Labelled Remittances
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Investment Overview
A $1.7m grant to Innovations for Poverty Action to test behavioural-based ‘labelling’ of financial products to increase the amount and impact of remittances sent by migrants to households in their home countries.
The Development Challenge
Migrant remittances represent a key financial flow to developing countries, accounting for over $400bn in 2015, roughly three times the total official development aid (ODA), and are often steadier and less volatile than either ODA or FDI. However, remittances tend to be a minority of the total earnings of overseas migrant workers. One reason for this is that migrants sending funds back to their households have limited ability to monitor and/or control the use of remittances by recipients. Absent confidence that recipients will put the savings to productive uses, the migrant worker may withhold potential additional remittances.
The Innovation
The project team is made up of academics with migration/remittance expertise, and members of financial institutions such as the Bank of the Philippine Islands (BPI), the Philippines’ largest bank by market capitalization. The team has previously collaborated on a lab-in-the-field experiment in Rome, where they tested approaches to increasing Filipino migrants’ remittances for education. They found that simply providing migrants an ability to label (in a non-binding way) remittances for education raised total remittance amounts 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. GIF will be funding the team to conduct randomised impact evaluations of the impacts of a real-world version of the remittance labelling product, relating to both the changes in remittance behaviour of the migrants, and changes in spending patterns and life outcomes of the recipient households.
Investment Objective
Through an RCT in the Philippines, test the impacts of a real-world version of a remittance labelling product, relating to both the changes in remittance behaviour of the migrants, and changes in spending patterns and life outcomes of the recipient households.
Why we invested
Potential to significantly increase remittances and improve household spending patterns and life outcomes.
Natural path to scale via private sector given opportunity to increase revenues at low cost.
Well-designed impact evaluation plan.
Strong partnership between academics and a commercial institution, who have collaborated on the earlier phase of this work.
Labelled Remittances in numbers
Migrants enrolled in the GIF-funded study
Increase in remittance amounts when the ability to label is provided
Labelled Remittances Impact Brief
Innovations for Poverty Action (IPA) and researchers from the University Michigan and Sapienza University of Rome are running a project to study the impact of giving migrant workers the ability to control and direct their remittances for specific uses. The participants in this study are Filipino workers living in Dubai and Sharjah in the United Arab Emirates (UAE). The Philippines is a notable recipient of remittances: in 2017 its citizens received about $33 billion – the third-highest amount in the world after India and China.
The project team is made up of academics with migration/remittance expertise, and members of the financial institution UAE Exchange. The academic team has previously collaborated on a lab-in-the-field experiment in Rome, where they tested approaches to increasing Filipino migrants’ remittances for education. They found that simply providing migrants an ability to label (in a non-binding way) remittances for education increased total remittance amounts by 15%. The project builds on this research and aims to analyse the impact of providing the option of labelled remittances to Filipino workers in the UAE on the amount of remittances sent and what those remittances are used for by their recipients. In 2017, GIF invested in randomised evaluations of the impacts of a real-world version of the remittance labelling product, relating to both the changes in remittance behaviour of the migrants, and changes in spending patterns and life outcomes of the recipient households.
Use of GIF Funds
The GIF grant initially funded two evaluations, one focused on Filipino migrants in the UAE and their households in the Philippines, and another focusing on South Pacific Islander migrants working in Australia. In response to the Covid-19 pandemic and the resulting disruption, funds were redeployed from the South Pacific Islander component of the study to new survey work related to Covid-19. This new survey work seeks to understand whether remittance labelling brings additional benefits by enhancing the role of remittances in coping with the Covid-19 crisis. The use of GIF funds of $1,596,921 is as follows:
$1,518,421 to conduct an RCT in the UAE and the Philippines to test the impacts of a real-world version of the remittance labelling product, relating to both the changes in remittance behaviour of the migrants, and changes in spending patterns and life outcomes of the recipient households.
$78,500 to complete an endline Covid-19 survey in the UAE and the Philippines, write-up the results, and submit it for publication.
Objectives
To partner with UAE Exchange to design and pilot a remittance product incorporating behavioural nudges. Further, to conduct a randomised evaluation of the Philippines-based remittance product to evaluate both the changes in remittance volumes sent by migrants and corresponding socioeconomic impacts on receiving households. Finally, to support the Philippines’ Covid-19 response by quantifying the role of international migrant remittances in helping households cope with the pandemic’s economic consequences, as well as investigating how these responses are affected by the remittance labelling innovation.
Impact to Date
Over 4,000 migrants and their primary remittance recipients were enrolled in the study. It found that the ability to label remittances with the migrant’s intended uses led migrants with low base levels of remittance activity to increase their remittance levels. For migrants who had higher remittance base levels, there was no change in their remittance behaviours. The final results of the study are yet to be published. Work on the Covid-19 survey is ongoing and results are yet to be determined.