Sunday, July 15, 2007

International debit cards as tools against underdevelopment

In 2005, migrant workers in the U.S. sent $52 billion back to Latin America and the Caribbean. Now governments are working to leverage that money to promote economic development. Foreign-aid donors are working with microfinance groups to find ways to make the most of the remittance boom. In Jamaica, the U.S. Agency for International Development is helping the Jamaica National Building Society channel remittances more cheaply through debit cards. Profits from the money-transfer transactions equip rural schools with computers.

At an IADB forum on remittances, a multinational network of migrant workers, businesses, credit unions, microfinance institutions and other financial players was featured using a debit card and the Internet to make everybody a winner. How does it work? Simple. At the core of the No Borders business there is a group of debit and stored-value cards issued through a network of affiliated partners of No Borders to individual cardholders in the United States and Latin America. Immigrant workers in the U.S. sending money home with the No Borders card are granted, at zero charge, one remittance transaction per month for up to $350 if they, and their beneficiaries back home, join credit unions in the No Borders network. The transaction costs are covered by a fee charged to financial institutions who want to join the network.

The cards can be reloaded and used for cash withdrawals and purchases at any authorized No Borders location, and can also be used as a payroll card for receiving payroll direct deposits. Funds from the cards can be transferred in real time to bank-issued debit cards, which can be then used for ATM withdrawals, purchases and other transactions.

The No Borders model also benefits cardholders in other ways, such as providing discount cards on health care, insurance, travel, and other products. In this way, affiliated financial partners benefit by increasing their share in the growing U.S. Hispanic market.

One of the most fascinating stories at the KDNC Second Business Workshop was told by Dr. Edward Wambugu, D.Ed., an educator in Chicago, IL. Dr. Wambugu travels to Kenya and five years ago he obtained three checking account debit cards from his bank in Chicago, and gave one to his contractor in Kahiga village, one to his brother in Kenya, and kept one with him. The contractor was responsible for building the shop, and his brother kept an eye to make sure that the project was going as planned. Dr. Wambugu instructed the contractor, and his brother, that they could withdraw money at a bank in Nyeri only when Dr. Wambugu called. He would authorize small quantities like $100 to $200 per month. The shop was done in no time ...

A front page article in the July 27 Wall Street Journal describes Citigroup's efforts to persuade "Mexico's long-neglected working class … to replace the rolls of pesos they fold into money belts with debit cards, credit cards and bank passbooks." It is part of Citigroup's experiment to "move down market in developing countries," including Brazil, India, China and other "fast-growing economies," the article says.

IADB President Luis Moreno points out that "Latin America’s thriving microfinance sector is a leader in this trend. In addition to extending millions of small loans to people shunned by traditional banks, microfinance institutions are now offering debit cards, housing loans and money transfer services aimed at leveraging the remittances Latin American immigrants send home, which last year rose to $53.6 billion. According to the latest IDB research, these remittances are forecast to surpass $60 billion in 2006."

With banks becoming imposing more requirements for the opening of international accounts for non-residents, reloadable debit cards provide an easy alternative for cross-border transfer of funds. Cards which allow to use more than 843,000 PLUS® ATMs worldwide, are helpful to have US funds available from Panama's local ATMs, at rates lower than Western Union and bank transfers.

TravelersCash™ – Travel Cash card

The prepaid travel card that gives you 24 hour access to your traveler funds in any local currency. This reloadable Card that isn't linked to your bank account. And if it's lost or stolen, your balance is replaced within 24 hours.

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