Migrant transnationalism and the choice of transfer channels for remittances: the case of Moldova

Abstract

Migrant remittances, particularly when transferred through the banking system, may contribute to financial development in migrants' home countries. We analyse the determinants of the choice of transfer channel (formal services versus informal operators or personal transfers) by Moldovan migrants in 2006. We estimate a multinomial logit model from household survey data. Our explanatory variables include socio‐economic characteristics of the migrant and other household members, the pattern of migration (destination country, legal status, duration), and financial information (average amount and frequency of payments). Key reasons not to use a formal transfer channel are a migrant's emphasis on low transfer cost (rather than speed, convenience or security), irregular legal status in the host country, and short migration spells. Our findings demonstrate that migrants' transnational capacities and activities in their entirety bear upon the choice of transfer channel; any policy interventions to promote the use of formal channels should reflect this.

Labour Migration from the Eastern Partnership Countries: Evolution and Policy Options for Better Outcomes

“…By contrast, informal transfers remain attractive especially for irregular migrants who do not wish to submit identification when making a transfer. Personal transfers are convenient enough but assume that somebody trusted is visiting the country of origin at the right time (Siegel, Luecke, 2013).…”

Personal values and characteristics of remittance channels: Insights from a means‐end‐chain study

“…In addition to studying the motivations to remit, scholars have started to understand the impact of the characteristics of remittance channels on the amount of financial remittances (e.g., Freund & Spatafora, 2008;Gibson, McKenzie, & Rohorua, 2006;Orozco, 2002;Yang, 2011) and on the choice of the channel (e.g., formal, informal, and personal remittances; e.g., Karafolas & Konteos, 2010;Kosse & Vermeulen, 2014;Siegel & Luecke, 2013). Three sets of channel characteristics have been highlighted as important in this regard: personal incentives (e.g., anonymity/secrecy, cultural familiarity, and personal contact); customer service characteristics (e.g., transparency, dispute resolution, accessibility, language, discrimination, and reliability/versatility); and economic characteristics (e.g., speed, cost, secondary 2 For example, it has been found that household income is negatively related to the amounts of remittances sent by altruistic-motivated immigrants whereas it is negatively related to the amounts of remittances sent by purely self-interested immigrants (i.e., whereas purely altruistic immigrants remit to support families with lower income, purely self-interested immigrants prefer not to remit to families with lower income because they will not directly benefit from the remittance: for example, through future inheritance) (Hagen-Zanker & Siegel, 2007).…”

“…benefits, and legal or regulatory aspects; Hernández-Coss, 2005). To date, studies have shown that the cost of financial remittances is the most relevant characteristic in determining the choice of remitting small amounts and through informal channels (e.g., Freund & Spatafora, 2008;Kosse & Vermeulen, 2014;Lerch et al, 2007;Orozco, 2002;Siegel & Luecke, 2013). Migrants instead are encouraged to use formal remittance channels when they prefer other transfer characteristics, such as speed, accessibility, and security (e.g., Karafolas & Konteos, 2010;Kosse & Vermeulen, 2014;Siegel & Luecke, 2013).…”

“…A number of studies have focused on individual remittancesender motivations to remit, identifying altruism, tempered altruism, and self-interest as main motives (for reviews, Rapoport & Docquier, 2006;Solimano, 2003). Other studies have shown that remittance channel characteristics-such as cost, speed, trust in the intermediary, and convenience-affect individual remittance behaviours (e.g., Freund & Spatafora, 2008;Lerch, Dahinden, & Wanner, 2007;Siegel & Luecke, 2013).…”

Estimating the economic model of Hundi using micro-level data

“…In this way, people living in rural areas are more likely to have less access to certain channels. There is also perceived access; someone who is uneducated and has little knowledge about the financial system may be too intimidated to walk into a bank, so essentially, that person does not have access to the bank (Siegel and Lücke 2009).…”