Remittances down but not out - Wehby sees green shots in May, June transfers

Money transfers to Jamaica have fallen by $1.3 billion over four months to April, the first such decline in years.

The data aligns with predictions by experts that the remittance sector will experience a pull-back due to COVID-19. Jamaicans use remittances primarily as a form of consumption to pay for living expenses rather than as a form of investment, which means the decline is more likely to impact vulnerable groups.

Between January and April, remittances inflows totalled $105.5 billion or US$748 million, down 1.2 per cent, according to the Bank of Jamaica in its newly released monthly remittance report. That decline equated to US$9.3 million.

The bulk of the remittances are transacted via six remittance companies led by Western Union. The franchise experienced a decline in transfers but said there has been somewhat of a recovery since May, with growth especially evident in online transactions, which rose 184 per cent that month.

“Our digital channel is growing significantly at over 100 per cent year over year,” said Don Wehby, Group CEO of conglomerate GraceKennedy Limited, which controls the Western Union money transfer franchise in much of the Caribbean.

In a “few years”, Wehby added, digital transactions will surpass in-branch transactions as the primary method for customers doing money transfers.

‘Significant Turnaround’

Wehby said that Western Union’s decline to April was just below the market, and that there’s been a “significant turnaround” in May and June – an indication, he added, that the overall market could see some recovery in later months, all things being equal.

For now, however, the official predictions are for remittances to fall from pre-COVID levels of US$2.3 billion to US$1.9 billion for the Jamaican market, post-COVID, in fiscal 2021.

Remittances and tourism flows account for the single largest inflows of foreign exchange for Jamaica. The latter is projected to fall even more dramatically than money transfers, from $3.1 billion post-COVID to US$995 million post-COVID due to the near total, albeit temporary, lockdown of the hospitality and travel markets.

The six primary remittance agents operate 482 locations, up from 453 locations a year earlier, according to the BOJ. Across the economy, net remittances over January to April, which factors in inflows from overseas and subtracts from outflows from Jamaica, was down 0.8 per cent to US$664 million.

The data indicates that initially net remittances had been on a growth trajectory in January and February, up 17 per cent, but then attenuated to two per cent in March when Jamaica had its first COVID case and the Government began implementing programmes to contain the spread of the novel and deadly coronavirus.

In April, the World Bank indicated that Latin American and Caribbean countries could see a double-digit drop in remittances due to the economic crisis induced by the COVID-19 pandemic and related shutdowns. The World Bank cited a fall in wages and employment from source markets for money transfers, such as United States, Canada, United Kingdom and Spain. It said remittances to low and middle-income countries, or LMICs, are projected to fall by 19.7 per cent to US$445 billion, which would represent a loss of financing of lifelines for many vulnerable households.

steven.jackson@gleanerjm.com