Release number IFAD/41/06

London, November 13, 2006 – A new initiative to improve financial services that allow foreign workers to send money back to their families – most often in poor countries – was jointly launched today by the International Fund for Agricultural Development (IFAD), the European Commission AENEAS Programme and the Consultative Group to Assist the Poor (CGAP). The €4.2 million Financing Facility on Remittances will award individual grants of up to €200,000 to support innovative money transfer, or ''remittance''services in rural areas that are cost-effective, easily accessible and, when possible, linked to other financial services such as savings, insurance and lending.

 “Remittances can be a vital lifeline for rural families,” said Henri Dommel, a senior technical adviser on rural finance for IFAD. ''While the individual amounts are often small, remittances arrive directly into the hands of poor people, so they have a very direct impact on improving livelihoods.''
''As a flow of capital into developing countries, remittances represent more than overseas development assistance – and are second just behind foreign direct investment,'' said Jennifer Isern Lead Microfinance Specialist for CGAP, a microfinance group housed at the World Bank.
The World Bank estimates that remittances to developing countries from overseas workers totalled $167 billion last year. Including unrecorded informal transactions, the bank estimates that total remittance flows may be as much as US$ 250 billion a year.
''The scale is huge – one in every six people may receive some kind of support through remittances,'' said Isern. “Reducing the cost and increasing the accessibility of those services is urgent, and will have direct and dramatic benefits for poor people.”
Competition has driven down the fees charged for wire transfers by roughly half since the late 1990s, allowing billions more to cross borders. But cost and accessibility still remain prohibitive for many poor people, particularly those in rural areas. Building on earlier remittance work, the Financing Facility on Remittances will promote access to remittances, especially in rural areas, by enabling local financial institutions to provide the service directly, or as an agent of commercial banks and remittance operators.
The project places particular emphasis on linking remittances to other financial services where possible. ''The impact of remittance services goes up dramatically when they are linked to other financial services such as savings, insurance and lending,'' said Marlene Vermorken of EC-EuropeAid. ''When combined with other services, remittances offer a rare chance to accumulate savings, invest in schooling, housing or a small business. Ultimately, they can help poor people to chart their own paths out of poverty.'' 
Household surveys sponsored by the World Bank show that remittances have reduced the number of people who live below the poverty line in countries like Uganda, Bangladesh and Ghana.
''But remittances are only one part of development, and what is important is how that money is used once it arrives,'' said Isern. ''So we hope that recipients will harness the full power of their remittances by saving, investing, and using the funds to fuel the engines of local prosperity.''

The fund plans to select its first round of grant recipients in early 2007 after a call for proposals and a competitive review process.

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About IFAD
IFAD is a specialized agency of the United Nations dedicated to eradicating poverty and hunger in rural areas of developing countries. Through low-interest loans and grants, it develops and finances projects that enable rural poor people to overcome poverty themselves. There are 188 ongoing IFAD-supported rural poverty eradication programmes and projects, totalling US$6.3billion. IFAD has invested more than US$2.9 billion in these initiatives. Cofinancing has been provided by governments, beneficiaries, multilateral and bilateral donors and other partners. Since starting operations in 1978, IFAD has invested US$9.2 billion in 716 programmes and projects that have helped approximately 301 million poor rural men and women achieve better lives for themselves and their families.

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About CGAP

The Consultative Group to Assist the Poor (CGAP) is a resource center for the microfinance industry, setting standards, offering technical and advisory services, training, and information on best practices, in addition to providing funding for innovative projects. Its 33 members – including bilateral, multilateral and private donors – are committed to building more inclusive financial systems that work for the poor. In 2004, the G8 endorsed CGAP’s Key Principles of Microfinance. More information at www.cgap.org

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About EC and EuropeAid
The European Commission is the European Community’s executive body. EuropeAid Co-operation Office is a department of the Commission, EuropeAid forms part of the portfolio of Ms B. Ferrero-Waldner, Member of the Commission with responsibility for External Relations and European Neighbourhood Policy. On 12 November 2004 the European Commission adopted a decision concerning the AENEAS Programme, aimed at providing specific and complementary financial and technical assistance to third countries in the areas of migration and asylum. This programme is based on the Regulation (EC) No 491/2004 of the European Parliament and of the Council of 10 March 2004.