Migrant remittances are becoming an increasingly important type of international financial flow, particularly in CIS countries, according to a discussion paper recently released by the United Nations Economic Commission for Europe (UNECE).
Figures from the International Fund for Agricultural Development (IFAD) reveal that in 2006 150 million migrants worldwide sent more than $300 billion to their families in developing countries. IFAD estimated that around 10 percent of the world population is currently dependent on money transfers to maintain their standard of living.
UNECE's discussion paper highlighted the fact that remittances, the portion of migrant workers' wages that are sent home, are particularly significant in the CIS economies; both in terms of size and economic importance in providing a source of external finance for the recipient countries.
Money transfers accounted for 36.7 percent of Tajikistan's GDP in 2006, in Kyrgyzstan and Moldova this figure was around 31 percent according to the IFAD. Although Russia received more money than any other CIS country, $13.794 million, it received the least in the group in terms of GDP at 1.4 percent.
Russia is currently considered to be a donor country as the amount of money transferred from Russia far outweighs the amount that it receives in transfers; in 2006 $1.3 billion flowed into Russia via transfer systems and the post office while $6 billion was channelled out, according to Russia's central bank.
The primary reason for this is that Russia is a key destination for migrant workers from the CIS. Recent figures from the Central Bank show that in the second quarter this year $2.4 billion was transferred between Russia and CIS countries. $1.8 billion was in transactions out of Russia and only $197 million was transferred to Russia from these countries, leaving the balance for Russia at minus $1.6 billion.
In contrast the balance for transfers between Russia and non-CIS countries for this period was positive, although negligible, at $21 million. The total figure for transfers between Russia and non-CIS countries within this period made up only around one seventh of the total amount of transactions.
HOW TO SEND MONEY HOME
Money transfers are becoming easier and cheaper in Russia as competition increases between the different service providers. The most widespread and the most popular provider is currently the international company Western Union. As with all providers, Western Union charges customers on a sliding scale, it offers an advanced worldwide security system and a 15-minute service.
MoneyGram International offers an even speedier 10-minute transaction time and offers slightly better rates than Western Union on transferring smaller sums; a transfer of $200 from Russia to the United States would cost $27 with Western Union (13.5 percent) and only $20 (10 percent) with MoneyGram. For larger figures Western Union offers a better deal: a transfer of $3,000 costs $120 (4 percent) with Western Union and $150 (5 percent) with MoneyGram.
Russian providers can often offer a far cheaper alternative to international providers and are fast picking up the pace in terms of technology and security.
"Since 2001, when the system started working, we never had a case of money lost. We use efficient and fast network and have state-of-the-art IT systems. Our standards meet all Russian and international standards," says Suren Hayriyan, CEO for UNIStream, which operates via UNIStream bank in Moscow.
UNIStream charges rates between 0.9 percent to 1.8 percent for transfers from Russia to Britain and between 2.5 to 3.3 percent on transfers to the US, depending on whether the service point used is owned by UNIStream or a partner.
Under Russian law the maximum amount that may be transferred per person, per transaction, per day from Russia is $5,000 for residents and $7,000 for non-residents although there is no limit to what can be transferred into Russia. Valid identification documents are required to both send and receive transfers.
The Moscow News
By Rebeccah Billing