Remittances and Financial Inclusion: A Demand-Side Analysis of Low-Income Jordanians and Syrian Refugees in Jordan

28 Feb 2018

Remittances volumes to low- and middle income developing countries have a potentially large development impact because they are three to four times bigger than official development assistance and more stable than foreign direct investment. They are projected to reach US$450 billion in 2017 (KNOMAD 2017). On such important volumes, the slightest decrease in transaction cost amounts to millions more channeled to end recipients. Over recent years, the global average cost for sending remittances has stuck at around 7 percent of the amount sent, still far from the goal of 3 percent by 2030 that is envisioned by the Sustainable Development Goal to “reduce inequality within and among countries.” Understanding remittances behavior and designing adapted, innovative, and low cost remittances services have thus become important issues for both financial inclusion and economic development. In this environment, CGAP and GIZ initiated research in 2016 to assess the potential for digitizing domestic and international person-to-person (P2P) remittances as part of the broader Digi#ances project. Jordan has long been a net receiving country, with inbound remittances representing 11.3 percent of GDP in 2016 (Verme et al. 2016). The protracted Syrian conflict and its uncertain resolution suggested remittances could be an important mechanism of family support. GIZ and CGAP sought to inform development interventions aimed at improving access to financial services for low-income Jordanians and Syrian refugees living in Jordan.

Paving the Way for Digital Financial Services in Jordan

30 Aug 2017

CGAP engaged DMA to research the Jordanian remittances market to inform development interventions and pilots aimed at improving access to financial services for low-income Jordanians and Syrian refugees living in Jordan, leveraging international remittance flows into and out of the Kingdom.

Research took place between April and September 2016 and focused on assessing the supply of services for both the domestic and international payments market. Using the Committee on Payment and Settlement Systems (CPSS)-World Bank General Principles for International Remittances, a general assessment was completed on the market structure, regulatory and competitive environment, transparency and consumer protection. A detailed analysis of eight corridors, selected based on their size and potential for digitization, was also completed to assess the viability of launching a digital pilot in one of these corridors to test an end-to-end digital solution for international remittances. The five inbound corridors were from the UAE, Saudi Arabia, Qatar, the United States, and Germany to Jordan; three outbound corridors were from Jordan to Egypt, Palestine, and the Philippines.

The main findings are as follows. In the domestic market, the innovative new payments system of JoMoPay sits alongside a highly cash-based society. While the infrastructure and regulatory framework are sound and offer the potential for the rapid uptake of mobile payments, a concerted effort is needed to drive this uptake, both from a consumer and a service provider perspective. Consumer protection also needs to be addressed in the near term.