Migration, Remittances and Development in Lesotho

REMITTANCE CHANNELS

MIGRATION POLICY SERIES NO. 52 43 kkkkkkkkkkkkkkkkkkkkkkkkkkkkkk Table 21: Distribution of Household Income Household Income Group (M) National Sample of Households Migrant-Sending Households % Cumulative % % Cumulative % 0-2499 51.8 51.8 12.2 12.2 2,500-4,999 14.8 66.6 10.4 22.6 5,000-7,499 7.9 74.5 16.7 39.3 7,500-9,999 6.3 80.9 15.6 54.9 10,000-12,499 5.6 86.4 15.1 70.0 12,500-14,999 3.3 89.8 9.2 79.2 15,000-17,499 1.6 91.3 4.9 84.1 17,500-19,999 2.2 93.5 4.9 89.0 20,000-22,499 0.8 94.4 2.1 91.1 22,500-24,999 1.1 95.5 2.7 93.8 25,000-27,499 0.3 95.8 1.3 95.1 27,500-29,999 0.3 96.2 0.6 95.7 30,000-32,499 0.3 96.5 0.7 96.4 32,500-34,999 0.2 96.7 0.4 96.8 35000 and up 3.3 100.0 3.2 100.0 Source: SAMP Data Base REMITTANCE CHANNELS T he CDP system linking Lesotho with the South African mines is the primary formal channel for remittance flows. Outside the system, the most popular ways of remitting are informal. This is true for Lesotho and the region (Table 22). Migrants bring the money to Lesotho themselves (54%) or send it via a trusted friend or co-worker (33%). Very few use other formal money transfer systems; for example, only 5% use the Post Office and only 2% use banks. Easily the most popular way of sending goods home is to bring them personally (82%). A smaller number entrust them to friend or co-workers (12%). But only 4% use official rail transport channels and less than 1% entrust their goods to the taxis that ply the routes between Lesotho and the South African towns where they work. Considerable attention is given in the remittance literature to the methods that migrants use to remit and the expense involved in remitting , through both formal and informal channels. The main policy recommendation is that governments and private sector institutions should lower the transaction costs of remitting, as well as make it easier for migrants to access and use formal channels through reform of banking and other financial regulations. In the case of Lesotho, hand-to-hand MIGRATION, REMITTANCES AND ‘DEVELOPMENT’ IN LESOTHO 44 kkkkkkkkkkkkkkkkkkkkkkkkkkkkk transfer of cash and goods is easily the most important channel. It is hard to see how transaction costs on personal transactions can be reduced unless the reason for return home is only to transfer remittances, in which case transportation costs make this a very costly means of remitting . Table 22: Major Remittance Channels Cash Goods Lesotho % Region % Lesotho % Region % Post Office 5.1 7.1 0.7 4.2 Wife’s TEBA account 1.8 3.1 - Bring personally 54.1 46.8 81.9 66.0 Via a friend/ co-worker 33.4 26.2 11.8 14.7 Via Bank in home country 1.8 6.1 - Via TEBA own account 0.7 3.3 - Bank in South Africa 0.9 0.8 - Via Taxis 0.2 1.5 0.7 3.5 Bus 0.0 1.1 3.8 5.2 Rail - - 0.0 1.3 Other method 1.9 3.9 0.7 2.9 Total 100.0 100.0 100.0 100.0 Source: SAMP Household Survey Using friends and co-workers to carry cash and goods home is also relatively popular and, once again, quite feasible given geographical proximity . Problems that arise within this method pertain mainly to slowness and theft. Very few migrants cite either the cost of transactions or the lack of banking facilities as a problem for them. Basotho migrants do not generally see a problem in need of a solution. This does not mean that if cost-effective financial services were available, migrants would not use them. Some certainly might. But at the moment, most seem happier to take remittances with them when they go home. The survey confirmed very low usage of formal institutions for money transfer between South Africa and Lesotho. The problem is not in moving money as both countries are members of the Rand Monetary Area (RMA). The Rand is legal tender in Lesotho...