[House Hearing, 110 Congress]
[From the U.S. Government Publishing Office]




 
                       THE ROLE OF REMITTANCES IN
                   LEVERAGING SUSTAINABLE DEVELOPMENT
                   IN LATIN AMERICA AND THE CARIBBEAN

=======================================================================

                                HEARING

                               BEFORE THE

                            SUBCOMMITTEE ON
                       DOMESTIC AND INTERNATIONAL
                 MONETARY POLICY, TRADE, AND TECHNOLOGY

                                 OF THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                       ONE HUNDRED TENTH CONGRESS

                             FIRST SESSION

                               __________

                             MARCH 7, 2007

                               __________

       Printed for the use of the Committee on Financial Services

                            Serial No. 110-9


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                 HOUSE COMMITTEE ON FINANCIAL SERVICES

                 BARNEY FRANK, Massachusetts, Chairman

PAUL E. KANJORSKI, Pennsylvania      SPENCER BACHUS, Alabama
MAXINE WATERS, California            RICHARD H. BAKER, Louisiana
CAROLYN B. MALONEY, New York         DEBORAH PRYCE, Ohio
LUIS V. GUTIERREZ, Illinois          MICHAEL N. CASTLE, Delaware
NYDIA M. VELAZQUEZ, New York         PETER T. KING, New York
MELVIN L. WATT, North Carolina       EDWARD R. ROYCE, California
GARY L. ACKERMAN, New York           FRANK D. LUCAS, Oklahoma
JULIA CARSON, Indiana                RON PAUL, Texas
BRAD SHERMAN, California             PAUL E. GILLMOR, Ohio
GREGORY W. MEEKS, New York           STEVEN C. LaTOURETTE, Ohio
DENNIS MOORE, Kansas                 DONALD A. MANZULLO, Illinois
MICHAEL E. CAPUANO, Massachusetts    WALTER B. JONES, Jr., North 
RUBEN HINOJOSA, Texas                    Carolina
WM. LACY CLAY, Missouri              JUDY BIGGERT, Illinois
CAROLYN McCARTHY, New York           CHRISTOPHER SHAYS, Connecticut
JOE BACA, California                 GARY G. MILLER, California
STEPHEN F. LYNCH, Massachusetts      SHELLEY MOORE CAPITO, West 
BRAD MILLER, North Carolina              Virginia
DAVID SCOTT, Georgia                 TOM FEENEY, Florida
AL GREEN, Texas                      JEB HENSARLING, Texas
EMANUEL CLEAVER, Missouri            SCOTT GARRETT, New Jersey
MELISSA L. BEAN, Illinois            GINNY BROWN-WAITE, Florida
GWEN MOORE, Wisconsin,               J. GRESHAM BARRETT, South Carolina
LINCOLN DAVIS, Tennessee             JIM GERLACH, Pennsylvania
ALBIO SIRES, New Jersey              STEVAN PEARCE, New Mexico
PAUL W. HODES, New Hampshire         RANDY NEUGEBAUER, Texas
KEITH ELLISON, Minnesota             TOM PRICE, Georgia
RON KLEIN, Florida                   GEOFF DAVIS, Kentucky
TIM MAHONEY, Florida                 PATRICK T. McHENRY, North Carolina
CHARLES A. WILSON, Ohio              JOHN CAMPBELL, California
ED PERLMUTTER, Colorado              ADAM PUTNAM, Florida
CHRISTOPHER S. MURPHY, Connecticut   MICHELE BACHMANN, Minnesota
JOE DONNELLY, Indiana                PETER J. ROSKAM, Illinois
ROBERT WEXLER, Florida               KENNY MARCHANT, Texas
JIM MARSHALL, Georgia
DAN BOREN, Oklahoma

        Jeanne M. Roslanowick, Staff Director and Chief Counsel
Subcommittee on Domestic and International Monetary Policy, Trade, and 
                               Technology

                 LUIS V. GUTIERREZ, Illinois, Chairman

CAROLYN B. MALONEY, New York         RON PAUL, Texas
MAXINE WATERS, California            MICHAEL N. CASTLE, Delaware
PAUL E. KANJORSKI, Pennsylvania      FRANK D. LUCAS, Oklahoma
BRAD SHERMAN, California             STEVEN C. LaTOURETTE, Ohio
GWEN MOORE, Wisconsin                DONALD A. MANZULLO, Illinois
GREGORY W. MEEKS, New York           WALTER B. JONES, Jr., North 
DENNIS MOORE, Kansas                     Carolina
WM. LACY CLAY, Missouri              JEB HENSARLING, Texas
KEITH ELLISON, Minnesota             TOM PRICE, Georgia
CHARLES A. WILSON, Ohio              PATRICK T. McHENRY, North Carolina
ROBERT WEXLER, Florida               MICHELE BACHMANN, Minnesota
JIM MARSHALL, Georgia                PETER J. ROSKAM, Illinois
DAN BOREN, Oklahoma


                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    March 7, 2007................................................     1
Appendix:
    March 7, 2007................................................    21

                               WITNESSES
                        Wednesday, March 7, 2007

Albino, Nitza Segui, CEO, International Migrants' Development 
  Fund...........................................................     9
Bendixen, Sergio, President, Bendixen & Associates...............     4
McNamer, Bruce, President & CEO, TechnoServe.....................    11
Orozco, Manuel, Remittances and Development Program, Inter-
  American Dialogue..............................................     6
Rhyne, Dr. Elisabeth, Senior Vice President, ACCION International     7

                                APPENDIX

Prepared statements:
    Waters, Hon. Maxine..........................................    22
    Albino, Nitza Segui..........................................    26
    Bendixen, Sergio.............................................    30
    McNamer, Bruce...............................................    51
    Orozco, Manuel...............................................    56
    Rhyne, Dr. Elisabeth.........................................    78


                       THE ROLE OF REMITTANCES IN
                   LEVERAGING SUSTAINABLE DEVELOPMENT
                   IN LATIN AMERICA AND THE CARIBBEAN

                              ----------                              


                        Wednesday, March 7, 2007

             U.S. House of Representatives,
                       Subcommittee on Domestic and
                     International Monetary Policy,
                             Trade, and Technology,
                           Committee on Financial Services,
                                                   Washington, D.C.
    The subcommittee met, pursuant to notice, at 2:15 p.m., in 
room 2128, Rayburn House Office Building, Hon. Luis Gutierrez 
[chairman of the subcommittee] presiding.
    Present: Representatives Gutierrez, Maloney, Moore, Clay, 
Hinojosa; Paul, Jones, and Roskam.
    Chairman Gutierrez. Good afternoon. The Subcommittee on 
Domestic and International Monetary Policy, Trade, and 
Technology of the Committee on Financial Services will come to 
order.
    Today's hearing is entitled, ``The Role of Remittances in 
Leveraging Sustainable Development in Latin America and the 
Caribbean.'' In this hearing, the subcommittee will examine the 
increasing sums of remittances flowing into Latin America and 
the Caribbean from the United States and around the world, and 
explore how these remittances can be leveraged by individuals, 
communities, banks, credit unions, international institutions, 
government, and NGO's, and used for long-term development 
opportunities in the region.
    Per the committee rules, we have agreed to limit opening 
statements to 5 minutes per side, but with no objection, all 
members may submit written statements for the record. We are 
expecting Floor votes around 3 p.m., at which time we will 
probably have to take a short recess, so I want to move as 
quickly as possible to our witness testimony.
    And with that, I now recognize myself for 5 minutes for an 
opening statement.
    This hearing has been a long time coming. It is the first 
hearing on the issue of remittances in the House Financial 
Services Committee since 2003. Since then, remittances in Latin 
America have increased from $38 billion to a staggering $60 
billion. And this is the first hearing, that I am aware of, to 
focus solely on the issue of remittances for sustainable 
development. I believe the focus of this hearing is 
appropriate, because of the sheer volume of remittances flowing 
to Latin America and the Caribbean, especially when compared to 
official aid and direct investment.
    This will be the first in a series of hearings on 
remittances. This spring, our subcommittee will hold another 
hearing to focus on the sending side of remittances, and the 
regulatory issues that are associated with the process.
    But today our distinguished panel is here to discuss the 
use of remittances by recipients for developmental purposes. As 
I said, remittances sent to Latin America and the Caribbean 
from all parts of the world were estimated to be at more than 
$60 billion in 2006. This amount surpasses both the official 
development assistance and foreign direct investment to the 
region.
    Seventy-five percent of forty-five billion of the 
remittances sent to these regions originated in the United 
States. Total remittances now represent 5 times the amount of 
official development assistance to Latin America and the 
Caribbean.
    The timing and importance of this hearing is punctuated by 
President Bush's imminent 6-day trip to Latin America. 
Coinciding with this trip, the President is calling for 
increased trade with the region and a promise of more aid. 
Earlier this week, he stated that since he took office, the 
President of the United States has doubled the amount of 
assistance to Latin America to a total of $1.6 billion last 
year--$1.6 billion versus $45 billion--which is more likely to 
spur sustainable development.
    The reality is that we are behind the curve when it comes 
to leveraging remittances for sustainable economic development, 
and I believe that the remittances issue should be part of the 
dialogue when it comes to trade issues and development in Latin 
America and the Caribbean.
    The majority of remittances are sent to improve the 
economic well-being of households in the recipient nation. 
Studies suggest that about 80 percent of remittances are used 
to pay for everyday needs of the recipients. That still leaves 
as much as 20 percent of savings--20 percent savings and 
investment. For Latin America in 2006, 20 percent represents 
$20 billion--still far more than the total official aid to the 
region.
    The challenge that remains is how to leverage remittances 
sent to Latin America and the Caribbean in a way that will help 
develop the economies of the recipient nations.
    We have a top-notch panel, which I will be introducing 
shortly, and I look forward to a vibrant discussion. But before 
I close, I would like to talk a little bit about the tradition 
of remittances. There is a long history and tradition of 
sending money to friends and loved ones in other countries, a 
tradition that is not unique to the United States. Migrant 
workers contributed heavily to their home country's GDP in 
Spain, Italy, and Ireland as early as the 19th century.
    In 1901, Italy was the first country in the world to enact 
a law to protect remittances, and in 1960, Spain was the first 
country to sign an international treaty to lower the cost of 
remittances received.
    The debates on this issue are also not new. My staff found 
a book published in 1856 that dedicated an entire chapter to 
objecting to remittances. At which group was the author's anger 
directed? The Irish; it seems that the hard-working Irish 
living in America sent $8 million in remittances back to 
Ireland in 1854. At this point, I recognize the ranking member, 
Dr. Paul, for his opening statement.
    Dr. Paul. Thank you, Mr. Chairman. As you pointed out, this 
is an issue that has been around for a long time, but it has 
come to the forefront more recently, because there is a lot of 
concern about immigration, and whether our immigrants are legal 
or illegal.
    I believe that when markets are free, and immigrants are 
legal, this is a non-issue. It's an economic transaction that 
is done voluntarily, and it should benefit everybody concerned. 
Today, conditions are a little bit different, and people are 
more concerned about the illegality of some of our immigrants.
    There is an incentive for illegal immigrants--or 
immigrants--to bring their families to this country if they are 
not able to receive a remittance. In many ways, if people are 
concerned about illegal immigration, they really ought to 
encourage remittances, instead of encouraging the immigrants to 
bring their families in.
    Just as other incentives encourage families to come in, if 
they are guaranteed amnesty or guaranteed welfare benefits, it 
makes it much easier to say, ``Bring the families along,'' 
rather than saying, ``Somebody is here legally and working, 
they should be permitted to send their money to whomever or to 
wherever they want.''
    The other concern I have for those who do worry about 
this--and I think rightfully so--is the idea that once you 
start to regulate, or put on controls, you can't do it on just 
those you don't want to participate. You have to put the 
regulations on everybody. It's sort of like gun control. And as 
a conservative, we want to control illegal use of guns, we 
don't want to take away the legal use of guns.
    But if we want to control certain individuals from sending 
remittances to some countries, we really have to regulate 
everybody, and everybody has to be regulated, and everybody has 
to make these reports. So, in an effort for those to tinker 
with these laws and make changes, I think I would urge caution 
that we never take away the freedom of choice and the freedoms 
that all Americans enjoy, and that we shouldn't tamper with.
    With that, Mr. Chairman, I yield back my time.
    Chairman Gutierrez. Thank you, Dr. Ron Paul, for your very 
insightful comments. I would like now, if the staff could 
please lower the screen?
    I am going to introduce the witnesses, while they take care 
of the technical issues. We have an excellent panel of 
witnesses today, all of whom are experts in the areas of 
remittances, or microfinance.
    Our first witness is Mr. Sergio Bendixen, president of 
Bendixen & Associates, and a widely recognized Hispanic public 
opinion researcher.
    Our second witness is Dr. Manuel Orozco of the remittances 
and development program at Inter-American Dialogue.
    Our third witness is Dr. Elisabeth Rhyne, senior vice 
president of ACCION International, where she focuses on 
remittances and microfinance issues.
    Our fourth witness is Ms. Nitza Segui Albino, founder and 
CEO of the International Migrants' Development Fund.
    And, finally, we have Mr. Bruce McNamer, president and CEO 
of TechnoServe, a company that focuses on microfinance and 
development around the world.
    And so I recognize Mr. Sergio Bendixen for 5 minutes.

 STATEMENT OF SERGIO BENDIXEN, PRESIDENT, BENDIXEN & ASSOCIATES

    Mr. Bendixen. Thank you so much, Mr. Chairman. It is an 
honor to be here. I have referred to the remittances as a river 
of gold that flows from the north, from the United States, from 
Europe, and from Japan, to Latin America, because of the sheer 
volume of money that goes down south.
    But I am now beginning to speak about remittances as maybe 
the most important economic engine for Latin America in this 
new century, because there is now clear evidence that the 
remittances that are received in Latin America are allowing 
people to have access to mortgages, to have access to small 
business loans, and to have access to investment products that 
will allow for the economic development of Latin America.
    I speak about the subject with a great deal of confidence, 
because the Inter-American Development Bank has given me the 
privilege of studying the remittance flows from the United 
States, Japan, and Europe to Latin America in surveys done in 
approximately 23 countries. We have interviewed more than 
60,000 people who either send or receive remittances. I am 
going to share with you--and I am very glad to see the Power 
Point presentation working--some of the basic facts and figures 
that we have learned over the last few years.
    First of all, let me remind--I don't think I need to remind 
you, Mr. Chairman, but for those who may not be so familiar 
with the process of remittances, we are talking about a process 
that involves the poorest of the poor. As you can see from this 
graphic, 75 percent of the Latin American remittances that send 
remittances home on a regular basis live on less than $30,000 a 
year. They are the working poor. And many of them live on the 
edge of the poverty line.
    And as you can see from this graphic, the percentage of 
Latin American immigrants that send money home has increased 
over the last 5 years. In a survey conducted nationally in 
2001, 59 percent of Latin American immigrants were sending 
money home. That number is now up to 73 percent. And maybe the 
exactness of the number is not important, but definitely the 
trend is up. Remittances will continue to increase over the 
next few years. The reasons why, we can discuss at another 
meeting, because there are many.
    But there is no doubt that remittances are increasing. 
There are now 12.6 million Latin American immigrants sending 
money home on a regular basis. They are sending money every 
month, at approximately $300 per remittance, for a total of 
$3,600 per year. If you do the math, we're talking about--and 
you referred to it--$45 billion sent from the United States to 
Latin America during 2006.
    And if you add the approximately $10 billion sent from 
Europe, mostly Spain, Portugal, Italy, and France to Latin 
America, and the $3 billion or $4 billion from Japan, and the 
$1 billion or $2 billion from Canada, you have $60 billion 
arriving in Latin America during the past year. That is $200 
million every day, of every week, of every month of the year; 
truly a river of gold.
    Let's put that $60 billion in context of what else--what 
kind of other money arrives in Latin America. When you total up 
the amount of money in foreign direct investment--the amount of 
money that Wal-Mart, that Toyota--we've been hearing lately 
about all the money the Chinese have been putting into Latin 
America--that adds up to only $45 billion.
    And when you look at the money that is put into Latin 
America as official development assistance--that's the World 
Bank, the IDB, the IMF, the money that we give as part of our 
aid program--we're talking about $6 billion.
    So, in comparison, as you mentioned in your opening 
statement, there is no doubt that remittances are now the 
largest source of capital that can benefit Latin America to 
economically develop.
    There is another great advantage of remittances that not 
everybody understands. This money does not go to the 
government. This money does not go to the big financial 
institutions. This money does not go to business interests. The 
remittances are a mechanism to redistribute wealth; they go 
directly to the people.
    As you can see in this graphic from our study in Mexico, 30 
percent of the money received in Mexico goes to the poor; 
another 57 percent, the yellow and the blue bars, goes to 
people who are working Mexicans; and 13 percent goes to the 
middle class. This is money that goes directly into people's 
pockets, and gives them the freedom and the choice to decide 
what to do with it.
    As I mentioned at the beginning of my presentation, there 
is now evidence, clear evidence--scientific evidence, I 
believe--that remittances are beginning to be used to leverage 
access to investment products.
    Back in 2003, in a poll conducted in Mexico, we found that 
about 20 percent of remittances were being used to open up a 
savings account to finance the university education of young 
people, to get a loan to open up a small business, to maybe 
build a house, or to get a construction loan. In a poll 
recently completed late last year--
    Chairman Gutierrez. You have 30 seconds. The little red 
light turned. You know, I will stay here all afternoon, but--
    Mr. Bendixen. That number was up to 40 percent.
    Now, what do I recommend to the committee? I think that the 
most important thing that I can say to you is to make it as 
easy as you possibly can for remittance senders to have access 
to a bank account.
    The FDIC pilot program in the City of Chicago for financial 
literacy has had great results in the City, and I think if it's 
taken nationally, if we can get more remittance recipients and 
senders to understand the value of having a relationship with a 
financial institution, the more that these remittances are 
going to allow these countries to be able to progress 
economically, as people begin to use the money, not just for 
consumption, not just for poverty alleviation, but for economic 
development. Thank you.
    [The prepared statement of Mr. Bendixen can be found on 
page 30 of the appendix.]
    Chairman Gutierrez. We will make sure we have them in our 
field hearing in Chicago. Thank you.
    Mr. Orozco, please?

    STATEMENT OF MANUEL OROZCO, REMITTANCES AND DEVELOPMENT 
                PROGRAM, INTER-AMERICAN DIALOGUE

    Mr. Orozco. Good afternoon. Thank you very much for 
inviting me to share with you some of the knowledge we have 
accumulated over time about the impact of remittances on 
development. I am going to focus most of my remarks on the 
policy opportunities to leverage these funds.
    My colleague sitting here, Mr. Gutierrez, has talked about 
the impact that the flows have. In practical terms, the impacts 
are both social and economic. At the social level, it has an 
effect on poverty reduction. One way to think about it is the 
following way--the flow of remittances that people receive are, 
most of the time, 30 percent above per capita income in most of 
these countries.
    So, for example, take a country like Nicaragua. Per capita 
income is $1,000. People are receiving about $2,000 in 
remittances. And if you look at another country, for example, 
Haiti--we just came back from Haiti, from presenting a study 
that we did there--the average amount sent is $150 a month. And 
the per capita income in that country is $600 a year.
    So, you can see how poverty reduction is really one of the 
effects that comes from remittances. More importantly, is also 
the economic effect that this has, and that is that there is 
a--not only the flow that goes for the--to take care of the 
basic needs of the population, but also a flow that has an 
effect on the daily activities through savings.
    In many of these countries--basically, in Central America 
and Caribbean countries, the flow of money that is saved by 
migrants, who have a higher propensity to save than people who 
do not receive remittances, may be as high as 50 percent of 
gross domestic savings in the whole country. So remittances are 
not only responsible for consumption, but also, they really 
help to increase the savings ratio of the country, and in turn, 
increase the capacity to provide financing for investment in 
the home country.
    All of these issues have a short-term and immediate-term 
effect in keeping people out of poverty. The policy challenge, 
from the development context, is how to get people out of 
poverty, given this reality.
    Last year, as you mentioned, $62 billion went to Latin 
America, predominantly from the United States. We have 
identified a number of policy opportunities and solutions, some 
of them based on actual experience and other ones on 
observation of other cases.
    I have submitted to you the testimony and material that 
contains it, but I am going to elaborate on some of them. One 
of them is strategies to improve competition and cost 
reduction.
    Specifically, one of those strategies deals with adopting 
the automated clearinghouse system called ``Directo a Mexico.'' 
It's a system that costs $.67, and it consists of making 
transactions from bank accounts in the United States to a bank 
account in Mexico.
    Another strategy is to introduce debit cards into the 
country. It improves security of transfers on the sending and 
the receiving side, but more importantly, it reduces the amount 
of cash in the street, and therefore, it increases the 
opportunity to have savings in the cards.
    The cost of transactions has declined, but you still can do 
more on that. And the competition in the money transfer systems 
right now is there is this disposition to get engaged in this 
type of activity.
    Another recommendation is to accelerate financial 
intermediation projects with credit unions and microfinance 
institutions. These institutions are predominantly in areas 
where a significant flow of the remittances go. And yet, there 
is not other financial access. The impact that you can have is 
quite considerable.
    In practical terms, funding projects that deal with 
financial product design, for example, can have an effect of 
transforming that remittance recipient client into a financial 
client with the proceeds, with credits, etc. And whenever this 
has happened, there has been a significant transformation rate. 
One out of three people end up having bank accounts as a result 
of having these relationships.
    The third recommendation is to engage banking, depository 
institutions, more actively into the banking remittance 
recipients, in particular. Right now, 60 percent of remittances 
are withdrawn from banking institutions, yet only 20 percent of 
people have bank accounts.
    And I think we need to promote a community reinvestment act 
in Latin America in a way that you require that the banks that 
are providing this financial service also provide the range of 
other financial services, from risk mitigation to savings and 
credit.
    In Central America, for example, at least 10 to 20 percent 
of the revenue that banking institutions have earned from the 
overall transactions that come from remittance transfers.
    Chairman Gutierrez. Mr. Orozco, if you could, summarize 
quickly your comments so that--your 5 minutes are up.
    Mr. Orozco. My 5 minutes are up.
    Chairman Gutierrez. I am--
    Mr. Orozco. And, finally, I think, looking at remittance 
literacy, it's another area that I think is very important. The 
central banks of these countries really do not have tools to 
provide financial or remittance literacy to their communities, 
to their societies, and that is really an easy area to work on, 
from the U.S. perspective. Thank you.
    [The prepared statement of Mr. Orozco can be found on page 
56 of the appenidx.]
    Chairman Gutierrez. Thank you.
    Now we have Dr. Rhyne. Please, for 5 minutes.

  STATEMENT OF ELISABETH RHYNE, SENIOR VICE PRESIDENT, ACCION 
                         INTERNATIONAL

    Ms. Rhyne. Mr. Chairman, thank you so much for inviting us 
here. We are always delighted to share with you the work that 
ACCION International is doing.
    Let me just tell you who ACCION is, and why we are here. We 
are a U.S. non-profit founded in 1961, working in microfinance. 
We work through banks and microfinance institutions, primarily 
in Latin America, to provide financial services to low-income 
people in 23 countries. We reach more than 2,000,000 clients, 
with a total portfolio of loans of $2.4 billion.
    Since 2002, we have been working on the remittances issue, 
and trying to get a handle on it. And our perspective on that 
issue is mainly drawn from our partner institutions, who are 
financial institutions in Latin America, and therefore, it's 
mainly on the receiving side.
    We have worked with banks such as Citibank and microfinance 
institutions such as Banco Solidario of Ecuador, to develop 
products that leverage the economic impact of the remittances 
on the receiving end.
    We agree with the previous presenters, that remittances, by 
their nature, do contribute to economic development. It is 
difficult to leverage that in a specific way, because these are 
small, private--and as Mr. Paul said--voluntary transactions. 
So, with policy and legislation, it is difficult to affect that 
contribution. We believe that the best policy stance towards 
remittance is one that supports the senders and the receivers 
to achieve their own goals. And that is the effort towards 
which we have been working.
    The market research that we have done challenges the 
traditional perception of migration as a one-way process. 
Today's immigrant hasn't abandoned her home country, but is 
living a life that integrates both the United States and the 
country of origin. This could be seen by the persistence of 
remittance flows which continue for as much as a decade or more 
after the immigrant leaves. That continued involvement is 
supported by communications technology, transformation, and the 
ability to move money from one country to another.
    On the sending side, ACCION has identified that there is 
really a remittances life cycle that influences the size, 
frequency, and potential use of remittance flows. People 
arrive, and they get themselves established. Their incomes are 
low at the beginning, then they kind of hit a middle period 
where their incomes are higher, they're more established, and 
they're still very closely connected to their home countries.
    During this period, which we kind of think of as a 2- to 5-
year period after they arrive in the United States, is a time 
when they are most interested in making--in having their 
remittance flows used for investment and asset building back 
home.
    As they have been in the United States longer, they tend to 
shift perspective a bit more, and make more of their 
investments here in the United States, but they continue to 
send the remittances back home.
    On the receiving end, there is a different sort of 
perspective, and I think that's captured by looking at the way 
that remittances are used. Some of the statistics we have 
already seen. Everyday needs constitute the major use of 
remittances, but there is a substantial fraction that are going 
for health, for education, and for savings and investments, 
including real estate.
    We are interested in helping people to have more ability to 
put the remittances into those latter categories. But a 
fundamental problem is that many of the remittances--receiving 
families don't have access to financial products and services 
that can allow them to make these kinds of investments. They 
are unbanked. The IDB research puts the percentage of 
recipients lacking a bank account at 90 percent, which is 
extremely high.
    So, what we have been trying to do--we have been trying to 
achieve two objectives. One is to increase the participation of 
banks at both ends of the remittances industry, to encourage 
the access of senders, and especially the access of receivers, 
to a broader array of financial services.
    We have also been trying to develop remittance-linked 
products that will assist the customers in meeting their long-
term financial goals.
    Now, where we stand in trying to do that is we are first 
confronted with the fact that 70 percent of remittances are 
cash to cash, and go through money transfer companies. We have 
been working in the past couple of years on projects involving 
moving these flows towards bank accounts. Because when flows 
are associated with bank accounts, the senders have more 
options for how to manage the money they receive. It's more 
secure, it's often cheaper, and they gain an access to a 
broader array of financial services.
    For example, we have been working with Citibank and Banco 
Solidario in Ecuador, to implement a bank-to-bank remittance 
services. Now, we have encountered a lot of challenges in this. 
Many of them are challenges because it's a new industry. The 
bank staff on the sending side are unfamiliar with the customer 
base.
    Chairman Gutierrez. Dr. Rhyne?
    Ms. Rhyne. They find it expensive to serve these 
customers--
    Chairman Gutierrez. I'm sorry, Dr. Rhyne? If you would--
    Ms. Rhyne. My 5 minutes are up already?
    Chairman Gutierrez. Yes.
    Ms. Rhyne. Okay.
    Chairman Gutierrez. It goes quickly here.
    Ms. Rhyne. It sure does.
    Chairman Gutierrez. We would like to ask questions, too.
    Ms. Rhyne. Let me say two things, then. One is the products 
that we have found that matter the most for receiving 
families--savings accounts, home improvement loans, and 
insurance products--we would like to be able to offer those 
transnationally, but find that there are many policy barriers 
that stand in the way.
    And in terms of policy recommendations, I would support the 
broad recommendations that Manuel Orozco just mentioned, 
promoting industry structures that allow for the smooth 
movement of funds, a competitive setting for the industry as a 
whole, for the removal of the barriers of access of senders to 
banking services, supporting the expansion of financial 
services to recipient families, which is ACCION's main 
business, and increasing the financial literacy of senders and 
receivers. Thank you.
    [The prepared statement of Dr. Rhyne can be found on page 
78 of the appendix.]
    Chairman Gutierrez. Thank you, Doctor.
    Ms. Albino, please?

 STATEMENT OF NITZA SEGUI ALBINO, CEO, INTERNATIONAL MIGRANTS' 
                        DEVELOPMENT FUND

    Ms. Albino. Chairman Gutierrez, and members of the 
subcommittee, thank you for the opportunity to be here.
    Before I continue with my testimony, I would like to 
provide you with a brief background of the International 
Migrants' Development Fund, FIDMi. FIDMi is a young, 
independent, not-for-profit organization based in Washington, 
D.C., whose mission is to contribute to poverty reduction in 
trans-national communities through their engagement in the 
formal financial system.
    FIDMi was founded in 2002 by a multidisciplinary group of 
community leaders, international and community professionals, 
development professionals, and finance experts concerned with 
the excessive cost of money transfer services, leverage 
remittances to improve the quality of living of immigrants and 
their families abroad, and creating a viable model for their 
insertion in the formal financial system.
    FIDMi's development model consists of one-stop affordable 
financial services, in partnership with Lafayette Federal 
Credit Union and other financial institutions in Central 
America, culturally appropriate, low-literacy, advocacy and 
community reinvestment, particularly capitalizing on the income 
generated as a result of our remittances program.
    Others have spoken about research, and so I am going to 
skip all of that, and I am going directly to some of our 
lessons learned. One of FIDMi's core programs is Semillas, 
``seeds,'' an education program that focuses on financial 
literacy. FIDMi--this program's main objective is to increase 
immigrants' capacity to understand and to engage in the formal 
financial system.
    This is particularly important, since large percentages of 
Latino immigrants--almost 50 percent--do not use the services 
of formal financial institutions, and did not have access to 
these institutions while living in their countries of origin. 
In many Latin American countries, according to a study 
published by Dr. Orozco, 2 in 10, in many countries, have bank 
accounts.
    A workshop session of our education curriculum discusses 
with program participants the impact of remittances at--as 
individuals, members of a family, and their countries of 
origin. Through these workshop sessions, our staff has been 
able to gather the following data. The vast majority of program 
participants--mostly women--send money to pay for health, 
education, and food expenses, to pay for all debts, and to pay 
the cost of investments such as mortgage loans, and small 
businesses.
    Immigrant practices show that remittances is an important 
factor for development. Through investing in education, health, 
nutrition, and business development, the quality of life for 
their families and children left behind significantly improves.
    Our concern is raised by the following question. What 
strategies can be leveraged so Latin American and Caribbean 
families consider migration as an option, and not a way out of 
their countries?
    Please allow me to share a few areas in which remittances 
can be leveraged: provide incentives to financial institutions 
to create services and products that can be accessed by poor, 
rural, and urban marginalized recipients of remittances; 
stimulate financial institutions receptors of remittances to 
partner with the third sector to provide basic financial 
literacy in rural and marginalized communities, including in 
communities of indigenous and African backgrounds; and engaging 
financial institutions and not-for-profit organizations to 
provide financial education in primary and secondary schools.
    Education programs should be accompanied by allowing 
youngsters who receive remittances to open savings accounts. 
Fomenting programs that provide microcredit for women who are 
remittances recipients. Microcredit for women will have a 
multiplied effect, since they will help increase health, 
education, and nutrition variables, for example, and are 
excellent money managers.
    Encouragement of an environment in which a wide range of 
financial institutions, including credit unions, promote their 
services in immigrant communities, leading immigrants to have 
access to credit and loans for investments in micro and small 
businesses, and mortgage loans, for example, that could be paid 
in the form of remittance or directly into their accounts in 
financial institutions abroad.
    Encourage and get to commit money transfer agencies, 
particularly the largest companies, to dedicate at least one 
percent of their income in supporting sustainable projects, 
particularly credit and savings programs, or small or medium-
scale impact, not through largest banks. This program should be 
tied to financial money management education.
    Encourage a climate in which immigrants interested in 
returning home can open savings accounts in financial 
institutions in the United States. A portion of monies that are 
saved will be matched at a three-for-one for micro and small 
businesses in their community of origin. Programs must be tied 
to business education program.
    Discourage state of the union to tax immigrants to send 
money to their countries of origin, since they, immigrants, 
are--
    Chairman Gutierrez. Sorry, your time is up, thank you.
    Ms. Albino.--continuing to mitigate poverty in their 
communities of origin.
    And lastly, widening the funding stream for innovative 
programs and projects that--lead by not-for-profit 
organizations in the United States that reach out to immigrants 
who are interested in investing in their home communities. 
Thank you, very much.
    [The prepared statement of Ms. Albino can be found on page 
26 of the appendix.]
    Chairman Gutierrez. Thank you.
    Mr. McNamer, please?

    STATEMENT OF BRUCE MCNAMER, PRESIDENT & CEO, TECHNOSERVE

    Mr. McNamer. Mr. Chairman, and members of the subcommittee, 
thank you for the opportunity to testify before the 
subcommittee to share our views on the potential for 
remittances to unlock economic growth for the world's poor.
    Almost 40 years ago, when a Connecticut entrepreneur named 
Ed Bullard created TechnoServe to apply private sector 
solutions to poverty in the developing world, he could not have 
foreseen the enormous potential power of these new capital 
flows as a tool for fighting poverty. Since then, TechnoServe 
has evolved to focus on building thriving businesses and 
industries as a catalyst for poverty-reducing economic growth, 
with a particular focus on the rural economy, where 70 percent 
of the world's poor reside. We operate in 15 countries 
worldwide, with a global staff of 400, mostly with backgrounds 
in the private sector.
    Mr. Chairman, remittance flows are a critical issue in 
relations between the United States and the developing world, 
particularly with the nations of Latin America. The roughly 40 
million Latinos living in this country sent a significant 
amount of capital to Latin America, roughly $60 billion last 
year. Remittances are an important source of capital. They now 
comprise more than official development assistance and foreign 
direct investment, combined, to Latin America.
    But while remittances represent enormous potential to 
create economic development in poor regions of Latin America, 
this potential has not yet been realized. While remittances 
help to feed families and educate children and meet other 
important basic needs, overall they have not been used for 
business start-up or growth--important catalysts for broad-
based economic development.
    The Inter-American Development Bank reports that less than 
10 percent of those receiving remittances have a savings 
account. Only about one percent of remittance flows have been 
used to start a business. This translated into significant lost 
opportunities to invest in productive economic activity in 
real, thriving businesses. And it is such businesses that offer 
the jobs and the income that have the potential to sustainably 
lift people out of poverty.
    How, then, to harvest the potential for these flows to 
jump-start private sector growth? How do we answer the question 
posed by this subcommittee on leveraging remittances for 
sustainable development?
    We would submit that in order to do so we need to think 
about this in a more holistic sense. And to think about capital 
intermediation here, on both the supply and demand side. 
Several factors need to be in place to enable and support the 
development of thriving enterprises. On the supply side, 
capital is certainly critical, and remittances are potentially 
a source of such capital, provided the right investment 
vehicles and incentives can be put in place.
    However, capital alone is necessary but not sufficient. On 
the demand side, you need viable business opportunities and 
entrepreneurs in which to invest. And the mere fact of capital 
will not guarantee that this happens. This is not a case of 
``build it and they will come.''
    And, in fact, what we have here is neither supply nor 
demand. Remittances are not pooled for capital investment, and 
there are too few viable undertakings in which to invest--a 
classic chicken/egg quandary: no businesses, little incentive 
for capital formation; no capital formation, no opportunities 
for business growth.
    So, what do we do? Well, we work on both. How do we 
facilitate the flow of remittances toward the flow of 
investment? That is, how do we work on the supply side? 
Critical to doing so is providing the right institution and 
policy framework for capital formation. And the simplest and 
most effective means for doing so is encouraging and 
aggregating remittances into savings accounts. To this end, we 
recommend a broadening of emphasis, particularly in the 
microfinance field, from microloans to providing savings 
accounts. This requires a range of new products and services, 
and a strengthening of institutions to provide them. And, in 
fact, there are a number of NGO's and others, including people 
at this table, who are currently doing just this.
    From this base, you can start to think, then, about more 
systematically capturing remittance flows directly into savings 
accounts, and perhaps from there into more sophisticated 
services. For example, strengthen local institutions as agents 
for the provision of loan guarantees from individuals or home 
town associations in the United States to investments in Latin 
America.
    Beyond this--and, again, still on the supply side--there 
may be other opportunities for capital formation. Tax 
incentives for the creation of pooled investment vehicles in 
the United States could create a means for U.S.-based citizens 
of other nations to invest in businesses in their home 
countries. There are existing examples of successful funds in 
Latin America, based on remittance flows. More such products 
need to be developed to catalyze investments for business 
start-up and growth.
    But again, availability of capital and market access alone 
are not enough. Would-be investors need productive enterprises 
in which to invest their capital. Without a growing pipeline of 
entrepreneurs developing viable competitive businesses, there 
is little opportunity to channel remittances away from 
household consumption into business investment.
    So, we must increase the focus on the demand side of the 
business creation equation, to providing business building 
skills and know-how, information, technology, business support 
services, and the facilitation of market linkages. Development 
assistance funds like those administered by USAID and IADB have 
an important catalytic role in providing those components, 
supporting entrepreneurship development programs, bringing in 
private sector actors and creating market linkages, and working 
to build international trading capacity.
    Our own experience shows that providing this programmatic 
support for business formation and growth, focused 
interventions, can spear dynamic new businesses and real 
sustainable growth.
    As just one short example, with the support of USAID and 
other partners, TechnoServe has run business plan competitions 
throughout Central America. In El Salvador, in the past 3 years 
alone, these competitions have helped entrepreneurs create over 
160 companies, generating over $30 million in revenues, and 
creating over 1,000 jobs. The entrepreneurial spirit is alive 
and well in the region. What it needed is the catalyst to 
unleash and power it.
    Development assistance channeled to these types of 
entrepreneurship, development, and trade capacity-building 
activities has a vital role to play. But again, this is a two-
sided equation. Get the supply and get the demand. And in that 
context, remittances play a potentially critical role. Thank 
you.
    [The prepared statement of Mr. McNamer can be found on page 
51 of the appendix.]
    Chairman Gutierrez. Thank you. I recognize myself for 5 
minutes.
    Mr. Orozco, and Mr. Bendixen, this question is for both of 
you. With all of your combined experience on the ground in 
Latin America and the Caribbean, and experience with the Inter-
American Development Bank, what direction could we give to the 
International Development Bank, through legislation or 
otherwise, that would assist the Bank in encouraging the 
nations of Latin America and the Caribbean to focus on this 
issue, and to start to harness remittances for developmental 
purposes? Mr. Orozco, would you care to go first?
    Mr. Orozco. I think the primary direction is to establish a 
collaborative agreement between the United States and these 
countries, where there is an element of cross-conditionality. 
You provide technical assistance to increase financial access 
to people who receive remittances, to increase the savings 
ratio in the country, in the communities. In exchange for that 
support, economic performance of these countries needs to be 
demonstrated.
    I think the issue of increasing investment portfolios is 
very important. I don't think that everybody can be an 
entrepreneur. But you can enable the environment to offer the 
opportunities for people who can have the chance to do so, to 
have access to financial resources.
    And there are plenty of institutions that can do that. The 
Inter-American Development Bank, so far, has provided $70 
million in funds with remittances. And the return of that 
investment has been that one out of three people are getting 
financial access who--of those people who withdraw money at the 
microfinance institution. This is an important success, when 
you think especially in terms of the millions of people who are 
receiving remittances.
    So, we need to expand that through USAID, through OPIC--
OPIC is in a strategic position, the Overseas Private 
Investment Corporation, to do so. They have the funding. Thank 
you.
    Chairman Gutierrez. Mr. Bendixen?
    Mr. Bendixen. Mr. Chairman, I am biased. But the message I 
would send to the IDB is keep doing the great work that you 
have been doing. The Inter-American Development Bank has 
focused a light on this whole process. It was instrumental in 
bringing the cost of sending money to Latin America down 
substantially. It is now taking a leading role in making sure 
that government and business and financial institutions and the 
people themselves know that there are financial opportunities, 
that this money can be leveraged for the well-being of their 
families and of their countries.
    And I would also make this point. I think that the great 
thing about remittances is that the government just doesn't 
really need to get all that involved. The process is already 
working, even though a couple of the witnesses might not agree 
with my figures, the latest research done by the IDB shows that 
there is now 40 percent of the money sent in remittances in 
some countries, like Mexico and Brazil and Peru, that is 
available for economic development.
    Remittance companies have done a great job in getting the 
money there quickly and getting it there safely. And now they 
are beginning to offer mortgages, small business loans, and 
access to capital.
    I think that, in a way, just allows the process to 
continue, makes sure that there is a light on it, so that 
everybody is well informed, and makes sure that the data is 
good. There is so much money there, that if we just leave it 
alone and allow private enterprise to do its work, it will lead 
to tremendous things in Latin America.
    Chairman Gutierrez. Thank you. We will continue to work--I 
don't know who would like to respond to this question, but 
maybe--there is a thought that says, ``Well, you know, all of 
this money, all these billions of dollars leave the United 
States of America and go--and aren't spent here. So you don't 
buy cars here, you don't buy clothing here, you don't create 
economic development here with the capital. You don't invest, 
and so that money is just sent away, $60 billion''--well, $35 
billion from the United States. How--Ms. Albino, how would you 
respond to that?
    Ms. Albino. I would say, first of all, that probably 60 to 
70 percent--I read a figure that is around 80 percent of the 
money stays here. And one of the problems that we find is that 
immigrants do not have access to the formal financial system, 
so they use other means to distribute their money, or to use 
their money, or, to hide it in their mattresses, so to speak.
    And opening the opportunities for immigrants to save here, 
investments can be done in here as well. You know, a lot of 
immigrants are here to stay. So their dreams to build capacity 
here, to have better conditions of living in the United States 
is also a very important aspect of it.
    Chairman Gutierrez. Thank you very much. Dr. Ron Paul, the 
gentleman from Texas, is recognized for 5 minutes.
    Dr. Paul. Thank you, Mr. Chairman. I want to follow up on 
the chairman's comments about where this money goes, and what 
good it might do or not do.
    I was pleased to hear Mr. McNamer emphasize the private 
approach to solving poverty, and that, of course, is what I 
have always emphasized. I am not a fan of foreign aid. I don't 
see foreign aid as being voluntary. I see that as extracting 
funds from poor people here, sometimes, and sending it to 
governments elsewhere. And I certainly favor market decisions 
over bureaucratic decisions.
    So, this idea that there are remittances that go into these 
countries, I think, is actually a good alternative to foreign 
aid. If you're not a supporter of foreign aid and you still 
want to help, you don't want to do anything to interfere with 
this, because there is really--the way I see it--no dark hole.
    They get the money, and some of it will come back here, and 
they will buy American products. And the other thing that might 
happen is they might buy a Treasury bill, some of that money 
might end up buying a Treasury bill, which serves our interest.
    I guess the closest thing to a dark hole would be if the 
money is cash and it goes into the underground economy, but 
even that is not a negative for us, because that is literally 
an interest-free loan. I mean, they could have put it into a 
Treasury bill and earned interest, but they just take the cash.
    It might not be good for us in the long run, because it 
encourages us to inflate--that is, create money to buy goods 
and services and pay these bills--and we literally get the 
benefit, temporarily, of exporting our inflation. So when these 
funds leave our country and maybe sit there, it's not a 
disadvantage. I don't see many disadvantages for allowing 
remittances to occur.
    And I don't have a precise question, but I would just like 
to get Mr. McNamer maybe to follow up on this, and maybe give 
me an idea about how these funds would be broken down. Is the 
amount that goes into the underground economy minuscule, and do 
some of these dollars end up buying Treasury bills? And just 
how do you see these dollars playing out in the marketplace?
    Mr. McNamer. Well, I have to start with the disclaimer that 
I am not here as the remittance expert. I sort of operate more 
on the business development side. But just a couple of 
comments.
    Agreeing wholeheartedly with what you have said, and 
pointing out in addition, a lot of these monies cannot--if they 
are productively invested in businesses--generate a set of 
service and products that can actually become part of the trade 
flows between our countries, and then thereby actually offering 
American citizens a broader set of cheaper goods and services 
from other countries. So it actually does come back to this 
country.
    And I couldn't agree more that these are private 
individuals transacting privately, making private decisions 
about where they want to allocate their monies. As to kind of 
the level and amounts of, you know, where these variance 
remittances go, I have to sort of disclaim any real precise 
knowledge of that.
    Dr. Paul. Dr. Rhyne?
    Ms. Rhyne. Thank you. I wanted to comment on the issue 
about whether remittances are a substitute for foreign aid. I 
think that foreign aid is aimed at different purposes, it's 
aimed at achieving structural change in the countries.
    And if you look at the history of USAID and its support for 
microfinance over the years, one of the reasons that we're even 
talking about the progress that has already been made in 
helping recipients gain access to financial services in the 
home countries is because of the investments that USAID has 
made over the years in microfinance that helped create some of 
those institutions.
    Chairman Gutierrez. Thank you.
    Mr. Bendixen. Just quickly, Congressman, because foreign 
aid is not in the same order of magnitude as remittances, let 
me read you the figures for Mexico. Mexico, in 2006, received 
$35 billion in oil revenues, $25 billion in remittances, $17 
billion in foreign direct investment, $14 billion in tourism, 
and when it comes to all the aid, $110 million. So you're 
comparing $25 billion to $110 million. It's not even a part of 
the same conversation, in all honesty.
    Dr. Paul. I would say maybe that's a proper proportion. I 
yield back.
    Chairman Gutierrez. Thank you. Thank you, Dr. Paul. I yield 
to the gentleman from Missouri, Mr. Clay.
    Mr. Clay. Thank you, Mr. Chairman, and thank you for 
holding such an interesting hearing.
    Ms. Albino, in your testimony, you mentioned the importance 
of providing financial literacy to all, especially in Latin 
America, and including those of indigenous and African 
heritage. Please discuss some of the unique obstacles faced by 
these groups when it comes to financial literacy and financial 
issues in general.
    Ms. Albino. Well, we know that indigenous and African 
descendants are the poorest in the region. So, the point is 
that if we provide financial literacy and opportunities for 
business development, there might be another angle in which our 
communities can be better off.
    Mr. Clay. So that would be a way to kind of attack poverty 
in--
    Ms. Albino. Of course. And Mr. Orozco can tell you more, 
and probably Ms. Rhyne and--
    Mr. Clay. I was getting to Ms. Rhyne. Thank you so much.
    Ms. Albino. And Mr. Bendixen, for instance, on Honduras and 
in Central America, the experiences with remittances.
    Mr. Clay. Okay, thank you. Perhaps Dr. Rhyne or Mr. 
Bendixen would like to address the question.
    Ms. Rhyne. Quickly, to comment on some of the goals of the 
financial literacy work that we do--one, is we want people to 
be able to think about what their life financial goals are, how 
to set them, and how to plan and go about achieving them.
    Two, is to understand what the available options are for 
themselves, as consumers of financial services, to understand 
how financial services work.
    And, three, how to be a smart consumer, to tell the 
difference between a good set of services that are being 
offered, and one that is not being offered on proper terms.
    Mr. Clay. Thank you for that. Mr. Bendixen?
    Mr. Bendixen. Again, a set of figures--five million out of 
six million Latin Americans go to a bank to pick up their 
remittance. Their relative in Europe or the United States or 
Japan sends it through a remittance company, but they go pick 
it up at a bank, 50 or 60 percent. About 10 percent have a bank 
account. They're showing up at the bank every month.
    Mr. Clay. They might as well stop in and open an account.
    Mr. Bendixen. They are picking up $200 or $300 every month, 
and the bank doesn't offer them a savings account, a checking 
account, nothing. And when you look at Haitians, and when you 
look at the black people in Latin America, it's even lower.
    So, there is a rejection, almost, from the banking 
institutions in Latin America to let the regular people into 
the system. Now, that's something that is changing, and it's 
changing fast. But I want to point out that right now a lot 
more could be done by the banks. The remittance companies are 
the champs here.
    Mr. Clay. Thank you.
    Mr. Bendixen. They let everybody participate. The banks--
    Mr. Clay. Thank you for that response, Mr. Bendixen. Dr. 
Rhyne, let me ask you, in your written testimony you mentioned 
that ACCION has helped banks and microfinance institutions set 
up remittance services through partnerships with money transfer 
companies and bank-to-bank services through Citibank and 
others.
    In what countries is this taking place, and how successful 
has it been? And is it something that ACCION intends to 
replicate in other areas of the region?
    Ms. Rhyne. It is--we have worked in five or six countries. 
We are working in Mexico, we have worked in Ecuador, Peru, 
Bolivia, Haiti--am I forgetting--we are working now in 
Nicaragua.
    We have been, I think, successful in helping our 
institutions, who are small financial institutions, gain access 
to the remittance industry on the receiving end, to become 
distributors of remittances. And I think it's--we have faced a 
harder challenge on the side of developing the cross-sell 
financial products.
    So, we are encountering more barriers to putting these 
funds into loans and mortgages, but we are able to bank the 
customers and offer them savings accounts.
    Mr. Clay. Okay. Thank you. And my final question is to Ms 
Albino. In your testimony, you mention encouraging the large 
money services businesses to dedicate one percent of their 
income to support sustainable development projects. That's an 
interesting idea.
    My first question is, have you suggested this to the 
industry?
    Ms. Albino. In the past, I worked for a multi-lateral 
organization, the International Organization for Migration. We 
developed a program with various countries, primarily Caribbean 
countries, and we approached Western Union--that was in the 
past; there have been changes since then--and MoneyGram, so 
they could devote at least one percent of the income, or the 
profits they generate. And of course, at the time, there was no 
interest.
    There has been a lot of changes in the industry, which we 
have to recognize. However, there is a lot more to be done in 
that direction.
    Mr. Clay. My time is up. Thank you all for your responses.
    Chairman Gutierrez. Thank you, Mr. Clay. And to my good 
friend from Texas, a gentleman that has shown great interest in 
this issue and has been very helpful, Mr. Hinojosa.
    Mr. Hinojosa. Thank you. I have enjoyed all of the 
presenters. I think they have interesting information, and 
particularly Bendixen's Power Point presentation, and how 
important these remittances are throughout the world, and 
particularly those that have over $1 billion in remittances, 
based on that map that I saw.
    But I think of most interest to me were some of the points 
that were made by Dr. Rhyne and Ms. Albino, the reason being 
that you seem to be addressing how microloans can help people 
if they had the financial literacy to invest it or to start up 
small microentrepreneurship businesses.
    And most Congressmen like myself who have regions and 
pockets throughout our Congressional district where there is 
great poverty, where there is high unemployment, they are--they 
have a similarity to these countries that you all talked about, 
the difference being that they don't have $500 or $1,000 annual 
income, like some of these countries do. And yet, they don't 
seem to come out of that hole where there is so much poverty 
and many are second, third, fourth generation of immigrants--
forgive me, not immigrants, but migrants, going to harvest 
crops and coming back. So, it's interesting that you all come 
up with some ideas.
    And so, I will start with my first question to Ms. Albino. 
You mentioned ways to leverage the remittances. What have you 
found has worked best in the areas that you have studied, and 
why would they be successful and other areas unsuccessful?
    Ms. Albino. You mentioned financial literacy and some of 
the barriers that some of your constituents have. One of the 
interesting lessons that we learned last year when we launched 
a program is that we were conducting and facilitating financial 
literacy courses to our members and clients. However, we didn't 
have a very rich--they couldn't address opening bank accounts 
or accessing financial products.
    And what we did, in order to come up with a solution, was 
to engage in a relationship with a financial institution, with 
a credit union. Through the credit union now, we not only do 
financial literacy and money management courses for individual 
counseling, what we do also is to engage them in the process. 
We engage them in the financial institution that provides them 
with an adequate product that they can use.
    There are no maintenance fees. In some of the products--for 
instance in checking accounts or savings accounts--there is no 
cap. So you can--with their membership, you can put $5 or $10 a 
month into your account, and you can keep your account, and no 
charges will be made, for instance.
    So, microcredit is also another vehicle in which we found 
that some of our clients could benefit, so that they can better 
their lives.
    Mr. Hinojosa. Dr. Rhyne?
    Ms. Rhyne. Yes, our primary business is offering financial 
services, and in particular, working capital loans for 
microbusinesses. And we do that both in the United States and 
in Latin America and around--in other countries, as well.
    One of the issues is the percentage of receivers of 
remittances who are already microentrepreneurs, or in a 
position to become microentrepreneurs, varies. In Nicaragua, 
for example, we found that was a third, so that's a very 
substantial fraction to work with, in terms of offering them 
loans.
    What we want to do is to make sure that--and we're working 
on the sort of underwriting methodologies to do this--is how 
can somebody who is receiving a remittance payment get credit 
for that--in terms of his capacity to borrow? So, if you're 
receiving the money on a regular basis, that is--it becomes 
part of your income, but it's very hard to establish that kind 
of, you know, banking framework as something you should be 
getting credit for, and therefore, saying you can borrow this 
money. But we're working on methodologies to do just that.
    Mr. Hinojosa. One question to you. With Citigroup being in 
Mexico, as successful as they are worldwide, it seems to me 
that they would be the ones to set the example to other 
bankers, receiving those remittances and to open up accounts to 
take the unbanked and open up accounts. Is that happening?
    Ms. Rhyne. Yes, it is happening. It is--you have to think 
of Citibank as a very large bureaucracy. You have groups within 
those institutions who are very interested in making that 
happen, but you have a lot of inertia; it is like turning 
around the QE II.
    So, yes, they are successful, but they do have to overcome 
embedded kind of interest in not being--or lack of interest in 
this market segment.
    Mr. Hinojosa. I yield back.
    Chairman Gutierrez. Thank you, very much. Are there any 
further questions of members of the committee?
    I ask unanimous consent that all members have 5 days to 
revise and extend their remarks. I would like to say thank you 
to Mr. McNamer, Ms. Albino, Dr. Rhyne, and Dr. Orozco. I would 
like to give a special thanks to Mr. Bendixen for his work on 
the causes of better understanding our community, others--you 
are helping me understand our community. Imagine, if I have to 
try to understand them, imagine the ignorance that exists 
outside.
    And I think that, as the President goes to Latin America, 
maybe--according to this panel--it's pretty clear that foreign 
aid is good, maybe, economic development is good, but it seems 
to me he better focus on remittances. Thank you so, so much.
    [Whereupon, at 3:12 p.m., the hearing was adjourned.]


                            A P P E N D I X



                             March 7, 2007


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