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Remittances Labelling

A $1.7m grant to Innovations for Poverty Action to test behavioural-based ‘labelling’ of financial products to increase the amount and impact of remittances sent by migrants to households in their home countries. 

Investment Overview

Location: 
The Philippines and South Pacific
Sectors: 
Remittances

Remittances Labelling


Remittances | The Philippines and South Pacific | Test and Transition

 

The development problem: Migrant remittances represent a key financial flow to developing countries, accounting for over $400bn in 2015, roughly three times total official development aid (ODA), and are often steadier and less volatile than either ODA or FDI. However, remittances tend to be a minority of the total earnings of overseas migrant workers. One reason for this is that migrants sending funds back to their households have limited ability to monitor and/or control use by recipients. Absent confidence that recipients will put the savings to productive uses, the migrant worker may withhold potential additional remittances.

The innovation: The team comprises of a partnership between academics with migration/remittance expertise, and financial institutions such as the Bank of the Philippine Islands (BPI), the Philippines’ largest bank by market capitalisation. The team has previously collaborated on a lab-in-the-field experiment in Rome, where they tested approaches to increase Filipino migrants’ remittances for education. They found that simply providing migrants an ability to label (in a non-binding way) remittances for education raised total remittances by 15%. If this intervention is effective as a real-world product, it could be scaled by banks and other remittance providers like money transfer operators quite easily, because labeling requires minimal modification to existing platforms.  GIF will be funding the team to conduct randomized impact evaluations of the impacts of a real-world versions of the remittance labeling product, relating to both the changes in remittance behaviour of the migrants, and changes in spending patterns and life outcomes of the recipient households

Why we invested:

  • Potential to significantly increase remittances and improve household spending patterns and life outcomes
  • Natural path to scale via private sector given opportunity to increase revenues at low cost
  • Well-designed impact evaluation plan
  • Strong partnership between academics and a commercial institution, who have collaborated on the earlier phase of this work