IOM–UPU-PAPU PILOT PROJECT PILOT STUDY ON “SUPPORTING AN AFFORDABLE ELECTRONIC REMITTANCE TRANSFER SYSTEM BETWEEN TANZANIA AND UGANDA” IOM is committed to the principle that humane and orderly migration benefits migrants and society. As the leading international organization for migration, IOM acts with its partners in the international community to: • Assist in meeting the operational challenges of migration, • Advance understanding of migration issues, • Encourage social and economic development through migration, and • Uphold the human dignity and well-being of migrants. Opinions expressed in the report are those of the author and do not necessarily reflect the views of the International Organization for Migration (IOM). The designations employed and the presentation of material throughout the report do not imply the expression of any opinions whatsoever on the part of IOM concerning the legal status of any country, territory, city or area, or the delimitation of frontiers or boundaries. Prepared for IOM by Dr H.Bohela Lunogelo December 2009 TABLE OF CONTENTS EXECUTIVE SUMMARY................................................................................................................................. viii CHAPTER 1: Study Background .........................................................................................................................1 1.1 Introduction...................................................................................................................................................1 1.2 The Study Objectives.................................................................................................................................... 1 1.3 Outline of the Report ...................................................................................................................................2 CHAPTER 2: Literature Review on Migration and Remittance.....................................................................3 2.1 International Recognition of Migrants and Remittances.......................................................................3 2.1.1 Migrant Remittances ..........................................................................................................................3 2.1.2 Remittances and Poverty Reduction ............................................................................................... 3 2.1.3 Migration and Education...................................................................................................................4 2.2 Migration and Development ......................................................................................................................4 2.3 How Unique Is This Study?........................................................................................................................4 CHAPTER 3: Approach and Methodology........................................................................................................5 3.1 Location of Study..........................................................................................................................................5 3.2 Types of Data and Sources of Data............................................................................................................5 3.3 Geographical Coverage by the Team of Consultants.............................................................................6 3.4 Preparatory Work by the Senior Consultant ...........................................................................................6 3.4.1 National Interviews and Consultations in Uganda ......................................................................6 3.4.2 Field Interviews in Uganda...............................................................................................................7 3.4.3 Interviews and Consultations in Tanzania.....................................................................................7 3.4.4 Field Survey in Tanzania ...................................................................................................................7 3.5 Data Analysis and Study Limitations .......................................................................................................8 CHAPTER 4: The Policy and Legal Environment for Remittance Management ......................................10 4.1 Views from Policy Makers ........................................................................................................................10 4.2 What is the Policy and Legal Environment for Remittances?.............................................................10 4.2.1 On Cross‐Border Transfer of Funds ..............................................................................................10 4.2.2 On the Role of Non‐Banking Institutions in Handling Funds ..................................................11 4.2.3 On the Role of Buses and Courier Companies ............................................................................11 4.3 Views of Key National Stakeholders on the Role of Remittances to Development Agenda.........11 Table 1: Views of Senior Public Officials on the Role of Remittance to Development ...............11 4.4 Summary of Key Stakeholders on the Prevailing Remittance Systems and Required Interventions ..............................................................................................................................................12 iii Table 2: Views of Senior Public Sector Officials on the Role of Remittance to Development ...12 CHAPTER 5: Analysis of the Remittance System between Uganda and Tanzania..................................14 5.1 Formal Remittance System........................................................................................................................14 5.2 Post Office Remittance System.................................................................................................................14 5.2.1 International Financial System (IFS)..............................................................................................14 5.2.2 Commercial Banksʹ Remittance System........................................................................................15 5.2.3 Commercial Banks on Migrantsʹ Remittance...............................................................................16 Table 3: Comparison Between Different Money Transfer Systems................................................16 5.2.4 Non‐Banking Financial Services.....................................................................................................16 5.2.5 Non‐Financial Remittance Services ...............................................................................................16 5.3 Informal Remittance System.....................................................................................................................17 Table 4: Frequency of Sending Money Home by Sampled Migrants ............................................17 Table 5: Probability of Using Different Remittance Systems by Sampled Migrants...................17 5.4 General Assessment of Migrants Remittance Transfer Possibilities..................................................18 5.4.1 Migrantsʹ Assessment o the System...............................................................................................18 Table 6: Post Office Customer Feedback on Offered Services ‐ Dar es Salaam............................18 Table 7: What Should Be Done to Improve Remittance Services ...................................................19 5.4.2 Migrantsʹ Views on the Informal System......................................................................................19 Table 8: Usage of Formal and Informal Channels for Remittance by Interviewed Migrants in Tanzania ....................................................................................................................................................20 Table 9: Factors Considered by Migrants When Sending Money ..................................................20 Table 10: Procedures for Sending Money for Different Remittance Systems...............................21 Table 11: Problems Experienced by Migrants With the Informal Remittance Transfer System21 CHAPTER 6: Key Findings of the Study ..........................................................................................................22 6.1 Introduction.................................................................................................................................................22 6.2 Characteristics of the Migrants Interviewed..........................................................................................22 Table 12: Social Characteristics of Sampled Migrants in Uganda and Tanzania.........................23 6.3 How Does the Money Flow Between the Two Countries?..................................................................23 6.3.1 How Can We Explain This Asymmetric Relationship? .............................................................24 6.3.2 Which Towns Dominated Sending and Receiving Funds? .......................................................24 Table 13: Comparison of Source of Funds and Destination Between Official Data and Migrantsʹ Information......................................................................................................................................24 Table 14: Top Five Tanzanian Districts Receivers of Ugandan Funds (USH) 2006‐2008 ...........25 Table 15: Top Five Districts Receiving Money (TSH)