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Mr. P. van den Boogaerde

Abstract

Arab financial assistance to developing - particularly Arab - countries rose sharply between 1973 and 1980 but fell gradually through the 1980s, owing mainly to weakening oil prices. As a percent of GNP, however, Arab contributions remain the largest among major donors. This paper surveys the volume and distribution of Arab financing from 1973 to 1989.

Connel Fullenkamp, Mr. Thomas F. Cosimano, Michael T. Gapen, Mr. Ralph Chami, Mr. Peter J Montiel, and Mr. Adolfo Barajas

Abstract

Immigrant remittances are truly a force to be reckoned with in the global economy. These private, unrequited transfers of money from migrants to the family members they leave behind, often sent a few hundred dollars at a time, nonetheless add up to billions of dollars annually: US$114 billion in 2003, the last year for which complete data are available. This figure includes only remittances sent through official, measurable channels, and much more is believed to flow through informal channels. Consequently, remittances represent one of the largest international flows of financial resources.

Mr. Mohammed El Qorchi, Mr. Samuel Munzele Maimbo, and Mr. John F. Wilson

Abstract

Since the September 11, 2001, terrorist attacks in the United States, there has been renewed public interest in informal funds transfer (IFT) systems. Press coverage, which often focused on the putative connection between the IFT systems and terrorist financing activities, helped to increase the level of official concern about IFT systems’ potential susceptibility to financial abuse. Some national financial regulators began examining existing regulations and, in some cases, designing, developing, and implementing new financial sector policies, including those that address IFT systems.1 Such actions led to a need to better understand the historical context within which IFT systems have evolved, the operational features that make the systems attractive, the fiscal and monetary implications for remitting and recipient countries, and the regulatory and supervisory responses to its current usage.

Mr. Mohammed El Qorchi, Mr. Samuel Munzele Maimbo, and Mr. John F. Wilson

Abstract

This study responds to the growing interest in the operational characteristics and economic and regulatory implications of IFT systems. It contributes to the limited analytical literature on financial remittance mechanisms operating outside the conventional banking sector. It draws on the experience of a select sample of countries known to rely on the informal hawala system and reports on the (1) historical context within which the hawala has evolved; (2) operational features that make the system’s use attractive for both legitimate and illegitimate purposes; (3) fiscal and monetary implications for hawala-remitting and hawala-recipient countries; and (4) regulatory and supervisory responses. Although quantification of hawala remittances is subject to great uncertainty, this study also attempts to show, through a simulation, how this system can be quantified in 15 countries that are likely recipients of informal remittances.

Connel Fullenkamp, Mr. Thomas F. Cosimano, Michael T. Gapen, Mr. Ralph Chami, Mr. Peter J Montiel, and Mr. Adolfo Barajas

Abstract

The unique characteristics of remittances and their potential economic impact have attracted the attention of policymakers and researchers in recent years, as evidenced by a growing literature aimed at analyzing remittances and their consequences for individual countries. Three main features of remittances provide the impetus for embarking on a study of their macroeconomic impacts: the size of these flows relative to the size of the recipient economies, the likelihood that these flows will continue unabated into the future through continued globalization trends, and the fact that these flows are quite distinct from those of official aid or private capital, which are much better understood in the literature. These features suggest that remittances’ macroeconomic effects are likely to be substantial and sustained over time and may have unique implications for policymakers in recipient countries.

Mr. Mohammed El Qorchi, Mr. Samuel Munzele Maimbo, and Mr. John F. Wilson

Abstract

Different terms are used to describe informal funds transfer systems, including “alternative remittance systems,” “underground banking,” “ethnic banking,” and “informal value transfer system.” This study uses the term “informal funds transfer systems” for four basic reasons. First, in some jurisdictions, these systems are the dominant means by which financial transfers are conducted and therefore cannot be referred to as “alternative remittance systems.” Second, in some communities, informal funds transfer service providers operate openly—with or without government recognition; thus, this system cannot be referred to as “underground.” Third, the use of these mechanisms is often cross-cultural and multiethnic; thus the term “ethnic banking” is overly restrictive. Fourth, IFT better captures the sense and nature of financial transfers akin to conventional banking that are of primary interest to this discussion.

Connel Fullenkamp, Mr. Thomas F. Cosimano, Michael T. Gapen, Mr. Ralph Chami, Mr. Peter J Montiel, and Mr. Adolfo Barajas

Abstract

Given the findings of the previous chapter, the next logical step is to establish a new set of stylized facts about remittances derived from properly measured data. Because stylized facts identify the basic set of questions and issues to be explained, it is essential to begin with an accurate data set. Therefore, the chapter first undertakes a complete examination of the empirical characteristics of workers’ remittances,1 beginning with evidence on the growth of workers’ remittances over the past three decades and followed by regional and cross-country comparisons of remittance receipts. Then the chapter presents comparisons of workers’ remittances with other international balance of payments flows, with special emphasis on the volatilities of the various flows. Finally, the chapter examines evidence on the correlation of workers’ remittances with the most important macroeconomic variables. Wherever appropriate, the behavior of remittance flows to developing countries is emphasized.

Mr. Mohammed El Qorchi, Mr. Samuel Munzele Maimbo, and Mr. John F. Wilson

Abstract

Since the terrorist attacks of September 11, 2001, there has been increased public interest in informal funds transfer (IFT) systems. This paper examines the informal hawala system, an IFT system found predominantly in the Middle East and South Asia. The paper examines the historical and socioeconomic context within which the hawala has evolved, the operational features that make it susceptible to potential financial abuse, the fiscal and monetary implications for hawala-remitting and hawala-recipient countries, and current regulatory and supervisory responses.

Mr. Mohammed El Qorchi, Mr. Samuel Munzele Maimbo, and Mr. John F. Wilson

Abstract

IFT systems are ancient and well rooted in the cultures of various countries. Despite the different terminology ascribed to them—fei-ch’ien (China), hui kuan (Hong Kong), hundi (India), hawala (Middle East), padala (Philippines), and phei kwan (Thailand)—the growth of informal funds transfer systems is primarily entrenched in the monetary facilitation of trade between distant regions. Before the advent of paper money, traders historically used gold and other precious metals for payments. However, insecurity along many trade routes led to developing alternatives that did not require the physical movement of gold and precious metals. This process occurred at different times in the various regions of the world and gave birth to instruments that are similar to, or work on the same basis as, IFT systems.

Connel Fullenkamp, Mr. Thomas F. Cosimano, Michael T. Gapen, Mr. Ralph Chami, Mr. Peter J Montiel, and Mr. Adolfo Barajas

Abstract

Understanding the motivations for remitting is necessary for analyzing the wider economic consequences of remittances, for at least two reasons. First, the amount that a migrant transfers to family members remaining at home at any given time depends, among other things, on the migrant’s underlying motivations to go abroad and to remit funds in the first place. The size and timing of remittance flows in turn determine their effects on economic activity in the receiving country. Second, the intended purpose of remittances affects the end uses of these funds, and the uses to which recipients put them is also an important determinant of their economic impact on the recipient economy.