News Archive

posted 11/23/04

Katie Mastriani
212-854-1244 or

Missed Opportunities for Economic and Community Development in the Dominican Republic

Lenora Suki, Associate Director at the Earth Institute at Columbia University’s Center for Globalization and Sustainable Development, has completed an evaluation of financial institutions that channel remittances between immigrants in the United States to their friends and family in the Dominican Republic. Suki found that this poorly served population, who receives over $2 billion a year in remittances, pays higher service fees and receives fewer services than most of Latin America resulting in missed opportunities for economic and community development.

“The Earth Institute’s research in the area of remittances aims to illuminate the institutional aspects of this financial flow,” said Jeffrey D. Sachs, Director of The Earth Institute at Columbia University. “The opportunities to leverage remittances for improved development outcomes are tremendous – lowering costs to senders who are often poor, increasing access to financial services and deploying technology to improve accessibility to a wide range of services. Early progress is showing remittances linked to education, community development, microfinance, business enterprises, and diaspora philanthropy.”

Ms. Suki interviewed 25 major financial institutions from the United States and the Dominican Republic to capture the widest range of experiences for how these institutions service customers sending and receiving remittances. She found an entrenched remittance market where 80-85% of remittances are home delivered to customers in the Dominican Republic with service fees as high as 5% to 8% in local currency and 7% to 15% for delivery in US dollars. This cost is higher than in many countries in Latin America, although prices have fallen recently. For example, in Mexico, customers pay less than a 5% service fee and have a wide range of options for getting remittances. In the Dominican Republic, remittance customers rarely go to the financial institution and therefore receive few value-added services from these institutions such as ATM cards and small loans.

“The spillover effect is that there are few options for people who want to save or invest some part of the money they receive. Nor is there any outlet for community investment,” says Ms. Suki. “However, we are starting to see more promising new initiatives. The government is running a pilot program to distribute food subsidies through debit cards. This could increase the use of debit cards and help change the culture of relying on home delivery of remittances.”

Ms. Suki will present her results of the study, funded by the Multilateral Investment Fund at the Inter-American Development Bank (IDB), on November 23, 2004 at the conference—Sending Money Home: An Analysis of the Remittance Market Between the United States and The Dominican Republic. The Honorable Rafael Albuquerque, Vice President of the Dominican Republic, Professor Jeffrey D. Sachs, Director of the Earth Institute, Mr. Hector Morales, Acting U.S. Executive Director of the IDB, and Mr. Donald F. Terry, Manager of the Multilateral Investment Fund at the IDB are convening the conference being held in the Dag Hammarskjold Lounge at Columbia University’s School of International and Public Affairs from 8:30 am to 1:30 pm.

The Multilateral Investment Fund at the IDB announced recently that it will fund Suki to continue her study in Mexico, Guatemala and Ecuador. She plans to begin this research in early 2005.

The Center on Globalization and Sustainable Development (CGSD)manages the social sciences activities of the Earth Institute. Its mission is to maintain and augment the intellectual community focused on the use of social sciences approaches to address the most pressing international development problems of our time. By design, this mission overlaps with those of social science departments across the University, with whose faculty CGSD collaborates. In addition, the hallmark approach of CGSD involves conducting interdisciplinary research and policy work as often as possible. CGSD operates on the underlying principle that because development problems cross disciplines - from the environment to disaster preparedness to public health to economic planning - so must the solutions.

The Earth Institute at Columbia University is the world’s leading academic center for the integrated study of Earth, its environment and society. The Earth Institute builds upon excellence in the core disciplines—earth sciences, biological sciences, engineering sciences, social sciences and health sciences—and stresses cross-disciplinary approaches to complex problems. Through research, training and global partnerships, it mobilizes science and technology to advance sustainable development, while placing special emphasis on the needs of the world’s poor.