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Workers' remittances to Azerbaijan, Georgia and Moldova - An EBRD study
In 2006, the EBRD’s multi donor fund for the early transition countries (ETC) decided to fund a study that would analyse the flow of remittances to ETCs. The Bank is presenting the study’s findings at a conference in Tbilisi, Georgia on “Workers’ Remittances to ETCs”.
Sibel Beadle, an EBRD Principal Banker, explains some of the study’s findings.
Why have the ETCs become the focus of this study on remittances?
Remittance flows to the early transition countries are a new phenomenon. Little is known about the remittance flows to these countries while remittances in Latin America and Eastern Europe are well-researched. This is why a joint study by the EBRD and the Asian Development Bank looked at six countries - Armenia, Azerbaijan, Georgia, Kyrgyz Republic, Moldova and Tajikistan.
The EBRD surveyed remittance flows to Azerbaijan, Georgia and Moldova, as well as Russia as a remittance sending country. It also analysed the financial sector of the three countries.
What did the study find out?
We found out that in recent years, the annual flow of remittances to many ETCs has increased significantly, often reaching levels as large as the deposit base of the banking sector in these countries. These annual remittance flows in the ETCs are often larger than Foreign Direct Investment (FDI) in the region.
There are about half a million regular remittance recipients in each of the three countries studied. Azeris receive the majority of remittances from family members living in Russia. In contrast, less than half of all remittances to Georgia and Moldova come from Russia. In Georgia, remittances also arrive from Greece, Germany, France, Austria, Belgium, the United States, and Armenia. In Moldova, remittances also arrive from Italy and other European nations.
Nearly one-half of all recipients have been receiving money from abroad for less than three years. The study finds that a substantial percentage of the money sent from abroad to these three countries arrives by informal means.
More than eighty percent of the money received in Azerbaijan, Georgia and Moldova, is spent on daily expenses – housing, food, clothing, and medicine. The study shows that a very low percentage of remittance recipients have a bank account and therefore they have no access to credit and other financial investment products. In Azerbaijan and Moldova, about one-fifth of recipients have a bank account, while in Georgia, the percentage of those with a bank account is even lower – 11 per cent.
The remittance senders and receivers have improved their economic conditions over the last three to five years. There is a greater access to cash and greater financial stability for many senders and receivers. Legalising the flow of remittances, bringing the cash into the formal economy and learning how to invest it are the main challenges for Azerbaijan, Georgia and Moldova.
How will the data be used?
The EBRD will present the data to public and private sector representatives at a conference on Workers’ Remittances to the ETC region in Tbilisi on 27 March 2008.
We hope that this study will shed light on the legal and administrative hurdles to remittance flows, which would need to be removed before remittance based products could be developed in this region. This conference will help to educate commercial banks, the national authorities, and the public in general about the importance of remittances and provide a platform to discuss product ideas as well as the experience of other remittance receiving countries.
At the end of the conference, the EBRD would like to take back clear ideas on potential next steps in the ETC region that can facilitate and reduce the cost of remittance transfers. It is likely that this conference will lead to further projects in remittances in the ETC region in the near future, and for these, additional donor support may be needed.
Fast facts on remittances in Azerbaijan, Georgia and Moldova
- Remittance recipients in these three countries received a remittance between six and eight times during 2006. On average the amount sent home was between €100 and €150.
- Azeri, Georgian and Moldovan senders living in Russia tend to be young and male. However, unlike remittance senders in other continents, significant percentages of senders in Russia are citizens or legal residents of Russia and very few are undocumented.
- Approximately 3 out of 5 Moldovan, Georgian and Azeri immigrants living in Russia regularly send remittances to their families in their countries of origin. In total, an estimated 903,000 Azeris, 344,000 Moldovans and 283,000 Georgians living in Russia sent approximately €718 million to their family members during the last 12 months.
- The overwhelming majority of Moldovan, Georgian and Azeri remittance senders in Russia do not have a bank account.
- Moldovan, Georgian and Azeri immigrants living in Russia report relatively little interest in investment products such as mortgages or business loans in their home countries.
- Remittances represent a non-negligible source of foreign earnings to the banking institutions in Azerbaijan, Georgia and Moldova amounting to €1.1 billion. They have varying impacts depending on the economy of the country.
- The banking industry competes for the remittance business with a relatively important informal sector but it still handles the substantial majority of international money transfers to Azerbaijan, Georgia and Moldova. The remittance business and money transfer payments account for revenues that represent up to 20 percent of the financial institutions’ net income in all three countries.
By Marjola Xhunga
26 March 2008
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