Post by Sapphire Capital on Aug 8, 2008 20:16:09 GMT 4
Understanding the Development Potential of Worker Remittance Securitization
Heather Hughes
American University - Washington College of Law
American University, WCL Research Paper No. 2008-39
Abstract:
Financial institutions are seeking to leverage the value of the cash that emigrant workers remit to their home countries. Specifically, banks in developing countries have securitized remittance cash flows. The size and stability of worker remittances have caused a surge of interest among financial institutions, academics and others in recent years. Remittance securitizations - or, issuances of remittance-backed bonds - present specific instances in which parties in remittance-receiving countries have actually harnessed the value of remittances in order to access capital markets. Remittance flow securitization can enable developing region banks to raise funds at advantageous rates. Because these future-flow transactions depend upon the bank's capacity to retain or grow its market share of the cash flow securitized, they present an opportunity to ensure better services and lower costs to remittance senders and receivers. Remittance securitization could provide strong incentive for banking with the poor. Worker remittances are generated by emigration that can deprive communities of human capital necessary to effectuate development locally. This article considers possibilities for, and the propriety of, structuring these securitizations to maximize their development potential for remittance-receiving communities. The article explains how remittance securitization works and develops a list of questions to consider in assessing the implications for development of this financing practice.
papers.ssrn.com/sol3/papers.cfm?abstract_id=1096700
Heather Hughes
American University - Washington College of Law
American University, WCL Research Paper No. 2008-39
Abstract:
Financial institutions are seeking to leverage the value of the cash that emigrant workers remit to their home countries. Specifically, banks in developing countries have securitized remittance cash flows. The size and stability of worker remittances have caused a surge of interest among financial institutions, academics and others in recent years. Remittance securitizations - or, issuances of remittance-backed bonds - present specific instances in which parties in remittance-receiving countries have actually harnessed the value of remittances in order to access capital markets. Remittance flow securitization can enable developing region banks to raise funds at advantageous rates. Because these future-flow transactions depend upon the bank's capacity to retain or grow its market share of the cash flow securitized, they present an opportunity to ensure better services and lower costs to remittance senders and receivers. Remittance securitization could provide strong incentive for banking with the poor. Worker remittances are generated by emigration that can deprive communities of human capital necessary to effectuate development locally. This article considers possibilities for, and the propriety of, structuring these securitizations to maximize their development potential for remittance-receiving communities. The article explains how remittance securitization works and develops a list of questions to consider in assessing the implications for development of this financing practice.
papers.ssrn.com/sol3/papers.cfm?abstract_id=1096700