Release number IFAD/23/07

US$10 million fund to finance innovative projects around the world, with support from European Commission, Luxembourg, IDB, CGAP and UNCDF

Guatemala City, March 18, 2007 – The United Nation’s International Fund for Agricultural Development (IFAD) today announced the launching of a global initiative to improve remittances services that allow foreign workers to send money back to their families in rural areas around the world.

With financial support from the European Commission, the government of Luxembourg, the United Nations Capital Development Fund, the Consultative Group to Assist the Poor and the Inter-American Development Bank, the Rome-headquartered IFAD will establish a US$10 million Financing Facility for Remittances to fund innovative money transfers to Africa, Asia, Latin America and the Middle East.

“Remittances are a vital lifeline for rural families around the world,” said Pedro de Vasconcelos, coordinator of IFAD’s new remittances program. “These transfers go directly to improve the living standards of millions and millions of poor households.”

According to estimates by different multilateral agencies, worldwide remittances could represent more than US$250 billion a year, far surpassing overseas development assistance to poor countries. While competition has driven down the cost of these services between major cities, they are still more expensive when sent to rural areas lacking formal financial services.

IFAD’s fund will promote access to cheaper remittances by assisting financial institutions in rural areas interested in providing cost-effective services either directly or as agents of banks or money transfer companies. Priority will be given to proposals linking remittances with other financial services such as savings, insurance and loans.
“The positive impact of remittances increases dramatically when they are tied to other financial services,” said Donald F. Terry, manager of the IDB’s Multilateral Investment Fund, a pioneer in the study of remittances to Latin America and the Caribbean. “The challenge is to find mechanisms that will turn remittances from a poverty reduction plan to a development tool, benefiting millions of poor families and their communities.” 
IFAD plans to select a first round of grant recipients later this year after a call for proposals and a competitive review process. Projects may receive grants of up to US$260,000.

 

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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 poor rural people to overcome poverty themselves. There are 185 ongoing IFAD-supported rural poverty eradication programmes and projects, totalling US$6.1 billion. IFAD has invested US$2.9 billion in these initiatives. Cofinancing has been provided by governments, beneficiaries, multilateral and bilateral donors and other partners. At full development, these programmes will help nearly 77 million poor rural women and men to achieve better lives for themselves and their families. Since starting operations in 1978, IFAD has invested US$9.5 billion in 732 programmes and projects that have helped more than 300 million poor rural men and women achieve better lives for themselves and their families. Governments and other financing sources in the recipient countries, including project participants, have contributed US$9.1 billion, and multilateral, bilateral and other donors have provided another US$7.1 billion in cofinancing.