Responsible Finance Forum

DEL OTRO LADO: Financial behavior of households receiving international remittances in the Mexico Financial Diaries

Caitlin Sanford
02 March 2016
Source:  Bankable Frontier Associates
 Multilateral Investement Fund

This report was commissioned by the Remittances and Savings Program of the Multilateral Investment Fund to provide insight into the financial lives of remittance recipient households in Mexico. This information will inform both private and public sector initiatives to leverage migrant remittances for wealth building throughout Latin America and the world.

The research finds that remittance income is just one of many sources of income for these families. On average, households earned income from 6.5 different sources during the Financial Diaries study, including remittances. Remittance payments tend to be irregular and may exacerbate income volatility. The frequency of remittance payments is often a function of the employment situation and financial needs of the migrant sender. The research shows that some households are able to use financial instruments to smooth consumption in the absence of consistent income. Among the households included in this study, informal credit instruments dominate financial portfolios. The most common informal credit instrument used were loans from friends and family, buying goods on credit from local shops, and participation in rotating savings and credit associations (ROSCAs). The study found that families direct the majority of their remittance income towards daily household expenses, including increased spending on healthcare, better quality food, and education. In addition to meeting their basic household needs, recipients also leverage remittance payments as a sort of insurance mechanism, and request money in the case of emergencies or an unexpected need. Finally, the study showed that housing, education, and preparing for the migrant remittance sender’s return were the main motivations for saving among these households.