PM Tuilaepa with Australian Parliamentary Secretary for Pacific Islands Affairs Hon. Richard Marles.

By Tupuola Terry Tavita

Healthy competition between money transfer outlets has resulted in a remarkable drop in remittances costs.

Addressing a Pacific foreign ministers’ breakfast hosted by Australia’s Kevin Rudd this morning, Prime Minister Tuilaepa Sailele Malielegaoi pointed out that since the liberalization of Samoa’s financial system – and the subsequent entry of money transfer outlets (MTOs) – cost of remittances has dropped from a high of 23.7 percent in 2009 to just 13 percent this year.

Before that, he said, only trading banks handled all such international transactions.

“The liberalization measures immediately resulted in the reduction of the cost to remitters of money from places like Australia and New Zealand and to recipients of the money in Samoa.”

“The MTOs also improved convenience with their small branches spread out in the country. As a result, the bulk of remittances  – none of which is received by government – is now channeled through the MTOs.”

However, he said, the costs appear to have now hit a minimum and, has “plateaued”.

“MTO’s margins have approached reduced levels below which, they could no longer make a profit.”

This is compounded by the fact that Samoa’s remittance volume is comparatively very small as opposed to to Africas and South America.

The next step therefore in continuing to reduce costs, the Prime Minister said, will depend on mobile phone and internet technology. An example of this, he said, is Digicel’s Mobile Money solution.

“I understand that the World Bank is looking at innovative ways to help further reduce the costs of remittances in the Pacific and this work is due out sometime before the end of the year.”

According to Central Bank, $369 million was remitted to Samoa in the 2010-2011 period.

“These private remittances go directly to individuals and households, churches and other charitable organizations,” said Tuilaepa.

“None is received by government. According to a survey by Central Bank, virtually all private remittances received in Samoa is spent with very little saved or reinvested.”

That is why, he said, government earlier this year set up the Unit Trust of Samoa (UTOS)

“It is an investment vehicle that provides that provides to private individuals – whether in low or high income groups – an opportunity to participate in investment options that would otherwise be unavailable to the general public.

“It is hoped that part of the remittances would find its way to savings and investment through this UTOs vehicle.”

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