There is a close relationship between savings, investment and economic growth. Having a large pool of savings can provide capital to fund investment into potential business ventures to spur economic growth.
A 2013 study from the Inter-American Development Bank (IDB) reveals that although remittance inflows into Latin America total more than US$60 billion annually, very little of this sum is being saved.
Locally, a Bank of Jamaica (BOJ) study done in 2010 estimates that only nine percent of the remittances, or about US$185 million sent to Jamaica was being saved.
So how can remittances aid economic growth through savings and investments?
The answer lies in encouraging remittance recipients to save in the formal banking system.
Members of the local Jamaica Money Remitters Association (JMRA) posit that remittance recipients can be encouraged to save; and many remittance companies have implemented initiatives to encourage their customers to use the formal banking system and have undertaken financial literacy programmes. The COK Sodality Cooperative Credit Union’s Remittance arm encourages remittance recipients who are non-members to open savings accounts.
“We inform them about the different products and services that we offer as we believe that by encouraging them to save, we are offering them a chance to improve their lives,” said Nadine Matthews, Senior Remittance Officer at COK Sodality Co-Operative Credit Union.
As part of its initiatives to have greater financial inclusion among Jamaicans, the BOJ has hosted a series of consultations as part of plans to develop “Agent Banking”. Agent banking would allow retail outlets like those used for the distribution of remittances, to be contracted by financial institutions, to process certain customer transactions on their behalf.
The JMRA has indicated that the development of regulatory guidelines permitting agency banking may go a long way towards making savings options more accessible to receivers of remittances.