People in the UK send an estimated £2.3 billion a year to loved ones in over 50 developing countries – a key source of overseas funds for many economies. Yet many find the process difficult and insecure.
Charges vary widely and the total cost to send £100 to some countries can range from less than £4 to as much as £40.
According to research by the Department for International Development (DFID), the biggest worry for those sending money is whether it will arrive safely, followed by excessive charges and delays to relatives receiving the money.
The new charter, developed by the DFID-supported UK Remittances Task Force, commits participating firms to giving clear, transparent information in a standard format, including:
• total fees to the sender, and any fees payable by the receiver;
• the exchange rate that applies to the transaction;
• how much money will be received;
• how long the transfer will take, where and how the receiver can collect it; and
• what to do if things go wrong.
Signing up to the charter is voluntary for money transfer organisations. Already businesses covering over half of the money transfer locations in the UK have agreed to comply with the charter.
These include the Post Office, MoneyGram, Coinstar Money Transfer, Chequepoint, Ria Envia and many smaller businesses represented by the UK Money Transmitters’ Association making a total of over 18,000 outlets.
Each money transfer location that has signed up to the charter will display the charter on their premises to provide a further degree of confidence for customers. Each organisation will undertake an annual renewal process to ensure ongoing compliance.
Further to these safeguards, HM Treasury is now consulting on the implementation of the Payments Service Directive which will bring regulation to the money remittance sector.
International Development Minister Shahid Malik said:
“The new charter will give more confidence to people sending money to loved ones abroad by providing better information and transparency. I congratulate participating companies for their commitment to meeting the needs of consumers, many of whom are vulnerable.
“By promoting competition and transparency in the remittances sector we ensure a better deal for consumers in the UK and their families, and also help the fight against poverty in the developing world. We will continue to work with the financial sector to make sure payments are easy, affordable, on time and go through registered channels.”
Seymour Fortescue, Chairman of the UK Remittances Task Force, said:
“I am delighted that the charter is now a reality and that so many money transfer organisations have taken the initiative to sign up to it. It is very encouraging that the industry as whole is taking such a positive attitude to providing a high level of customer service and to being transparent and open.”
The Remittances Customer Charter comes as hits to DFID’s free, independent price comparison website www.sendmoneyhome.org reach a quarter of a million for the last month. The site enables consumers to search international payment companies and compare transfer methods, costs, and speed of transfer.
‘Send Money Home’ was the first website of its kind and has led to other price comparison sites from governments including Germany, France, the Netherlands and Norway.
NOTES TO EDITORS
1. The UK Remittances Task Force was formed in February 2006 with DFID support. Its aim is to reduce barriers to remittances to developing countries. Its private sector members work to increase the flow of remittances through registered channels, improve information for senders, and enhance access for senders and receivers.
2. DFID launched www.sendmoneyhome.org in March 2005 and has also distributed more than 900,000 information leaflets for some 20 countries, both in English and the national language, among migrant communities.
The cost of sending £100 to countries covered by these initiatives has fallen by an average of 5.6% since 2005. For remittance payments by Indians, the UK’s biggest ethnic minority, costs are down by over 20 per cent.
3. FACT FILE on sending money overseas:
• Ethnic minority communities in the UK send an estimated £2.3 billion a year to loved ones in more than 50 developing countries, including over £300 million to India and £200 million to Pakistan. The next biggest recipients are Nigeria, Jamaica and Ghana.
• Some 35 per cent of British ethnic minority households send money.
• Black Africans are the most likely to send money, while Asian households send the biggest amounts.
• Of those who send money, the average amount is £870 per year.
• The average income of senders is £22,000 and 70 per cent are aged 25-44.
• Almost half are sending money to parents, 15 per cent to spouses and children, and 25 percent to other close relatives. Others send money to friends or other contacts.
• Nearly a third of the money is used to buy food, 21 per cent for medical bills and 17 per cent to help pay for schooling.
• Globally, the World Bank estimates that more than US $220 billion worth of remittances were sent to developing countries in 2006.
• India is the world’s biggest recipient of remittances, estimated at £10 billion a year. Remittances through formal channels to Pakistan were an estimated £3 billion in 2007
• For many poor countries, remittances are a bigger source of money than investment by overseas companies. For example, Ghana receives 10-15 per cent of its national income from remittances, and around 3 per cent from foreign investment.
• Remittances also play an increasingly important role in the aftermath of natural disasters. Formal remittances to Pakistan increased by some £90 million following the devastating earthquake that hit Kashmir in October 2005.