The Role of Microfinance Institutions in the Remittance Market

An MFI-to-MFI Model

Demographics

Latin America

• Large and growing population

• High unemployment and skewed income distribution

United States

• 50 million Hispanics in US (largest minority group)

• Hispanic population in US increases by 5,000 each day

• 22 million Latin America-born citizens live in US

Migration Effects

Latin America

• Similar to women on the homefront who did work of men during WWII: women make big contributions but experience great suffering

• Remittances are largest source of hard currency and often exceed export income

United States

• Entrepreneurial; work multiple hourly jobs

• Maintain close financial ties with family

• $62B sent to Latin America in 2005 (more than U.S. FDA) – $300B sent globally

Latin Financial Market

Developing Countries

• Growing microfinance industry serving poor people

• Microfinance profitability, efficiency and portfolio quality competitive with banks

• 2006 Nobel Peace Prize awarded to microfinance

• MFIs ideally suited to serve remittance recipient market

U.S. Financial Market

United States

• 40M unbanked (63% Hispanic)

• Expensive, fragmented industry of mom-and-pop and non-financial providers

• Little/no access to credit

• Low penetration of banks and new technologies in MTO-dominated immigrant market

Microfinance Int’l Corp.

United States

• HQ in Washington, DC

• 9 MFIC-owned branches

• Bank and MTO partners

Latin America/Worldwide

• Distribution in 85 countries

• Financing for MFIs

• Transnational products

Overview

• For-profit led by 27-year Bank of Tokyo veteran

• MFI-to-MFI model

• Non-bank supervised by financial commissioners

• Specialized to serve bi-national families on both ends of remittance chain

Settlement Platform

• IT built off Cooperative Open Banking Information System (COBIS) used by 70 banks in 13 countries

• Consists of Internet technology and worldwide network

• Built our own settlement network of financial institutions

Alante Financial

Transactional Services

• Money transfer

• Check cashing

• Bill pay, money orders

• Phone cards

• Help building credit history

Loans and Insurance

• Unsecured term loans & credit lines; car loans

• Domestic and international mortgages/business loans

• Domestic and international health/life insurance products

One-stop shop offering integrated, affordable, value-added services and products and professional, bi-lingual service

Money Transfer Pricing

Transfer Amount $1 - $200$201 - $1500

$1501 - $2000

$2001 - $3000

Alante Financial

$6 – $7 $9 – $10 $13 – $15 $18 – $20

Conventional MTOs

5% – 10% 5% – 10% 5% – 10% 5% – 10%

SWIFT $40 $40 $40 $40

Distribution

• Latin America, North America, Asia, Europe, Africa, India

• MFIs & Banks

Technology

• Built on banking software used by 70 Latin banks

• Secure web-based interfaces & real-time payout

Unique Advantages

• Marketing & cross-sale support

• Extendable as a central processing platform for national and international networks of banks, credit unions, post offices

Turn-key remittance platform for MFIs, banks, credit unions, money transmitters & postal networks

Compliance

• Strong regulatory support and built-in compliance features

• System built post 9/11

MFI Market Entry Issues

Marketing & Data Management

• Establishing marketing strategy

• Tracking conversion rate from cross-sales

Business Model• Representation offices in foreign country?

• Partner with large or small money transmitter?

• Work with multiple money transmitters?

Scale & Profitability• Ability to generate profitable transaction volume

• Financial capacity & careful liquidity management to handle remittance volumes and potential new loan disbursements

Technology

• Efficient, secure, adaptable data transfer to institution’s MIS

• Cost of adopting technology and training

Products for MFIs & Banks

Transnational Services

Market channel for MFIs to cross-sell loans and mortgages to remitters in U.S.

Technical Assistance

Support with marketing, compliance, training, product development

Value-Added, Full-Service Partner to MFIs & Banks

Co-Branches

Co-branching opportunities with Alante Financial to expand products and services

Loans

Institutional loans for MFIs in our remittance network to support portfolio growth

For More Information

• mfi-corp.com / alantefinancial.com / ariasfs.com

• Jennifer Isern, William Donges & Jeremy Smith, Guide to Making Money Transfers Work for Microfinance Institutions: A Technical Guide to Developing and Delivering Money Transfers (CGAP, December 2006)

• Manuel Orozco and Eve Hamilton, Remittances and MFI Intermediation: Issues and Lessons, July 2005