Increasing Social Impact through Remittances Labelling

Following promising results in an earlier impact evaluation, GIF is excited to announce the funding of Innovations for Poverty Action with a $1.7m grant to conduct randomised evaluations to test behaviour-based ‘labelling’ of financial products to increase the amount and impact of remittances sent by migrants to households in their home countries.

Migrant remittances are an essential financial flow to developing countries – totaling over $400bn in 2015, roughly three times total official development aid (ODA). What’s more, they are often steadier and less volatile than either ODA or FDI.

One study suggests that a 10% increase in official international remittances as a share of GDP led to a 2.9% decline in the share of people living in poverty. On a micro-level, remittances can increase the consumption levels of recipient families, and can be deployed for productive purposes such as education, healthcare and savings.

However, remittances tend to be a minority of the total earnings of overseas migrantworkers. One reason for this is that migrants sending funds back to their households have limited ability to monitor and control their use by those who receive them.

If the sender doesn’t have confidence that recipients will put the savings to good use, they may end up withholding potential additional remittances.

Our investment

GIF’s investment will support a partnership between academics with deep migration and remittance expertise, as well as the Bank of the Philippine Islands (BPI), the Philippines’ largest bank by market capitalization, to test behaviour-based ‘labelling’ of financial products to increase the amount and impact of remittances sent by migrants to households in their home countries.

The randomised evaluations will focus on two regions:

1. The Philippines, the focus of the previous experiment, where as many as five million overseas migrant workers come from; and
2. The South Pacific, where remittances play a significant role in many of the island economies, contributing up to 20-25% of GDP in countries like Tonga and Samoa.

The team 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 with the ability to label remittances for education (in a non-binding way) 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 labelling requires minimal modification to existing platforms.

There are nearly 200 million migrants from low and middle-income countries who remit some portion of their earnings back home. If even a small percentage of this population adopted remittance labelling and increased their remittances, it would result in significant, cost-effective development impact.