Microfinance, Migration, and a Constant Stream of Remittances (Part 3 of 3 of the Remittance Series)
By Meg Gray, KF9 Nicaragua
This is Part 3 of 3 in a series of blogs discussing remittances that were inspired by a recent UN Human Development Report on migration. As you will see from our posts, there are many perspectives to look at and the issue is by no means simple. I encourage you to read Part 1 posted by Rob from Kyrgyzstan and Part 2 posted by Agnes from Samoa earlier today.
“Half of Nicaragua lives in Costa Rica,” said one of my coworkers at CEPRODEL when I asked him about remittances, “Everyone has someone sending them money.” This is an exaggeration of course, but his statement does hint at the tremendous importance remittances and migration play in Nicaragua’s economy. Roughly 10% of Nicaragua’s population abroad is living abroad with 48% of this group living in Latin America and 44% living in North America. More than 400,000 Nicaraguans live in Costa Rica alone, accounting for more than 10% of Costa Rica’s population. With a significant portion of its population abroad it is no wonder that remittances account for 12.9% of Nicaragua’s GDP. The significant number of people moving back and forth between Nicaragua and Costa Rica in particular hints at the complexity of migration and remittance flows. It isn’t just developing countries sending people to developed countries. It is much more complicated than that. As if to mirror this complexity, while working at CEPRODEL, I keep coming across clients, programs, and stories that demonstrate elements of this convoluted theme.
On my first visit to CEPRODEL’s branch office in Nagarote, I handed branch manager Miguel Calderón a list of Kiva borrowers that I wanted to visit. Looking at the list, Miguel slowly shook his head and said, “You can’t meet Juana. She left. She went to Costa Rica to look for work.” I never got to speak with Juana about why she left, but after doing a little research the economic incentives for leaving Nicaragua were clear. When I ask Nicaraguans what the unemployment rate is they usually ballpark the number at about 30%. Officially, the unemployment rate in Nicaragua was only 5.6% in 2008, but it is expected to rise considerably by the end of this year. The underemployment rate, however, was 46.5% in 2008 and this is also expected to rise dramatically in 2009 due to the worldwide economic crisis. Underemployment is defined as a worker who is employed, but not employed to their desired capacity in terms of hours, pay, or skill level. For instance, I have met many people here who make and sell bread or ice cream or nacatamales from their home. If this is their only form of income, they are likely underemployed since depending on the scale of their sales this income alone is probably not enough to live on. Despite a rise in unemployment in Costa Rica due to the economic crisis, it is still viewed as a land of opportunity for Nicaraguans. Though moving to the United States or Spain is the ultimate dream of some, Costa Rica is closer, cheaper, and easier to get into (both legally and illegally).
Despite the economic opportunity being created by microfinance organizations like CEPRODEL, every day I hear about clients, friends and family members who have left the country to look for work. Since Juana, I have come across only one other Kiva client who has actually left the country, but everyone seems to have a daughter, son, or sibling who is living abroad. “My daughter moved away 15 years ago,” said María Nieves wistfully, “There was more opportunity there. More jobs.” The UNDP Human Development Report from October 2009 suggests that “for many people in developing countries, moving away from their home town or village can be the best—sometimes the only—option open to improve their life chances. Human mobility can be hugely effective in raising a person’s income, health and education prospects.” One concrete example of benefit the report gives is that “a family who migrates from Nicaragua to Costa Rica increases the probability that their child will be enrolled in primary school by 22 percent.” Anecdotally, I have heard of many more direct benefits received. I have talked to people who receive remittances specifically for school fees, mammograms, medicine, and more.
Though the economic benefit to leaving may be fairly clear, the overall picture is much more complicated. Miguel, the CEPRODEL branch manager, laments the effects of migration. “It is wonderful to see our loans helping businesses develop,” he said, “but the really great thing is that these people haven’t left the country to look for work.” He went on to explain that if people had enough economic opportunities in Nicaragua they wouldn’t have to leave. When people leave, families are torn apart and mothers can’t have dinner with their children he continues, a situation which he finds tragic. Besides the effects on families, many people talk about the tension migration creates between Costa Rica and Nicaragua. I’m going to Costa Rica to visit other Kiva Fellows for Thanksgiving. When I told a coworker this he said, “Don’t tell them you’re from Nicaragua. They won’t let you in.” Costa Rican immigration policies are a hot button issue and every Nicaraguan seems to have a story about an atrocity committed against a Nicaraguan while they were working in Costa Rica. They run the gamut from horrible working conditions (for which there is a lot of evidence) to Nicaraguans being killed by angry mobs (for which I have found less evidence). Despite these negative effects, the flow of workers and remittances continues, suggesting that the good outweighs the bad.
Remittances from Costa Rica are so ubiquitous that organizations like CEPRODEL are creating programs to facilitate the remittance process. CEPRODEL partners with FOLADE (Foundation for the Development of Latin America) so they can offer remittance services to CEPRODEL clients through Remesas Instantaneas (Instant Remittances). Through this program, Nicaraguans living in Costa Rica can go to various stores and businesses throughout Costa Rica and to send money to family or friends back home in Nicaragua for a small fee. The Costa Rican stores and businesses are selected as sending points because they are near large Nica communities or frequented by a large number of Nicas. The money is then sent to the CEPRODEL branch that is closest to the recipient and the family member in Nicaragua only has to go to the branch and show their ID to pick up the money. About 500 people send money back to Nicaragua every month using this service. Just a drop in the remittance bucket.
There are several things that make CEPRODEL’s program with Remesas Instantaneas more popular with clients than more widely known methods of sending remittances such as banks or Western Union. First, it is cheaper. There is a $3 commission to send a remittance with Remesas Instantaneas. CEPRODEL gets about $1 of the commission and FOLADE gets the other $2. Other methods are generally more expensive. Western Union for example charges $16 and the Banco Nacional charges over $11. Take a look at this chart for more details. Second, the person sending the remittance does not have to be in Costa Rica legally. To send a remittance from Costa Rica, the client must supply the ID information for the person who is going to receive the remittance, but they do not have to show their own papers. This is very important to a lot of people, Doña Eligia, the Director of CEPRODEL’s program said. Right now, CEPRODEL’s remittance program is only set up to accommodate remittances from Costa Rica. They think a similar program would be popular for remittances coming from the United States in the future, but would also be harder to set up since Nicaraguan immigrants are not as geographically concentrated in the United States.
Interestingly enough, the remittance program is often the first contact CEPRODEL has with both the sender and the receiver of the remittances. Occasionally, CEPRODEL has clients sending remittances directly to loan officers with instructions to use the money to pay off an outstanding loan (either their own or a family members). It is more common, however, that CEPRODEL has never met either party and can use the remittance program to spread awareness about other programs. Doña Eligia told me that it is fairly common for the remittance recipients to begin getting loans for their small businesses from CEPRODEL as well.
Leaving the country permanently is one method of taking advantages of Costa Rica’s relative prosperity, but there are others. When I asked Kiva borrower Aurelia Hernandez, what her goals for the future were, she said she would like a larger loan to help her get into the clothing business and to pay for her to travel to Costa Rica to sell the clothing. Aurelia, who currently works making tejadas (which are similar to banana chips, only made out of plantains), is not the only Kiva borrowers I have spoken to who has this desire. In fact, many people are already doing this. Kiva borrower, Reyna Ruiz buys clothing in Nicaragua where it is cheaper and then goes to Costa Rica for 4-5 days at a time to sell it. Many other Nicaraguans work seasonal jobs in Costa Rica helping with the coffee harvest or in the tourist industry. As you can see, the flow of immigrants, remittances, and other monies between Costa Rica and Nicaragua is by no means clear-cut. In every case, there are positives and negatives. What is clear is that people are going to continue to move in search of economic opportunity especially if they live in a country where this is lacking relative to its neighbors or the rest of the world. I, for one, think that microfinance is one way to begin creating a world where fewer people need to leave their loved ones and communities behind in order to find economic opportunity.