Ranee Jayamaha: Moving from informal to formal in the provision of remittances Speech by Dr Ranee Jayamaha, Deputy Governor of the Central Bank of Sri Lanka, at the Global Payments Week, Sydney, 3-6 October 2006. *  *  *  Let me begin by thanking the World Bank, IMF and BIS officials for giving me this opportunity to speak on the Worker Remittances in Cross Border Payment Flows. Most of what has to be said on this topic has already been articulated by the previous speakers. Let me therefore be very brief. I intend to make this presentation in three parts. Part I deals with an overview of remittances. Part II elaborates the importance of remittances in the Sri Lankan economy and Part III discusses possible solutions to issues relating to remittances at macro and micro levels. Part I – Global overview In terms of magnitudes, worker remittance has become a significant component in foreign inflows and balance of payments in developing countries. The statistics presented here are largely estimates. According to the latest reporting, worldwide remittances during 2005 had been approximately $ 250 bn and it is likely to increase further. In 2005, developing countries appear to have received $ 167 bn from about 175 migrants. It is also estimated that around 500 mn of the world population is dependent on remittances. Formal institutional channels It is important to highlight some key points on the formal institutional mechanism/channels of remittance flows. Traditionally, the banks collected and disbursed remittances.

In summary, at macro level, the principles are as follows: Principle I : The market for remittances should be transparent and have adequate consumer production This requires transparency by individual remitting countries about their services as far as possible. The global price including fees at both ends, the exchange rate and other transfer fees should be made known to the remitter. Equally, the time it takes for transfers and accessing locations should be reduced. The receiver should be encouraged to provide bank account details to the formal channels to avoid delays. Principle II: Improvements to payment system infrastructure that has the potential to increase the efficiency of remittance services should be encouraged. This principle involves both domestic payment infrastructure in the remittance receiving countries, cross-border payment infrastructure in both home and host countries, including the infrastructure of corresponding banks. There is a role to be played by the central banks of both remitter as well as receiver's country in improving the cross-border payment infrastructure. Many central banks have taken the lead in facilitating the payment infrastructure, but there still seems to be gaps in the use of electronic networks in semi-urban and rural areas. The central banks and other relevant agencies should encourage the operators to increase interoperability of electronic networks. Similarly, the postal service should be encouraged to play a bigger role in transmitting remittances on a cross-border basis. The postal network is well known in semi-urban and rural areas and they are in a position to provide remittance services at competitive prices.