News Releases

May 24, 2007

IDB Fund approves US$725,500 for alternative remittance distribution channels in Ecuador

Program will benefit small Ecuadorian financial intermediaries

The Inter-American Development Bank’s Multilateral Investment Fund announced today the approval of a US$ 725,500 grant to expand remittance distribution channels in Ecuador by integrating regulated and unregulated credit unions into the high-tech national payment system administered by the Banco Central de Ecuador (BCE).

The main objective of the program is to help bring remittance recipients, particularly those in marginal and rural areas, into the formal financial system through financial intermediaries offering quality remittance transfer services.

Based on information from the BCE, migrant remittances in Ecuador grew nearly tenfold – from US $200 million to US $2.005 billion – from 1993 to 2005. Remittances average US $175 per transfer and benefit close to one million Ecuadorians, or 14 percent of the population.

However, remittance transfers in Ecuador are costly and slow, and access to formal banking channels is limited in rural areas, increasing costs, time and risks, according to project team leader, Rosa Matilde Guerrero.

“Remittance companies channel electronic transfers through national and international correspondent banks’ systems that find it quite costly to work with small financial intermediaries, particularly if they are unregulated or located in geographically remote areas,” said Guerrero.

Under the proposed project, the BCE will incorporate these small, rurally located financial intermediaries into a high-technology interbank payment system, such as the National Payment System, which will facilitate remittance transfers by reducing costs and transfer times and optimizing access to remittances in rural areas through the use of formal channels.

“This will in turn reduce the volume of flows through informal, risky channels and promote the recipients’ inclusion in the formal financial system,” added Guerrero.

MIF, an autonomous fund administered by the IDB, supports private sector development in Latin America and the Caribbean, focusing on microenterprise and small business.

Also available in: Español