

Regional and international bodies should play an active part to resolve some of the cross-border money transfer issues. International money transfer services should offer enhanced services at reduced costs. International message services, such as SWIFT, should facilitate the remittance flows through innovative products and technology link-ups between central banks and other stakeholders involved in remittance transfers. Micro level initiatives In addition to the macro level global principles, at micro level, the formal financial institutions should make all efforts to enhance accessibility to remitters and receivers. It is also necessary to recognize the remittance collectors, such as Hawala and Undial and for formal financial institutions to establish agency links with them. The moneychanger system should be streamlined, monitored and geared to attract remittances. In speeding-up delivery at low cost, the postal network should be strengthened. Both the postal network and the formal banking institutions should deliver remittances at doorstep. The banks and financial institutions in the home country should provide a package of facilities to migrant workers, prior to their departure. Opening of bank accounts, granting of housing loans are key to attract remittances to the formal channels. Banks and other formal financial institutions should display their charges and commissions on remittance services and be more transparent in their dealings with remittances. These are some of the steps that should be taken by remittance recipient countries, including Sri Lanka, in enhancing remittance inflows while making the remittance industry a sound and safer one. Thank you. 6  BIS Review 3/2007