International Remittances in Honduras

Transcription

INTERNATIONAL REMITTANCES
IN HONDURAS
REMITTANCES PROGRAMME
INTERNATIONAL REMITTANCES
IN HONDURAS
CENTRE FOR LATIN AMERICAN MONETARY STUDIES
MULTILATERAL INVESTMENT FUND
INTER-AMERICAN DEVELOPMENT BANK
First English Edition, 2008
Also Published in Spanish
All rights reserved
© Centro de Estudios Monetarios Latinoamericanos, 2008
Durango 54, Mexico, D.F. 06700
ISBN 978-968-5696-32-6
Printed and made in Mexico
Impreso y hecho en México
The opinions and views expressed in this paper are those of the authors and do not represent those of the Centre for Latin
American Monetary Studies (CEMLA) and the Inter-American Development Bank (IDB). The authors are solely responsible
for any errors of omission or commission.
Foreword
International remittances are increasingly important to the region’s economies, both in terms of macroeconomic
stability brought about by the receipt of large capital inflows, and in terms of development through financial
inclusion and poverty alleviation.
The Centre for Latin American Monetary Studies (CEMLA), through its close relationship with its regional
central bank members, has become increasingly active in the field of remittances. It has organized several
events in the context of its multiyear capacity-building and technical assistance programs that have clearly
shown that central banks believe remittances merit differentiated treatment to achieve better reporting on
their magnitude and characteristics.
There is a need to obtain more reliable data, to understand the rationale of the agents involved and to analyze
the structure of remittance markets, in order to promote regulatory policies that will help to reduce the cost
of sending money home, contribute to greater security and transparency in these transactions and avoid
inappropriate rules that could hinder their efficient development.
In this context, in mid-2004 CEMLA and the Multilateral Investment Fund (MIF) began designing a project
aimed at improving the statistical measurement of international remittance flows. MIF’s financial contribution
was approved by its Donors Committee in February 2005 under the title of “Improvement of Central Bank
Information and Procedures in the Area of Remittances’’ (RG-M1059) while in April of the same year CEMLA’s
Board of Governors, meeting in Cartagena, Colombia, formally approved the Centre’s participation as
Executing Agency for the project. The institutional arrangements for the Statistical Measurement Project (as
it became known) also comprise a Working Group on Remittances (WGR) formed by experts from central
banks in the region and a Remittances International Steering Committee (RISC) comprising experts from extraregional central banks and international stakeholder organizations that support the Project. 23 of 30 CEMLA
central bank members from the LAC region signed up to participate in the Project.
The first stage of the Project identified certain limitations with respect to the availability and quality of
information on remittances markets and flows that served as the starting point for the design of the work
program. These were: (i) a lack of agreement on basic BOP definitions; (ii) the lack of precision in measuring
flows; (iii) insufficient statistical information compiled on remittances through direct reporting; (iv) an
information deficit on the structure of international remittance operators, and (v) the need to clarify regulatory
and jurisdictional issues covering remittance service providers.
There are other general aspects that could be addressed indirectly through the project, such as encouraging
remittance senders and recipients to join formal systems through financial literacy campaigns, urging
regulators in both sending and receiving countries to promote cost transparency, understanding the underlying
microeconomic dynamics of remittances and disseminating best practices and lessons learned from the
studies conducted in the LAC region.
The work program seeks to attain its objectives by sending country missions to study the statistical measurement
of flows and the workings of remittance markets. The project deliverables include confidential reports to
the authorities with recommendations for improvements, as well as public reports describing central bank
procedures and the relevant aspects of the market. The organization of sensitization events, training courses
and technical assistance is also planned. Country missions will benefit from the technical collaboration of
RISC and GTR experts.
The current report, “International Remittances in Honduras” one of the public reports in the series, and was
prepared with the active participation of Banco Central de Honduras.
Kenneth Coates
Director General
CEMLA
Fernando Jiménez-Ontiveros
General Manager a.i.
MIF/IADB
About the Authors
This report is based on the findings made by the CEMLA Mission visiting Honduras in May 2007, which was
made up of two teams working in a coordinated manner in the international remittances area. The Remittances
Measurement international team directed by René Maldonado from the Centre for Latin American Monetary
Studies also included Enrique Montes from Banco de la República (Colombia), Paloma Monroy and John
Wilson (Consultants for the Remittances Programme). The second international team for Compliance Measurement of the General Principles for Remittance Services was directed by José Antonio García (World Bank)
and included Carlo Corazza (World Bank) and Gregory Watson (Multilateral Investment Fund, Inter-American
Development Bank). These two teams worked in a coordinated manner with the local team headed up by
José Leonel Valladares and América Buitrago, officers at the Central Bank of Honduras.
This report was drafted by René Maldonado and Irma Pérez with support of the Central Bank of Honduras
team, made up by José Leonel Valladares and América Buitrago and was complemented with observations
made by Sandra Patricia Gonzalez Serna (CEMLA), Nelly Zuñiga from BCH and the mission international
team members.
Honduras Report
TABLE OF CONTENTS
1. ECONOMIC BACKGROUND AND THE REMITTANCES CONTEXT .....................................1
1.1. The Macroeconomy......................................................................................................1
1.2. Labor Environment and the Migratory Process ..............................................................6
1.2.1. Labor Environment ........................................................................................................ 6
1.2.2. Migratory Process .......................................................................................................... 7
1.3. Evolution and Importance of Remittances .....................................................................8
1.4. Trends in the Measurement and Provision of Remittances Services .............................11
2. INSTITUTIONAL ASPECTS..................................................................................................13
2.1. General Legal Framework ...........................................................................................13
2.2. Regulatory, Supervisory and Oversight Authorities .....................................................19
2.2.1. Role of the Central Bank ............................................................................................... 19
2.2.2. National Commission of Banks and Insurance Companies (CNBS) ................................. 20
2.2.3. Financial Supervisor in Honduras .................................................................................. 21
2.2.4. Financial Information Unit ............................................................................................ 21
2.3. Role of Other Relevant Organizations.........................................................................22
2.3.1. Honduran Association of Banking Institutions (AHIBA)................................................... 22
2.3.2. Inter-Bank Processing Center (CEPROBAN) ..................................................................... 22
2.3.3. Statistics National Institute (INE)..................................................................................... 23
2.3.4. International Organization for Migration, IOM ............................................................... 23
2.3.5. General Direction of Migration and Migration Policy .................................................... 23
2.3.6. Sustainable Development Network ............................................................................... 24
3. DESCRIPTION OF REMITTANCES ......................................................................................25
3.1. Definition and Concept of Remittances.......................................................................25
3.2. Sender Profiles............................................................................................................25
3.3. Beneficiary Profiles .....................................................................................................28
3.4. Remittance Indicators .................................................................................................29
4. INTERNATIONAL REMITTANCES SERVICE PROVIDERS ....................................................31
4.1. Institutional Providers .................................................................................................32
4.2. Registered Institutional Providers ................................................................................33
4.3. Non-Registered Institutional Providers ........................................................................35
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Remittances Programme
4.4. Non-Institutional Providers .........................................................................................38
5. MEANS OF PAYMENT FOR REMITTANCES ........................................................................40
5.1. Cash ...........................................................................................................................41
5.2. Checks .......................................................................................................................42
5.3. Account Deposits .......................................................................................................43
5.4. Postal Instruments.......................................................................................................44
5.5. Cards ..........................................................................................................................44
5.6. Electronic Money .......................................................................................................44
6. SYSTEMS AND CHANNELS FOR THE TRANSFER AND PAYMENT
OF REMITTANCES ..............................................................................................................45
6.1. Information Transfer Systems ......................................................................................46
6.2. Systems Abroad ..........................................................................................................47
6.3. Cross-Border Systems..................................................................................................48
6.4. Local Systems .............................................................................................................50
6.5. Large Value Payment System ......................................................................................50
6.6. Low Value Payment System ........................................................................................50
6.7. Other Systems and Channels ......................................................................................53
7. COSTS, TIME AND ACCESS ................................................................................................54
7.1. The Cost of Remittances .............................................................................................54
7.2. Commission Charges ..................................................................................................54
7.3. Exchange Rate Differential ..........................................................................................55
7.4. Tax Costs ....................................................................................................................56
7.5. Access Costs ...............................................................................................................56
7.6. Cost, Time and Access to Non-Institutional Channels .................................................58
8. MEASUREMENT METHODOLOGY .....................................................................................59
8.1. Responsibility and Coordination .................................................................................59
8.2. Measurement by Channels .........................................................................................59
8.3. Registered Institutional ...............................................................................................61
8.4. Non-Registered Institutional........................................................................................65
8.5. Non Institutional.........................................................................................................67
8.6. Validation and Contrasting .........................................................................................68
8.7. Trends, Progress and Challenges.................................................................................68
9. TRANSPARENCY AND THE PUBLICATION OF INFORMATION .......................................69
9.1. Official Information ....................................................................................................69
9.2. Information Provided by the ACs ................................................................................70
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GLOSSARY...............................................................................................................................71
LIST OF ABBREVIATIONS ....................................................................................................... vii
List of Graphs
Graph 1. GDP at Constant 2000 Prices .................................................................................1
Graph 2. Annual Inflation Rate and Variation thereof In % ...................................................2
Graph 3. Devaluation Rate Lempira vs. US Dollar ................................................................3
Graph 4. Current Account Deficit 2000-2006 ......................................................................4
Graph 5. Current Account Deficit ........................................................................................4
Graph 6. Trade Balance: General Merchandises...................................................................4
Graph 7. Financial Account .................................................................................................5
Graph 8. International Reserves Balance ..............................................................................5
Graph 9. Open Unemployment ...........................................................................................7
Graph 10. Open Unemployment and Disguised Under-employment ....................................7
Graph 11. Worker’s Remittances. ..........................................................................................9
Graph 12. Receipts from Remittances, FOB Exports, In-Bond Industry and FDI .....................10
Graph 13. Remittance Service Providers ..............................................................................12
Graph 14. CNBS Organization Chart ....................................................................................20
Graph 15. Distribution of Senders per Country of Residence................................................25
Graph 16. Distribution of Urban-Rural Migration and per Gender........................................26
Graph 17. Distribution of Migration by Age Groups.............................................................26
Graph 18. Remittance Senders by Education Level...............................................................27
Graph 19. Migrants by Time of Residence Abroad ...............................................................27
Graph 20. Distribution of Senders by Migration Condition...................................................28
Graph 21. Distribution of Beneficiaries per Level of Education as of 2006 ...........................28
Graph 22. Usage of Remittances as of 2006 .........................................................................29
Graph 23. Ranges of Amounts Received as Remittances as of 2006 .....................................29
Graph 24. Frequency of Reception of Remittances as of 2006 ..............................................30
Graph 25. International Remittances Service Providers as of 2006 .......................................31
Graph 26. Share of Institutional Suppliers Registered in the Remittance Market ...................31
Graph 27. Participation of Registered and Non-Registered Agents in the Market ..................33
Graph 28. Western Union Share in the Remittance Market ..................................................36
Graph 29. Distribution of the Remittance Market by Type of Instrument ..............................40
Graph 30. Distribution of Remittances by Currency .............................................................41
Graph 31. Cash Payment of Remittances by Paying Agent ...................................................42
Graph 32. Means of Payment of Cooperative Association FACACH ......................................43
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Graph 33. Evolution of the Usage of Postal Instruments .......................................................44
Graph 34. Evolution of the Monthly Exchange Rate US Dollar-Lempiras ..............................56
List of Charts
Chart 1. Macroeconomic Indicators .....................................................................................6
Chart 2. Main Destinations Abroad for Honduran Migrants ..................................................8
Chart 3. Balance of Payments: Foreign Currency Receipts from Remittances ........................9
Chart 4. Remittances in the Main Countries of Latin America and The Caribbean ..............10
Chart 5. General Legal Framework .....................................................................................13
Chart 6. Structure of the Remittance Market in Honduras ...................................................33
Chart 7. Composition and Structure of Commercial Banks .................................................34
Chart 8. Remittance Recipient Banks..................................................................................35
Chart 9. Exchange Bureaus Paying Remittances as of 2006 ................................................35
Chart 10. Remittance Payment in Honduras per Type of Intermediary of Relative
Importance. ..........................................................................................................40
Chart 11. Evolution of Commissions Collected by Remittance Issuers ..................................55
Chart 12. Access Points for Reception of Remittances in Honduras ......................................57
Chart 13. Western Union: Access Points by Type of Institution ............................................58
Chart 14. Transmission and Payment of Remittances in Honduras, per Channel...................60
Chart 15. Measurement of Remittances Conducted by Means of International......................66
List of Figures
Figure 1. Operation of Remittances within the Payment System .........................................45
Figure 2. Information Transfer Scheme ...............................................................................46
Figure 3. Remittance Transfer as Cash Deposits to Collection Agents .................................47
Figure 4. Transfer of Remittances with Instruments other than Cash
at the Collection Points .......................................................................................48
Figure 5. Structure of Remittances per Border System .........................................................49
Figure 6. Large Value Payment System ...............................................................................51
Figure 7. Usage of Cards to Send Remittances ....................................................................53
Figure 8. Foreign Currency Sale Form ................................................................................62
Figure 9. Foreign Currency Buy Form ................................................................................63
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LIST OF ABBREVIATIONS
AC
Authorized Exchange Agents
ACH PRONTO
Clearinghouse for Payment Electronic Transfers
ACH
Automated Clearing House
AHIBA
Honduran Association of Banking Institutions
ATI
International Card Administrators
ATM
Automated Teller Machine
BCH
Central Bank of Honduras
BPM
Balance of Payments Manual
CAMR
Centre for Returned Migrants
CCEH
Honduran Electronic Clearinghouse
CEPAL
Economic Commission for Latin America and The Caribbean
CEPROBAN
Inter-Bank Processing Center
CNBS
Banking and Insurance Companies National Commission
CPI
Consumer Price Index
COHDESSE
Honduran Council of the Social Sector in the Economy.
DR-CAFTA
Dominican Republic-Central America Free Trade Agreement
EAP
Economically Active Population
ETD
Money Transfer Operators (MTO)
FACACH
Federation of Cooperative Associations of Savings and Credit
FICOHSA
Financiera Comercial Hondureña Sociedad Anónima
FIU
Financial Information Unit
FONAMIH
Honduran Migration National Forum
FOSEDE
Deposit Insurance Fund
GDDS
General Data Dissemination Standards
GDP
Gross Domestic Product
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HIPC
Heavily Indebted Poor Countries
ICADE
Institute for Cooperation and Self-Development
IMF
International Monetary Fund
INE
Statistics National Institute
IOM
International Organization for Migration
MPR
Monetary Policy Rate
NGO
Non-Governmental Organization
NSS
National Statistics System
PAN
Primary Account Number
POS
Point of Sale
PRAMEU
Regional Programme to Assist Migrants to the United States
RER
Reference Exchange Rate
RSP
Remittance Service Providers
RTN
National Taxpayer’s ID
SAPDI
Foreign Currency Public Auction System
SDN - HN
Sustainable Development Network - Honduras
SWIFT
Society for Worldwide Interbank Financial Telecommunication
TPS
Temporary Protected Status
UNISA
Support Services Unit
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1. ECONOMIC BACKGROUND AND THE REMITTANCES
CONTEXT
1.1. THE MACROECONOMY
In 1998 Honduras was hit by hurricane Mitch, causing damages amounting to USD3 billion. The
economy in Honduras shrank by 3% and the fiscal and current account deficits increased. However,
the country was able to comply with most of its macroeconomic objectives and was relieved from
its foreign debt by USD 4.4 billion under the IMF/World Bank initiative known as Highly Indebted
Poor Countries, HIPC debt relief.
As of 2000 the Honduran economy showed significant recovery with a growth rate of 4.8%, higher
than Latin America’s average of 4.0%. After that and as of 2003, economic activity experienced a
significant reactivation, showing real Gross Domestic Product (GDP) annual growth rate of 4.6%
for 2003-2006, a period of time where several economic sectors have been fostered, particularly
the construction sector. This improvement took place after two years of growth rates barely equal
to the demographic increase (2.5%) derived from the economic crisis of 1999. Likewise, the
decreasing trends of inflation and greater exchange stability have contributed to an improved
economic framework over the last five years.
Graph 1. GDP at Constant 2000 Prices
Source: Central Bank of Honduras (BCH).
In connection with the inflation rate, the Consumer Price Index (CPI) methodology was updated
in 2000, thus allowing a change in the base year. In 2001, the CPI had an annual growth rate of
8.8%, the lowest since 1993.
By 2006, the Honduran inflation rate declined to 5.3%, the lowest in the last 19 years. This effect
was due to the substantial impulse given to the private sector total expenditures, particularly
consumption and investment in real estate, as well as the aggregate supply derived from the good
December 2007
1
performance of the agricultural, in-bond industry and communication economic sectors. Such
objectives were attained despite adverse conditions resulting from high international oil prices
during the first nine months of the year. Additionally, a decline in interest rates in the financial
market allowed the expansion of credit towards the productive sectors.
Graph 2. Annual Inflation Rate and Variation thereof in %
With regards to interest rates, within the financial market, Central Bank of Honduras ( BCH) has
maintained as policy the performance of government securities auctions pursuant to the securities
maturity dates specified per auction, by making agents compete for the amounts awarded by
means of a reduction of the interest rates. During 2006, BCH reinforced this strategy through
three reductions in the Monetary Policy Rate (TPM), thus influencing the reduction of short-term
interest rates.
This decrease in interest rates, combined with the reduction of the additional reserve in foreign
currency, required of the banks permitted the expansion of credit granted to productive sectors by
the financial system, thus encouraging the economic growth, especially within the agricultural,
construction, in-bond and communication industries. Derived from the foregoing, there resulted
a higher demand for labor, improving the employment indicators. The economic growth effect
reached the population in the lowest stratum, helping reduce the poverty indicators.
After the introduction of the Currency Public Auction System (SAPDI)1,in 1994 the country reached
reasonable exchange stability level in 2001. Owing to the high availability of international reserves
held by the Central Bank and the exchange measures applied, the Lempira’s depreciation versus
the US dollar has diminished in the last few years. Therefore, the annual depreciation rate in 2007
dropped to 0.0%, compared to 5.6% at the end of 2001.
1
Exchange market policy in Honduras is based on the Currency Public Auction System (Sistema de Adjudicación Pública
de Divisas,SAPDI) by means of which a daily foreign currency auction process takes place within a 7% band over or
under the Basis Price determined for the auction.
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December 2007
Honduras Report
Resulting from the exchange stability at the end of 2005, the National Commission of Banks and
Insurance Companies approved new “Regulations to be observed by Institutions within the Financial
System for the granting of Loans in Foreign Currencies” with the aim to widen the credit market
and provide borrowers with other sources of financing.
Graph 3. Devaluation Rate Lempira vs. US Dollar
Another factor explaining the dynamic environment of the Honduran economy within the last five
years is the higher external demand, derived from better conditions of the commercial treaties and
the strong growth in Honduras’ commercial partners, particularly the United States over 2003-2005.
This becomes evident in the annual average growth of goods exports amounting to 16.0% and the
increase of the in-bond industry’s added value by 14.8% in the last year.
The main facts encouraging the evolution of the external sector are reflected in the Balance of
Payments. The Honduran Trade Balance has traditionally shown deficits due to structural weaknesses
of the export-import pattern: the high concentration of export products with little added value,
highly sensitive to natural phenomena (e.g. coffee and bananas) and strong dependency on oil
and capital goods imports.
An important in-bond industry has developed over the last several decades, mainly textile and
clothes manufacture: these sectors employ over 130,000 Hondurans, 5% of the active population.
This important increase of the manufacturing sector has been reflected in the GDP, rising from 9%
in 2001 to 11% in 2006.
The balance of payment’s current account showed deficit results in 2000, reaching 7.3% of GDP
within the last two years, (2005-2006), however, the deficit was offset by higher income received
from current transfers, specially workers’ remittances which reached (according to the latest
information) up to 20.8% of the GDP.
On the other hand, from 2000-2006, the capital and financial account recorded a positive balance
every year, mainly due to inbound foreign direct investment and portfolio inflows.
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Graph 4. Current Account Deficit 2000-2006
(In USD Million)
Graph 5. Current Account Deficit
(As GDP percentage)
Graph 6. Trade Balance: General Merchandises
(In USD millions)
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December 2007
Honduras Report
Graph 7. Financial Account
(In USD millions)
Foreign Direct Investment in Honduras over the last five years has shown a growing trend, likely
associated with greater macro-economic stability, the legislation favoring foreign investment, the
development of free zones and higher commercial openness.
In the last two years, the Honduran economy has increased international reserves by 22.2%,
promoting a higher income of foreign currencies, the performance of exports, family remittances,
the in-bond activity and higher capital income, which reached US $2,507.5 billion in 2007. This
level of reserves allows the Honduran economy to afford 3.5 months of imports without registering
income derived from exports.
Graph 8. International Reserves Balance
(In USD millions)
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Chart 1. Macroeconomic Indicators
2002
2003
2004
2005
2006(a)
2007(a)
3.75
4.55
6.23
6.05
6.28
6.30
Imports of goods and services
(In million USD)
5,113.5
5,527.3
6,676.1
7,473.4
8,301.0
9,593.6
Exports of goods and services
(In million USD)
4,286.8
4,345.2
5,178.6
5,747.6
5,880.8
6,344.3
Current Account Balance
(as % of GDP)
-3.6
-6.7
-7.6
-3.0
-4.7
-9.9
National Consumer Price Index
7.7
7.7
8.2
8.8
5.6
6.9
Annual Average Unemployment
Rate (%)
3.8
5.1
5.9
4.1
3.1
3.1
Public Sector Deficit
(as % of nominal GDP)
3.3
3.4
3.4
2.8
1.3
n.a.
8.40
9.19
7.89
7.23
5.38
n.a.
16.43
17.35
18.21
18.89
18.89
18.89
GDP (Real Annual Growth
Rate)
Inter-banking interest rate, end of
period (Lempiras per US Dollar)
Nominal exchange rate,
end of period
(a)
Preliminary.
1.2. LABOR ENVIRONMENT AND THE MIGRATORY PROCESS
1.2.1. Labor Environment
The unemployment rate in Honduras has decreased in recent years, dropping from 5.9% in 2004
to 3.1% in 2006. The Honduran economy is characterized by a large part of the labor force in the
informal sector. Around 3.9 million Hondurans depend on the informal economy. The country’s
rate in this connection is higher than the average in Latin America and it is only lower than that of
Nicaragua. Likewise, according to CEPAL more than 60% of the active population receives a salary
lower than the minimum salary of US $128 per month).
In connection with families with fixed incomes, the most common scenario is that of precarious
labor, that is, salaries derived from such jobs do not even cover their basic needs. Within the inbond industry, which creates direct jobs for approximately 130,000 people, the average monthly
income is US $200. However, at least two million people are estimated to survive with less than
US $2 per day.
Within this framework and in addition to open unemployment, it is important to consider the
degree of disguised under-employment that does not allow the labor to be fully employed in the
economy. This phenomenon is most pronounced within the rural framework, where most of the
Hondurans work only at survival levels.
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December 2007
Honduras Report
Graph 9. Open Unemployment(a)
(Percentage per year)
Source: INE Statistics National Institute.
Open Unemployment: Refers to people with a job who lost it,
and looks for a new job trying to establish a business of their own
and those looking for a job for the first time.
(a)
Graph 10. Open Unemployment and Disguised
Under-employment(a)
(Per Geographic Zone as of 2006 in Percentage
of Economically Active Population)
Source: INE Statistics National Institute.
Disguised Under-employment: Embraces people that
after working 36 hours a week or more, obtained monthly
income lower than the monthly minimum salary.
(a)
1.2.2. Migratory Process
The low average per capita income, together with the lack of employment, under-employment and
the precariousness of the latter are without doubt, the main causes of Honduran emigration.
Migration from Honduras is a recent phenomenon that accelerated during the last decade due
to the effects of Hurricane Mitch. Therefore, out of the total of households with international
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migrating relatives, 86.6% departed during the last 10 years compared to 13.4% that migrated
before.
Within the last decade, the gap between the emigrants coming from the urban area and from the
rural area has narrowed considerably. Based on information from the Statistics National Institute (INE)
out of the total households with emigrants leaving within the last decade, 50.9% are from urban
areas and 49.1% from a rural area. The migration flows prior to the last ten years were different:
66.8% came from an urban area and 33.2% came from rural ones.
On the other hand, according to INE results, the United States is the main destination of Honduran
emigrants, as 91.4% of the migrating population live there, followed by Mexico with 2.2%, Spain
with 2.1% and Central America 1.9%. The Honduran population in the United States is concentrated
mainly in New York, Washington D.C. and Florida.
Chart 2. Main Destinations Abroad for Honduran Migrants
(In %)
United States
Canada
2006
2007
91.4
95.0
2.2
1.3
Spain
2.1
1.1
Central America
1.9
n.a.
Others
2.4
2.6
Source: INE.
Honduran migration is mostly made up by male emigrants, with an age range from 20 to 54 years,
but more predominantly between 25 and 34 years of age. The main occupations of emigrants in
the countries where they find a job are: construction, cleaning, clothes manufacturing, sale of fast
food and agriculture among others.
1.3. EVOLUTION AND IMPORTANCE OF REMITTANCES
The importance of remittances in Honduras has been steadily increasing from a macro-economic
perspective, as they represented 7.5% of GDP in 2001, 12.8% in 2004 and up to 20.8% in 2007.
It could be considered that, as from 1990, they have been continually growing, especially after
hurricane “Mitch” and makes up the second fastest growth rate in the region.
The Central Bank of Honduras reported that remittance figures recorded in the Balance of Payments
rose from US $320 million in 1999 to US $2,561.4 billion in 2007. This represents 97.7% of all current
transfers in 2005, compared to 43.3% recorded for 1999. From another perspective, remittances
represented 39% of current income in the Balance of Payments in 2007 compared to 11% in 2000.
Today, workers´ remittances are considered as the main source of foreign currency in the country,
even greater than receipts from the in-bond industry, tourism, export of shrimp and agricultural
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December 2007
Honduras Report
traditional products, also higher than the Foreign Direct Investment figures. In 2000 remittance
credits reached US $409.6 million but by 2007 the total flows amounted to US $2,561.4 billion,
reflecting a growth rate of 10%2 compared to the previous year.
Graph 11. Worker’s Remittances
(Flows and Growth Rate as % of GDP)
Chart 3. Balance of Payments: Foreign Currency Receipts from Remittances
2000
2001
2002
2003
2004
2005
2006
2007
6.10
7.50
9.70
10.20
12.80
18.20
21.50
20.80
As % Current Income – BOP
11.00
14.20
17.50
19.10
21.60
30.10
38.30
39.00
As % good exports
13.20
16.80
20.40
22.40
25.10
35.20
44.80
45.80
115.00
188.70
278.10
209.10
208.20
296.10
345.40
313.90
GDP
% of Income from FDI
In comparison with the Foreign Direct Investment remittances in 2007 represented 313.9% of
such flows of resources compared to 115.4% in 2000, showing the great contribution these flows
represent to the country.
The Foreign Direct Investment flows have significantly increased over the last few years, mainly
encouraged by Honduras´ improved macro-economic stability and the current legislation applicable
to foreign capital companies. In 2007, the figure amounted to USD $815.9 million, reaching the
second highest level over the entire period 1993-2007. Some sectors that were fostered by such
increase were transport, storage and communications, which grew by 92.0%, particularly due to
the reinvestment of profits and the usage of loans by a cell-phone company. Those following in
importance were the manufacturing industry that grew by 29.0% and the financial sector by 13.5%
due to investments in the banking and insurance sectors.
It is important to mention that in 2005, the BCH introduced modifications in the methodology to measure
remittances.
2
December 2007
9
However, the Foreign Direct Investment flows into Honduras are still influenced to a great extent
by the economic openness of the Peoples Republic of China in periods prior to 2005, as well as
the inclusion of Honduras to the DR-CAFTA3.
Graph 12. Receipts from Remittances, FOB Exports,
In-bond Industry and FDI
(In USD millions)
According to the International Monetary Fund (IMF) in 2003, Honduras was among the main
remittance recipient countries at world-wide level. Within the Latin American and the Caribbean
region, in 2005 Honduras was the eighth largest remittances receiver based on the total flow value.
However, with regard to their importance within the economy as percentage of GDP, Honduras is
among the first positions, higher even than Mexico and the Dominican Republic.
Chart 4. Remittances in the Main Countries of Latin America and The Caribbean
In million of USD
Year
Mexico
GDP %
2003
2004
2005
2006
13,396
16,613
20,035
23,053
2003
2004
2005
2006
2.2
2.5
2.6
3.0
Colombia
3,060
3,170
3,314
4,200
3.8
3.3
2.7
2.0
Guatemala
2,107
2,551
2,993
3,610
9.7
9.5
9.5
9.0
El Salvador
2,105
2,548
2,830
3,316
14.3
16.1
16.7
18.0
Brazil
2,018
2,459
2,480
2,600
0.4
0.4
0.3
0.4
Dominican Republic
2,061
2,200
2,411
2,900
9.9
7.6
8.2
11.0
Ecuador
1,539
1,604
2,031
2,900
6.7
6.3
5.6
7.0
860
1,135
1,788
2,359
10.4
12.9
18.3
21.8
Honduras
Source: Drafted by the Mission based on data from Central Banks.
Dominican Republic-Central America Free Trade Agreement among the Dominican Republic, Central America and
the United Status, treaty looking for the creation of a free-trade area among signatories.
3
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December 2007
Honduras Report
In Honduras the remittances receipts make up the third largest income source of households and
they are mostly used to support their current expenditure. Based on information from the INE,
salaries represent 42% of household income in Honduras, income derived from own activities
36% and remittances up to 11%. The remittances receipts are used by 70% of households for
outlays to improve the quality of life of families left behind, increasing the monthly expenditure
in food, clothing and domestic appliances, 12% is used to cover medical expenses, 9% goes
to education, 5% to households and only a small percentage, 4% is channeled to savings and
investment.
1.4. TRENDS IN THE MEASUREMENT AND PROVISION OF REMITTANCES SERVICES
As of 2002, the main channels used for payment of remittances in Honduras are Banks, Exchange
Bureaus and post-office orders representing 46.2%. Couriers, including Gigante Express and Urgente
Express among others represent 36.8% cash deliveries by travelers 6.2%, post-office means 1.4%
and other means 9.6%.
At the beginning of 2004, the structure of the market for the provision of remittance services was
made up by institutions in the financial system, mainly Western Union and Money Gram as paying
agents, whose share of the market came to approximately 75%.
However, the same agents suffered modifications the following year since based on surveys
conducted by the BCH, the banking institutions and Exchange Bureaus were used by 75%, while
couriers 7%. Travelers increased their participation to 13.8%, the mail again was used by 6% and
other channels reached only 3.8%.
Graph 13. Remittance Service Providers
Source: Data for 2008 come from the survey conducted in February by the BCH.
December 2007
11
Likewise, a modification in the denomination of financial institutions and Exchange Bureaus was
introduced within the survey, considering them as electronic means, obtaining a participation of
81.7% followed by 9.3% of travelers, 8% of courier or messenger service companies and 1% of
post-office services.
In 2006, a higher increase in the usage of electronic means took place, going from 96.8% of
participation, 2% of travelers, 0.9% of courier or messenger service companies and 0.3% of postoffice services. It is important to mention that as of this survey, additional information is provided
in connection with the sending costs determined per company.
In the last survey, which was conducted in February 2007, the trend towards electronic means
represents 91.4%, 5.6% by means of travelers, 2.6% by courier or messenger service companies
and 0.4% with post-office services.
The evolution of market share for several Remittance Service Providers (RSPs) in the payment of
remittances market and the increased growth of institutional RSPs shows a great institutionalization
of the market, where the electronic means for the transfer of remittances prevail, thus reducing the
relevance of non-banking institutions for the payment of remittances.
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December 2007
Honduras Report
2. INSTITUTIONAL ASPECTS
2.1. GENERAL LEGAL FRAMEWORK
Honduras has no specific regulation whether limiting or regulating international remittance
transactions. However, the authorities have strengthened their management and control capacity
with the enactment and issuance of laws and regulations that govern and supervise the transactions
conducted by market agents, particularly those in the financial system, therefore indirectly affecting
the remittances.
Within the context of remittances, there are several related laws covering the process of sending
money and in connection with the payment system. There is also a regulation affecting public
trading of foreign currencies in the exchange market, the law regulating foreign currency income
from exports and others related to the payment and exchange into Lempiras of remittances.
The official entities in charge of regulating and supervising the financial system in Honduras are the
Central Bank of Honduras (BCH) and the National Commission of Banks and Insurance Companies
(CNBS).
Chart 5. General Legal Framework
(By the end of 2006)
Legislation
Subject
Date
Decree No. 53 - 1950
Law of the Central Bank of Honduras
1950
Decree No. 65-87
Law of cooperative associations of Honduras
1987
Decree 41-89,
General Regulation for the Consumer’s Law
1989
Decree No. 108-90
Law of Foreign Currency Income from Exports
1990
Decree No. 16-92
Law regulating Exchange Bureaus Regulates the authorization
of entities dealing with the purchase and sale of foreign
currencies out from the banking market that, for purposes of this
law, will be considered as Exchange Bureaus.
1992
Decree No. 170-95
Financial Institutions Law
1995
Decree No. 155-95
Law of the National Commission of Banks and Insurance
Companies (CNBS)
1995
Decree No. 228-96
Reforms to the Law of the Central Bank of Honduras
1996
Decree No. 53-97
Law regulating the National Fund for Production and Housing
1997
Resolution 337-6/94
of BCH reformed by
Resolution 139-4/2005
and Agreement
02/11/2007
Regulation for the Public Negotiation of Foreign Currencies within
the Exchange Market. Includes provisions applicable to currency
exchange transactions conducted in the domestic territory by the
exchange brokers regulated by the SAPDI. (Foreign exchange public
auctions)
1994
(continue on next page)
December 2007
13
Chart 5. (continue)
Legislation
Subject
Date
Decree No. 229-2000
Law regulating the Development Private entities Conducting
Financial Activities.
2000
Decree 188-2000
Reforms to sections 6, 13, 16, 17, 18, 20 and 34 of the CNBS
Law.2000
2000
Decree No. 22-2001
Law of Insurance and Re-insurance Institutions
2001
Decree No. 53-2001
Law of Insurance over Deposits made in Institutions within the
Financial System.
2001
Decree No.8-2001
Approval of the Securities Market Law.
2001
Decree No. 53-2001
Approval of the Law of Deposit Insurance Funds (FOSEDE), in
institutions within the Financial System with the aim to protect
savings and guarantee the restitution of deposits in cash.
2001
Decree 194 - 2002
Law of the Financial Balance and Social Protection.
2002
Decree No. 319-2002
Law of the Complementary Optional Regime for the Administration
of Private Pension Funds.
2002
Resolution No.869/2910-2002 of the CNBS
Regulation for the Prevention and Detection of Illegal usage of
Financial Services and Products in Money Laundering
(Communication CNBS No.052/2002).
2002
Resol.204-6/2003,
Resolution 73-2/2006
and Resolution No 470
-12/2006 reforms to the
Regulation
Regulation for the management of Deposit Accounts in Foreign
Currencies of Immediate Availability and their Reforms. Regulates
the deposits in foreign currency that any individual or business entity
may hold in the National Financial System. These accounts may be
deposits checking accounts, cash deposits made outside of an account,
savings deposits and term deposits.
2006
Decree No. 45-2002
Anti-money Laundering Law. It was approved with the aim to
improve transparency in the management of resources.
2002
Decree 51 - 2003
Law of Fiscal Equity.
2003
Decree 2008-2003
Immigration Law.
2003
Resolution No. 325-9/2003
Complementary resolution to the Anti-money Laundering Law.
2003
Decree No. 129-2004
Reforms to the Financial System Law.
2004
Decrees No. 106-2004
and No. 129-2004
Approval of the reforms over the Banks and Insurance Companies
National Commission Law and the new Financial System Law, as
well as the reforms to the Law of the Central Bank of Honduras
(Decree No. 111-2004), making up the current legal framework of
the financial system.
2004
Decree No. 157-2005
Re-evaluation of Assets Law.
2005
Resolution No. 220-6/2006
Eliminates the requirement of previous approval by the BCH for
credits abroad for the aquisition of land, construction, purchase
or improvement of housing in the domestic territory.
2006
Resolution No.686-29-2004
Regulation for the Adjustment of Bank’s capital, Savings and Credit
Associations and Financial Corporations.
(continue on next page)
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December 2007
Honduras Report
Chart 5. (conclude)
Legislation
Subject
Date
1438/27-12-2005
Regulations to be observed by the financial system institutions
in order to grant loans in foreign currencies.Approval of the
prudential regulation for the granting of loans in foreign currency.
The Directory of the BCH eliminated the 15% limit of collection
of funds in foreign currency for the granting of loans to borrowers
who do not generate foreign currencies.
Decree No. 14
Registration of Non-banking lenders.
Decree No. 51
Monetary Law.
Res.413-11/2007
Minimum and maximum amounts, commissions for transactions
conducted by SAPDI.
2007
Resol.412-11/2007
Determines limits of Foreign Currency Holdings to Exchange Agents.
2007
Source: Drafted based on the information related to the Honduran Legislation.
A summary description of the main legal and current provisions in Honduras per sector or type of
institution regulated thereof is as follows:
Payments System: Decree 111-2004. The Central Bank of Honduras in coordination with the
National Commission of Banks and Insurance Companies organizes and regulates the operation
of the payment system based on the current legal provisions in such a manner that they protect the
interest of financial and banking service users by means of general, transparent and neutral rules
regulating the credit, transfer, settlement and liquidation of checks and securities.
Negotiation of Foreign Currencies: Decree 111-2004. Only the Central Bank of Honduras and
the institutions authorized by it to act as exchange brokers may trade foreign currencies in the
domestic territory pursuant to the prevailing legislation and rules determined by the BCH Directorate.
Individuals may maintain assets in foreign currencies but may only trade them with the Central
Bank of Honduras or with the Exchange Agents legally authorized for such purposes. Exceptions
to the foregoing are transactions and amounts that, due to monetary and exchange policies may
be expressly authorized by the Directorate and the minor exchange transactions conducted by
tourists and other travelers.
Exchange Bureaus: Decree No. 16-92. Exchange Bureaus may purchase foreign currencies that the
private sector may receive from any source, except those that by legal provision or resolution of
the BCH Directorate should be traded at the National Financial System. Likewise, the Bureaus may
sell foreign currency to conduct any type of payments abroad. For such purposes, they may deal
with deposit accounts abroad, as the corresponding rules may determine. Under no circumstances
may the Exchange Bureaus establish agencies or branches within the domestic territory.
Exchange Rate: Decree 228-96. The exchange rate between the Lempira and foreign currencies may
be determined based on supply and demand pursuant to the rules established by the Central Bank
of Honduras Directorate. The deposit accounts at the Central Bank of the institutions participating
December 2007
15
in the payment system may work as a basis for the operation thereof based on the rules issued by
the Directorate. The institutions taking part in the payments system may be subject to supervision
of the National Commission of Banks and Insurance Companies.
Regulation of the Exchange Bureaus Law: Agreement number 251. For purchase and sale of foreign
currencies, the Exchange Bureaus are required to provide their clients a document evidencing the
transaction, containing at least, the following information:
•
Name of the bureau of exchange and its national taxpayer’s registry number.
•
Name of purchaser or seller.
•
Type of currency, amount and instrument of payment.
•
Exchange rate and date of transaction.
Different formats may be used for foreign currency purchase and sale transactions. The Exchange
Bureaus may report as regularly as determined by the Central Bank of Honduras about the
transactions conducted, but including the following information:
•
Initial balance of foreign currency holdings per type.
•
The total value of transactions conducted, indicating prices.
•
The final balance, per type of currency.
This information and any other that may be required, should be delivered to the BCH using the
formats created for such purpose, within the term established by the BCH. The Central Bank may
publish the information it may consider of interest to the public.
The Monetary Law. This law determines that the payment obligations of any type or nature taking
place in Honduras may be settled and paid in Lempiras.
Financial System Law and Exchange Bureaus Law. These laws determine that the banks, savings
and credit associations and exchange bureaus are authorized to conduct foreign currencies purchase
and sale operations.
Anti-money Laundering Law. This determines that multiple transactions in cash, the total of which
surpasses the limit amount established by the BCH (US $10,000) may be considered as a single
transaction and should be reported to the National Commission of Banks and Insurance Companies,
CNBS.
Likewise, the Directorate of the BCH, pursuant to Resolution No. 325-9/2003 has determined the
following:
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December 2007
Honduras Report
•
US $10,000 is the threshold amount to be notified about based on section 48 of the law
mentioned above.
•
US $2,000 or its equivalent in other currencies or domestic currency is the amount above
which the remittance companies should register and notify the CNBS.
•
Three (3) consecutive days of operations make up the term for multiple transactions in cash to
be considered as a single transaction when they are not conducted during the same day.
It also establishes that the provisions referring to the institutions under CNBS supervision and
related to money laundering will be applicable to individuals or business entities, whether regular
or irregular and unsupervised by the Commission if they conduct savings and loan operations
systematically in a manual or electronic manner.
Regulation for the Public Negotiation of Public Currencies within the Exchange Marke. Includes
provisions applicable to foreign currency exchange transactions conducted in the domestic territory
by the exchange brokers regulated by the Currency Public Auction System (SAPDI).
This specifies that the exchange agents may acquire foreign currency from the public at the current
reference exchange rate (TCR) and should transfer them totally to the BCH at least, the following
working day after purchase. The BCH will buy these currencies at TCR, plus the exchange commission
that may correspond.
Regulation for the Management of Foreign Currency Deposit Accounts with Immediate Availability.
Regulates the deposits in foreign currency that any individual or business entity may hold in the
National Financial System. These accounts may be deposits checking accounts, cash deposits made
outside of an account, savings deposits and term deposits
BCH resolution encouraging the investment of Honduran nationals residing abroad. On June 15,
2006 it was decided to eliminate the requirement for prior approval by the BCH for loans granted
to Hondurans abroad for the acquisition of land, construction, purchase or improvement of housing
in the domestic territory.
International actions. The International Rules and Practices adopted by Honduras in the last few
years are the following:
•
Basic Principles for Effective Banking Supervision – Basel Principles.
•
Methodology for the Evaluation of the Basel Principles.
•
Principles applicable to Insurance Companies.
•
Methodology for the Evaluation of Insurance Companies Principles.
•
Principles Related to the Securities Market.
December 2007
17
Service Programs to Emigrants
Temporary Protection Status: The United States favors with the temporary protection status regime,
(TPS)4 illegal immigrants coming from countries suffering natural disasters or armed conflicts.
Honduras is in this category of countries, as it was severely affected by Hurricane Mitch in October
1998. The TPS allows immigrants to become part of the U.S. labor market, but once their term is
up, they revert to their status as illegal immigrants.
Centre for Returned Migrants: CAMR was created due to the steady increase of migrants returning
to Honduras as of 1996, when the US enacted a new Immigration Law which increased the number
of categories of people that may be subject to deportation.
In Honduras the project was implemented by Caritas Honduras as of the year 2000 and it was
managed by the International Organization for Migration (OIM). The main objective is to offer help
to those Hondurans who have come back from the United States whether voluntary or involuntarily,
stressing assistance to vulnerable groups by means of economic support as in the educational and
social adaptation processes and establishes two stages of assistance.
Regional Program to Assist Migrants to the United States (PRAMEU): The program started in June,
2000, as a contribution to the solution of problems experienced by thousands Central Americans
going to Consulate offices in the United States with the aim to obtain the necessary documentation
to migrate to that country in a legal manner. Usually, the applicants have relatives in the United
States as citizens or residents, so the intention of migrating is to reunite the family. It is estimated
that the number of these applications in Honduras reaches 7,000 per year.
In parallel, PRAMEU contributes to reducing the illegal trips towards the United States, as these make
emigrants highly vulnerable and imply the possibility of being deported. The statistics suggest that
only 15% of applicants obtain their visa, but OIM intends to increase the percentage up to 90%.
OIM activities are to provide assistance but do not guarantee the visa will be obtained. The cost of
this service is US $120 for adults and US $60 for minors.
Information and Awareness Campaign about the Risks and Consequences of Irregular Migration:
In 2006 an information and awareness campaign was launched at the domestic level, addressed to
potential Honduran emigrants, about the risks and consequences of illegal migration.
In particular, information was included for potential emigrants to get acquainted with feasible and
real alternatives to migrate in a legal manner, helping them to make decisions about their future
and to dissuade them from looking for illegal people traffickers and means.
In July 2001, the US Government extended the Temporary Protection Status (TPS program) for another year to Hondurans
living in the US but lacking of legal work documents. This was the fourth consecutive time that Hondurans enjoyed
such measures. 85,000 Hondurans benefited from the extension of the program. This group of people makes up the
160,000 families of Honduran origin that live in the US today, adding up to 600,000 people, based on data reported by
the Honduran Government. (The Population Census in the US in 2000 reported no more than 300,000 immigrants of
Honduran origin living in the country).
4
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December 2007
Honduras Report
The campaign is being executed by the OIM in Honduras, in close cooperation with the governmental
authorities by means of the Foreign Affairs Ministry and the Direction of Population and Migration
Policy, as well as the civil association directed by the National Forum for Migrations in Honduras
(FONAMIH).
2.2. REGULATORY, SUPERVISORY AND OVERSIGHT AUTHORITIES
2.2.1. Role of the Central Bank
The BCH was created on February 3, 1950, by means of Legal Decree No. 53. This provision defined
the basis for the BCH to become one of the pillars of the Honduran economy. 46 years after, on
December 17, 1996, the National Congress, by means of Decree No. 228-96 approved a group of
reforms to existing law with the aim to harmonize the activities of the BCH with current conditions
and demands of the financial market. The latest reforms to the BCH Law intend to strengthen the
autonomy and independence of the Central Bank as the maximum monetary authority.
The bank’s main role is to govern and oversee the maintenance of the internal and external value
of the domestic currency, as well as to foster the regular operation of the payment system. With
such objectives, it should draft, develop and enforce the monetary, credit and exchange policy of
the country.
The BCH is subject to its Law and the regulations issued by its Directorate. The Directorate’s functions
are as follows: i) draft and direct the monetary, credit and exchange policy of the country based on
provisions stated in this law; ii) preserve the internal and external value of the domestic currency;
iii) promote the good operation and stability of financial and payment systems in the country;
iv) approve the annual monetary program, review it and assess it at least every three months; v)
authorize temporary credits for lack of liquidity to institutions within the national financial system;
vi) issue the regulations, general conditions and limits to conduct the operations of the BCH; and,
vii) produce estimations on foreign currencies income and outflows, as well as calculations of
the Balance of Payments, including the figures for remittances, based on information provided by
Exchange Agents.
The BCH is the regulator of the Honduran foreign exchange market, and it is the official authority
responsible for establishing operating conditions for national financial system institutions authorized
to operate as Exchange Agents, including the range of their operations. These institutions are obliged
to sell to the Central Bank all or part of their foreign currency assets they may acquire, based on the
rules determined by the Directorate. Individuals may maintain assets in foreign currencies and trade
them with BCH or the financial institutions authorized to make foreign currency exchanges.
Exchange Agents that do not comply with the provisions mentioned above are subject to sanctions
imposed by the Finance Ministry with fines going as high as ten times the amount of the negotiation,
depending on the severity of the infraction. Small scale exchange transactions conducted by tourists
and travelers in general are excluded from the foregoing, as they may act based on the regulation
issued by the BCH Directorate.
December 2007
19
The financial system institutions authorized as exchange agents are commercial banks, savings and
credit associations and the Exchange Bureaus. All of them should provide daily information on their
foreign currency transactions in the “Electronic Bulletin on purchase and sale of foreign currency”
and should report it to the BCH International Department on a regular basis.
2.2.2. National Commission of Banks and Insurance Companies (CNBS)
The Commission is a decentralized entity of the Presidency of the Republic, independent from it
in regards to functionality and budget, and that has sufficient administrative faculties to guarantee
the technical and financial management required to comply their objectives. While enforcing its
functions as determined by the Financial System Law (Decree 129-2004), and the amendments
thereof, the Commission regulates, supervises and authorizes financial system entities with the aim
to promote transparency, efficiency, prudence, honesty, responsibility, safety, trust and protection
of the interests of savers, investors and clients of the financial system.
Its main objectives are: i) to review, verify, control, oversee and supervise the institutions subject
to surveillance, ii) issue the regulations required for compliance with the foregoing; iii) supervise
compliance of the regulations issued by the BCH with regard to monetary, credit and exchange
policies by the institutions subject to surveillance; iv) supervise the proper incorporation, extension
Graph 14. CNBS Organization Chart
National
Comission
of Banks and
Insurance
Verification
and Control
Unit
Internal Audit
Department
Secretariat
Communications
and Protocol
Unit
Superintendency of
Insurance Companies
and Pension Funds
Direction of Legal
Counseling
Superintendency of
Securities and
other Institutions
Superintendency of
Banks, Financial
Institutions and AAP’s
Inspection
Unit
Division
of Securities
Inspection
Unit
Risk Control
Unit
Follow-up
Division
Inspection
Unit
Follow-up
Division
Financial
Information Unit
Follow-up
Division
Source: National Commission of Banks and Insurance Companies.
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December 2007
Honduras Report
of operations, mergers, transformation and closing of the institutions subject to surveillance as well
as the extension of activities abroad; and, v) review activities conducted by the representatives or
agents of any institution subject to surveillance.
The supervision conducted by the Commission covers all financial entities, except cooperative
associations and entities in charge of remittances, which are supervised by the Commission only for
purposes of control in cases of illegal usage of financial services. In turn, the institutions authorized
by the Commission to act as intermediaries in the financial system include: private and public
banking institutions, savings and credit associations, financial corporations, exchange bureaus,
insurance companies and pension fund institutions among others.
2.2.3. Financial Supervisor in Honduras
At present, there is no institution specifically in charge of protecting the consumer. However,
based on the stated in sections 24 and 26 of the Consumer Law General Regulation (Decree 4189, April 7, 1989) determines as follows “… any business providing services may determine the
costs thereof in an area visible to the consumer … any service provider, providing services of any
nature must indemnify the consumer for damages derived from services provided inappropriately
or in a deficient manner”.
Likewise, beneficiaries of remittances who may want to submit a claim and/or complaint for services
received from an exchange agent may file the claim with the Commission in the event such entity
is subject to the Commission’s supervision or before the Consumer Protection Office of the Public
Prosecutors Office for all financial entities. Judgments over such claims and complaints are issued
by the competent entities.
2.2.4. Financial Information Unit
Decree 45-2002 enacted the law against Money Laundering with the aim to repress and punish
such illegal activities, establish cautionary measures and apply the provisions contained in the
international conventions underwritten and ratified by Honduras.
The Financial Information Unit is a Division attached to the Superintendence of Banks within the
Intendancy of Banks, where the Public Prosecutors Office has a permanent representative. Its main
objectives are the reception, analysis and consolidation of information contained in the reports
received from the institutions subject to the Commission’s supervision and from non-supervised
entities that are required to comply with provisions in the Anti-money Laundering Law. Likewise,
it should be one means for the Public Prosecutors Office or the competent legal entity to obtain
the information that may be considered necessary for the investigation of felonies listed in Decree
45-2002.
By executing its duties, the FIU binds both, the supervised and non-supervised entities to the
following: i) report data about all atypical and multiple operations, ii) report any amount surpassing
the limit established by the BCH: for exchange bureaus being US $10,000 and up and for remittance
December 2007
21
institutions, US $2.000 iii) ensure that policies and strategies against money laundering activities
are complied with, such as “Know your Client” and the Manual to prevent illegal usage of financial
services, and iv) maintain updated records of clients for five years, among others.
2.3. ROLE OF OTHER RELEVANT ORGANIZATIONS
2.3.1. Honduran Association of Banking Institutions (AHIBA)
The Honduran Association of Banking Institutions is a non-profit organization that currently
comprises 16 commercial banks operating in Honduras. AHIBA was incorporated on September
24, 1956, by: Banco de La Propiedad S.A., El Ahorro Hondureño, S.A., Banco La Capitalizadora
Hondureña and Aseguradora Hondureña S.A. as founding members.
AHIBA´s objective has been to direct and promote the development of the private sector banking
system within the free enterprise and sound competition framework. For such purposes, AHIBA
develops activities such as:
•
Support and encourage the viability of a legal, economic and financial system that guarantees
the stability and development of private banking activity of the country.
•
Study and discuss economic policy, specifically monetary, credit and exchange policies
proposing amendments that may be considered as desirable, trying to coordinate the
relationship among the Private Banking Institutions, the Monetary authorities and the
Banking and Financial entities in the countries for such purposes.
•
Maintain permanent and smooth communication with other entities representing the private
sector, those linked to the economic and financial activity of the country and look for joint
actions.
•
Maintain an updated record of all laws, decrees and resolutions related to the banking,
economic and financial activities.
•
Represent the Member Banks before the relevant Banking and Monetary National authorities
and organizations, as well as domestic and foreign entities in any procedure related to the
banking operations.
2.3.2. Inter-Bank Processing Center (CEPROBAN)
The Inter-Bank Processing Center attached to the Honduran Association of Banking Institutions,
AHIBA, is responsible for the management of the funds electronic transfer system for companies, by
means of which it is possible to issue payments in favor of suppliers, payroll and make collection
from clients, independently from the financial institution. It is a network of financial services created
in March 2001 deriving from the interest of all banks in the system to work in a joint manner in
order to improve the financial services of the country.
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December 2007
Honduras Report
The first service provided was to establish the Checks Electronic Clearing House at domestic level,
providing services to several governmental institutions to operate online with the financial system.
At present, they are about to start providing electronic transfers of credits and debits at the national
level.
2.3.3. Statistics National Institute (INE)
INE is a technical and autonomous entity, with legal identity and resources of its own created by
Decree No. 86-2000, with the aim to improve and modernize the statistical information systems of
the institutions. In this context, INE, by mandate of law, aims to coordinate the National Statistical
System ensuring that official statistic activities are conducted in a coordinated and rational manner,
subject to common regulations. INE is a technical and non-political institution that bases its
information on research conducted in fields such as census and surveys.
INE’s formal objectives are: i) to provide timely and reliable statistics; ii) to organize the National
Statistics System: and, iii) to promote and develop the country’s statistics culture. Its role is
performed by compiling statistics based on research work conducted in the field, such as censuses
and surveys that provide the measurement and provision of micro and macro-economic, social and
demographic variables, as well as monitoring of the social and economic evolution of the country
and the comparison thereof with the international scope.
2.3.4. International Organization for Migration, IOM
The IOM is an international inter-governmental organization that aims to work with migrants and
governments to provide human responses to the challenges that migration represents. The IOM,
with headquarters in Geneva, Switzerland, has 98 member states and 34 observing members.
IOM works with its associates in the international community to: help to face the growing challenges
represented by managing migration at operational levels. IOM’s main action principles are: to
foster understanding of migration issues, promote social and economic development by means of
migration, work for respect the human dignity and the well-being of migrants. Since its creation,
the IOM has supported more than eleven million people around the world.
2.3.5. General Direction of Migration and Migration Policy
The General Directorate for Migration and Migration Policy was created in 1970 by means of Decree
No. 34 with the aim to i) regulate the transit of nationals and foreigners in and out the country,
as well as the residence of the latter in it and ii) keep records of people entering and leaving the
country, broken down per border and record instruments. This Directorate issues annual publications
and keeps statistical records on the deported population.
The GDM’s main duties are:
1. To ensure the requirements stated by law and its regulations are complied with, both for
the entrance and exit of nationals and foreigners, as well as for the continued residence of
the latter in the national territory.
December 2007
23
2. Adopt and apply the necessary measures to prevent and control clandestine migration.
3. Compile and organize migration statistics and regulate immigration based on the quotas
established by the State Ministry in the Secretariat of Home Office and Justice.
4. Resolve issues related to the entry, residence and exit of foreigners based on the provisions
stated in the Law and regulations thereof.
5. Apply the sanctions determined by the Law and regulations thereof, without prejudice to
the provisions contained in the current criminal legislation.
6. Comply with those orders hindering people from leaving the country.
2.3.6. Sustainable Development Network.
This is an NGO created in 1994 as a project of the United Nations. It is a non-profit organization
duly incorporated in 1998. The network has developed human and technological resources,
achieving international recognition. Since November 2001, the network opened the Electronic List
of Migration and Remittances, with the aim to exchange information. Participants are: researchers,
independent consultants, executive and technical personnel of governmental institutions, NGO’s
and officials from cooperation agencies.
As part of the exchange process, the information available RDS members has been gathered and
centralized. The “Remittance Group” was organized within this framework, an alliance of five NonGovernmental Organizations. Institute for Cooperation and Self-development (ICADE), Sustainable
Development Network (RDS - HN), Andar Association, Support Services Unit (UNISA) and an entity
representing organizations within the civil society: Honduran Council of the Social Sector in the
Economy]. Such group aims at managing and drafting proposals trying to promote that remittances
become an instrument to help the development of the country, within the framework of national
proposals for development as part of the Strategy to Reduce Poverty.
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December 2007
Honduras Report
3. DESCRIPTION OF REMITTANCES
3.1. DEFINITION AND CONCEPT OF REMITTANCES
In order to measure income from remittances, the Central Bank of Honduras follows definitions set
out in the Balance of Payments Manual issued by the International Monetary Fund, which define
family remittances in paragraph 302 as follows: Current transfers conducted by emigrants working
in another economy different from the national one. Emigrant is any person traveling to another
economy and staying over there, or being foreseeable that will remain in such other economy for
a year or more.
3.2. SENDER PROFILES
The United States is the main destination for Honduran migration as 91.4% of the total migrating
population lives there, followed by Mexico where 2.2% of migrants reside, Spain hosting 2.1% and
Central America where 1.9% of migrants remain5. The Honduran population in the United States
is mainly concentrated in New York, Washington D.C., New Orleans and Florida.
Graph 15. Distribution of Senders per Country of Residence
Source: INE.
Notwithstanding that the United States is still the main destination for Honduran emigrants Spain
has gained importance as destination for migrants over the last five years due to the immigration
policy in place. Out of the recent migrating population6 4% went to Spain. Out of the non-recent
migrating population7 2.2% are in Spain those living abroad for more than five years amount to
1%.
Source: Last survey conducted by INE in 2007.
Recent emigration refers to migrants who left the country less than a year ago.
7
Those living abroad for 1 to 4 years.
5
6
December 2007
25
Over the last decade, the gap between the migrants coming from urban areas and from rural areas
has narrowed considerably. According to information from INE, out of the total number of households
with migrants within the last decade, 50.9% comes from urban areas and 49.1% come from rural
areas. Migration flows before the last ten years were different: 66.8% came from an urban area
and 33.2% came from rural ones.
What regard to gender profile of these migration flows, 70% are male and 30% are female.
Graph 16. Distribution of Urban-Rural Migration and per Gender
(At year-end 2006)
Source: INE.
The structure of the migrating Honduran population reflects a young profile and it is concentrated
in the economically active segment. Based on surveys conducted by the INE for 2006, most of the
remittance senders took part of the Honduran labor market before migrating: 18.7% of migrants
were between 15 and 19 years old when migrating, 58.8% were between 20 and 34, 14.5% were
between 35 and 49 and 1.5% was between 50 and 64 years old.
Graph 17. Distribution of Migration by Age Groups
(At year-end 2006)
Source: INE.
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December 2007
Honduras Report
With regard to education level, most migrants have studies above the national average. Based
on information provided by INE 32% of Honduran migrants had 9 years of studies at the time of
departure, compared to 59% with elementary education, this is, about 6 years of studies, and 3%
with higher-level studies and 4% with no level of education whatsoever.
Graph 18. Remittance Senders by Education Level
(At year-end 2006)
Source: INE.
Additionally, 64.5% of migrants have been living abroad for over a year and 35.5% less than that.
Within the migrating population living abroad for over one year, 42% have been abroad between
1 to 4 years, 29% between 5 and 9 years and 30% for 10 or more.
Graph 19. Migrants by Time of Residence Abroad
(At year-end 2006)
5 years or more
30%
Less than 1 year
11%
1 year
14%
4 years
28%
2 years
10%
3 years
7%
Source: INE.
With regards to the current legal status of Hondurans abroad, 60.5% have no papers or visa, and
35.8% are legal residents out of which, 12% are covered by the TPS, 12% are residents, 2.4% have
work visas and 1% tourist visas. 2% of the total is naturalized.
December 2007
27
Graph 20. Distribution of Senders by Migration Condition
(At year-end 2006)
Without Documents
62%
Refugee
5%
Resident
12%
TPS
Work Visa
2%
Student Visa
1%
12%
Tourist
Visa
3%
Other
1%
Nationalized
2%
Source: INE.
3.3. BENEFICIARY PROFILES
In connection with remittances recipients, out of the total households in Honduras receiving
remittances, 56% are located in urban areas and 44% in rural ones. Regarding gender, 54% of
households receiving remittances have male heads of family, and 46% are households headed by
a woman.
In connection with level of education, 56% of heads of household receiving remittances have
elementary education, 6% have further education and 17% have no studies whatsoever.
Graph 21. Distribution of Beneficiaries per Level of Education as of 2006
Source: INE.
In Honduras, remittances make up the third most important income source of households and
they are mostly used to improve their current expenditure. Based on information from INE, the
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December 2007
Honduras Report
remittances represent 11% of household income, income derived from salaries 42% and selfemployment activities amount to 36%. The remittances receipts are used by 70% to improve the
quality of life of families left behind, increasing the monthly expenditure on food, clothing and
domestic appliances, 12% is used towards medical expenses, 9% for housing, 5% for education
and only 4% is channeled to savings and investment.
Graph 22. Usage of Remittances as of 2006
Source: INE.
3.4. REMITTANCE INDICATORS
The average monthly remittance reported by BCH and INE through surveys and market figures
ranges from US $202 to %286. At the upper end, BCH by means of the surveys conducted every
six months reports an average monthly remittance received of US $286. More in the middle, INE
surveys find about US $264, whereas one of the most important remittance operators in the markets
reports the average monthly remittance to be about US $202.
Graph 23. Ranges of Amounts Received as Remittances as of 2006
$US 200 to <300
16%
$US 100 to <200
35%
$US 300 to <400
7%
$US 400 to <500
4%
$US 500 to <1.000
5%
More $US 1.000
3%
$US 50 to < 100
20%
nk/na
1%
< $US 50
9%
Source: INE.
December 2007
29
Another important aspect defining remittances and their flows is the frequency with which such
funds come into the country.
Graph 24. Frequency of Reception of Remittances as of 2006
Source: INE.
As shown in this graph, most of the remittances (44.7%) are sent on a monthly basis, followed by
14.2% on an annual basis. The same percentage is received every two months and a frequency
less than a month represents 8.1%.
About 7% are reported to be received every quarter, 6% over one year and from 4 to 6 months
with 5%, similar to the period of time of 6 to 11 months. Finally, only 1% does not have a defined
range, so it is possible to say that remittances are most commonly sent once a month. This is similar
to results from other countries which have endeavored to measure remittance frequency.
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December 2007
Honduras Report
4. INTERNATIONAL REMITTANCES
SERVICE PROVIDERS
In Honduras, according to the Financial System Law and the Exchange Bureaus Law, only the
Authorized Exchange Agents (ACs) including commercial banks, the savings and credit associations
and Exchange Bureaus are authorized to conduct purchase and sale of foreign currency transactions.
In this framework, within the ACs, only banks and Exchange Bureaus provide reception and payment
remittance services in the country.
Besides Banks and Exchange Bureaus as ACs other institutions also conducting payment of
remittances. Those companies fully focused in sending and receiving remittances are the ones
enjoying the largest market share. Completing the group of service providers in connection
with institutional remittances, the Cooperative Associations of Savings and Credit also settle
remittances. Their participation and relevance in the market has been increasing in the last
few years.
On the other hand, apart from institutional suppliers of remittance services, there are other
participants in the market settling remittances that usually provide the service in a personal manner,
including individual travelers, messengers and other mechanisms that do not involve financial
institutions in the final stage of payment.
Graph 25. International Remittances Service Providers as of 2006
Institutionals
94%
Non-Institutionals
6%
Based on official statistics, 94% of total of family remittances received in Honduras are sent
through institutional channels. The AC’s providing remittance services consider Western
Union and MoneyGram to be the only international remittance institutions with physical
presence in the country. Once the remittances arrive in Honduras, delivery to the recipient
is mainly conducted by means of the Financial System, generally through banks with the
largest number of branches in the country that have more presence in small cities in the
interior regions.
December 2007
31
Graph 26. Share of Institutional Suppliers Registered in the Remittance Market
(At year-end 2006)
The non-institutional channels occupy a smaller share of the market, only 6.4% and among those,
the main remittance service providers are messengers, although their participation is becoming
smaller over time, favoring the institutional channels that provide the service in a safer and cheaper
manner, besides the fact of being more efficient.
4.1. INSTITUTIONAL PROVIDERS
Remittance services institutional providers may be divided in two groups: institutions registered
and authorized to conduct remittance operations and the non-registered institutions or those with
no specific authorization to conduct such transactions. In connection with non-registered entities,
these conduct operations in the remittance field included in the authorization and control levels
of authorities within the payments and surveillance systems.
In Honduras, the institutions recorded as providing remittance services correspond to Authorized
Exchange Agents, including Banks and Exchange Bureaus. This category is registered and conducts
operations as an exchange market agent, as there is no special registry for the authorization of
payers/collectors of remittances in particular, as opposed to other kinds of transactions.
On the other hand, there are also institutions, such as cooperative associations, that also settle
remittances and are registered with the Superintendence of Banks as financial intermediaries.
Therefore, these are enabled to conduct transactions to settle remittances. However, they are not
considered as ACs and are neither bound nor controlled by the exchange regulations and in this
case they are considered as part of the non-registered institutional remittance intermediaries.
Finally, there are other institutional actors that have no registration at all as remittance agencies
acting through their own offices in the country. In Honduras, the most representative remittance
entity is Western Union. Besides making payment through other entities, such as banks, with which
it has contractual relationships, Western Union has its own offices where remittances be disbursed
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December 2007
Honduras Report
as well. These institutions do not have formal authorizations to operate as such nor authorization
for their transactions. They are only regulated by the rules, laws and control enforced against
money laundering.
Graph 27. Participation of Registered and Non-Registered Agents in the Market
Source: Own elaboration with information of BCH.
Data for Honduras show that over half the institutions providing remittance services are formally
registered and submit reports on their activities and operations to one of the control entities. The
foregoing goes along the distribution of the remittance market in the country, as most of the remittances
are conducted by ACs, which are bound to report their transactions in detail. It is also important to
highlight that 37% of the remittances sent via institutions (35% of the market) are conducted beyond
control of the authorities, although, as it will be seen after, there are mechanisms preventing suspicious
transactions and that gather information in an indirect manner about these types of institutions.
4.2. REGISTERED INSTITUTIONAL PROVIDERS
Out of the institutions making up the National Financial System Honduran law only authorizes
commercial banks, savings and credit associations and Exchange Bureaus to conduct foreign
currency purchase and sale operations by means of their participation in the daily auctions of US
dollars performed by the Central Bank. These participants in the foreign currency purchase and
sale system with the BCH are called Authorized Exchange Agents ACs8. Among which, there are 16
banks and six Exchange Bureaus that currently take part in the remittance market.
Chart 6. Structure of the Remittance Market in Honduras
(At year-end 2006)
Entities
Commercials Banks
Exchange Bureaus
Participation in Percentage
16
89%
6
11%
Source: Own elaboration with information of BCH.
As of December 31, 2006, the institutions making up the Honduran National Financial System include: commercial
banks, savings and loan associations, financial corporations, state banks, second-floor banks, insurance companies,
prevision institutes, stock markets, Exchange Bureaus, deposit general storehouses and representation offices.
8
December 2007
33
Among ACs, banks have a market share of 89% that, in terms of the total remittance market, reaches
51.5%. Such market share has continuously increased in the last few years. Whereas Exchange
Bureaus only conduct 11% of the transactions involving remittances of the ACs, as to say, only
7.1% of the total amount of remittances arriving to Honduras.
Commercial Banks
Next chart shows the commercial banks that participate in Honduran remittances market. One of
this banks have opened agencies in Miami and Florida (FICOHSA Express), combining the services of
sending and reception of remittances with a window for loans and another one receiving payment
of loans and credit card.
Chart 7. Composition and Structure of Commercial Banks
(At year-end 2006)
Institution
Banco Atlantida, S.A.
Reference name
Headquarters
Bancatlan
Tegucigalpa
Bac Honduras
Tegucigalpa
Banco de Occidente, S.A.
Bancocci
Sta. Rosa de C.
Banco del País, S.A.
Banpais
San Pedro Sula
Banco Financiera Comercial Hondureña, S.A.
Ficohsa
Tegucigalpa
BGA
Tegucigalpa
Bamer
Tegucigalpa
Banco de América Central, S.A.
Banco Grupo del Ahorro Hondureño, S.A.
Banco Mercantil, S.A.
Banco Continental, S.A.
Bancon
San Pedro Sula
Banco Uno
Tegucigalpa
Banhcafe
Tegucigalpa
Ficensa
Tegucigalpa
Banco Promerica, S.A.
Promerica
San Pedro Sula
Banco de los Trabajadores, S.A.
Bancotrab
Tegucigalpa
Lafise
Tegucigalpa
Banco Cuscatlan
Tegucigalpa
Honduras
Tegucigalpa
Banco Uno, S.A.
Banco Hondureño del Café, S.A.
Banco Financiera Centroaméricana, S.A.
Banco Lafise, Honduras, S.A.
Banco Cuscatlan de Honduras, S.A.
Banco Honduras, S.A.
Source: Banking and Insurance Companies National Commission.
Out of the 16 commercial banks taking part of the remittance market, 93% of the volume traded
by the banking sector is concentrated in five entities. In this connection, in 2006, one bank had
the largest market share with 32.1%, the three largest payers owns 62.1% of the total remittances
paid.
The relative participation of banks in the remittance market has increased during recent years.
However, the distribution within the banking sector has been maintained, showing that these
actors as a whole are gaining ground in the remittance payment market, without competing among
34
December 2007
Honduras Report
themselves due to the conditions of agreements made with the remittance companies abroad and
the uses and fidelity that these type of services generate among those receiving the remittances.
Chart 8. Remittance Recipient Banks
(In percent of total remittances)
Market Share Banks
2004
%
2005
%
2006
%
1st payer bank
32.5
31.8
32.1
2nd payer bank
18.4
14.6
18.8
3rd payer bank
9.1
10.9
11.2
4th payer bank
8.2
10.7
10.8
5th payer bank
11.0
11.6
10.1
6th payer bank
13.8
11.8
9.9
Source: Own elaboration based in BCH.
Exchange Bureaus
There are 8 Exchange Bureaus registered with the National Commission of Banks CNBS and Insurance
Companies] in Honduras. Out of this number, only three of them control 94% of the total volume of
operations within this sector, showing the degree of concentration among this type of providers.
Chart 9. Exchange Bureaus Paying Remittances as of 2006
Exchange Bureaus
Divisas Corporativas, S.A.
Headquarters
Tegucigalpa
Roble Viejo, S.A.
Tegucigalpa
Corporación de Inversiones Nacionales, S.A.
Tegucigalpa
La Confianza, S.A.
Las Manos
Promerica, S.A.
San Pedro Sula
Del Centro, S.A.
Tegucigalpa
Servigiros, S.A.
Tegucigalpa
La Preferida, S.A.
El Paraiso
Source: National Commission of Banks and Insurance Companies.
Despite the fact that Honduras has at least 8 Exchange Bureaus, only six of them take direct part in
the remittance business. The other two do not make remittance payments, but rather serve other
market agents as a means to exchange remittances received in dollars into Lempiras, as they are
ACs and have access to the BCH Exchange system, thus becoming supporting participants.
4.3. NON-REGISTERED INSTITUTIONAL PROVIDERS
Among institutional providers, there are some which are not registered or controlled by the
authorities in a specific manner in regard to international remittance services. It is common
December 2007
35
to find the international remittance agencies among these types of actors, also some kinds of
non-bank financial intermediation entities, post offices and others that, despite having or not
some generic authorization to provide some services have no specific authorization to realize
remittances.
In Honduras, the international remittance agencies neither have a specific authorization nor are
considered as ACs. Just as it happens with the Cooperative Associations of Savings and Credit that
have authorization to realize remittances but are not considered as ACs. Therefore, for purposes
of this report, they are considered as non-registered entities.
Finally, as regards post offices, they are also not considered as ACs nor have a specific authorization
to realize remittances. However, and due to their transnational character, the payment of remittances
is a natural continuation of the type of services provided, although the usage of post offices is
decreasing due to the speed of market financial institutions.
Money Transfer Operators, MTO
Pursuant to the current legislation in Honduras, the international MTOs face no legal hindrance
to provide international remittance services at local level. However, as they have non-registered
financial institutions, they are not controlled by the CNBS and only report information about some
operations to the FIU in connection with any unusual transactions detected.
Only one International MTO, operates independently as local remittance agency. Another agencies
act by means of formal entities that employ as agents to provide their services. The largest MTO
has 11 proprietary branches at national level.
Graph 28. Largest MTO Share in the Remittance Market
(At year-end 2006)
Other Alliances
17.15%
Direct
42.85%
Through Banco
de Occidente
40.0%
Source: Own elaboration based in BCH.
In addition, The largest MTO participates in the Honduran remittance market by means of three banks
with which it has exclusive agreements and by means of independent allies such as supermarkets,
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December 2007
Honduras Report
hardware stores and others with timetables more flexible than those of banks9 especially during
the weekend. Likewise, this MTO has non-exclusive agreements with few banks for the Roatan
Department that, due to its location and lack of infrastructure, is of difficult access and the cost of
transportation is very high. These attributes give a large network of 250 agencies and locations to
pay remittances at the national level.
98% of the largest MTO transactions originate from abroad, where the operation cost is determined.
The remittance is not directed, but may be disbursed in any bank or company associated, including
both the offices of agents with which it has business relationships or its own offices.
This MTO, controls about 35% of the total remittance market in the country, 57% are paid
out through their agents and the remaining 43% is paid at its own offices in the country.
This international remittance agency maintains service agreements with its agents, including
exclusive service agreements. This is the reason why their transactions through their agents are
highly concentrated. For example, one bank associated pays 40% of their transactions.
Cooperative Associations of Savings and Credit
Honduran Cooperative Associations are not acknowledged as authorized exchange agents. Therefore,
they do not participate in the central bank’s foreign currency auctions. They pay remittances anyway,
due to agreements with international MTOs and other cooperative union organizations focused on
collecting remittances abroad.
Since they are not ACs, the Cooperative Associations receiving foreign currency to pay Lempiras
in Honduras must exchange the currency with ACs in the market, that is, by means of a bank
or Exchange Bureau. This may influence the operating costs of the associations in transacting
remittances. However, since most of them carry out the collection of remittances in foreign
cooperation agencies abroad, their commission costs tend to be lower.
The Cooperative Associations of Savings and Credit operate in rural areas (52%) and in urban
ones, and disburse around 20% of the remittances in the country: these totaled about 18,000
transactions conducted in 2006. The data on remittances paid by Cooperative Associations are
added to data of the commercial banks since these non-banking institutions do not report directly
to the BCH.
Postal Services
Within the last five years, the use of postal services as a mechanism to remit money has had important
changes. As of 2002, the usage of this means to send remittances was not higher than 1.4% of
the total market, reaching in 2003 up to 0.6%, and 0.8% in 2004, respectively. 2005 showed an
increase in the usage of this means reaching 3.2% of the total market. However, as from that date,
there has been a continuous decrease, derived from the use of wire transfers carried out through
traditional financial institutions.
Based on information provided by the MTO, Saturdays, Sundays and Mondays are the most active days for remittance
payments.
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December 2007
37
4.4. NON-INSTITUTIONAL PROVIDERS
Among the remittances entering Honduras by means of informal suppliers, such as remittances in
kind and pocket remittances10, are those delivered by means of couriers or messengers and those
delivered through travelers. As noted before, this amount of remittances is estimated from results
obtained from the Survey on Expenses and Remittances conducted over Relatives of Hondurans
Living Abroad (EGRFH) conducted by BCH on a semi-annual basis.
In 2006 and based on the information gathered from the Central Bank and the survey conducted
with international travelers, remittances channeled through formal entities accounted for 94% of
total transactions, while the remaining 6% were conducted by means of informal intermediation
sources.
Hand-carried Cash
Visitors and Honduran abroad residents that entering the country may carry pocket remittances or
bring them for a relative, a friend or an acquaintance. These types of remittances are estimated based
on surveys conducted by the BCH in the main airports in the country and pursuant to such information
it is possible to see that they represent 3.7% of the total remittances paid in the market.
Sending these remittances cannot be programmed as it can only be done when there is somebody
traveling from one country to another and carrying them along. Therefore, it is not a practical
manner to send family remittances, the characteristics of which include the constant and regular
flow of funds. For this reason, it is unlikely that in the future, the market share of this type of channel
will increase.
Transport of cash by couriers and messengers
A second means of transportation of cash or kind are remittances sent by means of couriers or
messengers. These people transfer funds in a regular and periodical manner. In the last few years
they had great importance and a significant market share, particularly cash remittances.
Despite the foregoing, messengers and couriers have not stopped participating in similar activities,
such as the transportation of goods between countries, carrying nostalgic products abroad and
carrying back other goods that emigrants send to their relatives in Honduras. In this sense, the
transfer of these products is considered as part of the remittances in kind, but these are still not
quantified by the statistics organizations in the country.
Other transportation means and payment of remittances
Finally, there are other means different from transportation of money since, besides remittances in
cash, emigrants may send a credit, debit or pre-paid card to their relatives in Honduras that may
be used in any ATM or POS to withdraw money or pay for goods or services.
10
“Pocket remittances” are cash delivered in person by the visitor and is not part of the travel expenses.
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December 2007
Honduras Report
Payments and cash withdrawals made with international cards are made using the means within the
financial system, but quantification and identification thereof as remittances is very complex and it
is currently impossible in practice. Due to the foregoing, these types of remittances are estimated
from the BCH surveys, calculating that approximately 1.4% of the market uses these means.
December 2007
39
5. MEANS OF PAYMENT FOR REMITTANCES
The instruments used to pay remittances may vary according to the characteristics of the market
and the deeper analysis of each country. In Honduras, remittance service providers may disburse
remittances in cash, by checks, through deposits in bank accounts or by means of cards. However,
the most common scenario is the final disbursement of remittances in cash, representing 88.8%
against 11.2% paid by means of credit to bank accounts, used to amortize loans or other means.
Graph 29. Distribution of the Remittance Market by Type of Instrument
(At the beginning of 2007)
Source: Own elaboration.
In general, within the group of authorized agents in the Honduran exchange market, only banks
report payment of remittances by means of credit into bank accounts or for payment of loans.
They have also designed new products that allow the remittance senders and their beneficiaries,
a wider use of financial services, looking for a larger “inclusion” of their clients. In turn, although
some market participants make remittance payments in instruments other than cash, for example,
by direct deposit into bank accounts or by checks, these are currently exceptional cases: almost
all payments are made in cash.
Chart 10. Remittance Payment in Honduras per Type of Intermediary
of Relative Importance
(By year-end 2006)
Cash
Deposit in bank account
and payment loans
Others
Total
71.1
9.8
n.a.
80.9
Exchange Bureaus
7.1
n.a.
n.a.
7.1
MTOs
5.6
n.a.
n.a.
5.6
Others
5.0
n.a.
1.4
6.4
88.8
9.8
1.4
100
Banks
Total
Source: Central Bank of Honduras (BCH)..
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Honduras Report
An important aspect of the Honduran remittance market is the possibility of paying remittances in
Lempiras or in US dollars. The bi-currency nature of the Honduran economy makes it difficult to
reconcile data from the Exchange Balance with the data corresponding to remittances. However,
due to the fact that, in general the use of US dollars in the economy is not widely spread in retail
transactions, the remittances received in foreign currency must be exchanged into Lempiras to
be used in the country. Therefore, sooner or later remittance receipts should pass through the
authorized exchange agents and get recorded in the Exchange Balance records.
In this connection and pursuant to the data reported by the agents interviewed during the mission,
30% to 40% of remittances are paid in US dollars, those paid in cash and those paid by means of
deposit into a bank account.
Graph 30. Distribution of Remittances by Currency
US Dollars
35%
Lempiras
65%
The remittances payers and beneficiaries need to change the US dollars received into Lempiras.
Therefore, they must go to an authorized agent within the exchange market to obtain the domestic
currency.
5.1. CASH
As mentioned above, most remittances are paid out in cash. The Exchange Bureaus make all their
payments in cash. Banks pay cash 87.9% of cases and MTOs pay cash 89.8% of the time. In this
case, we should consider that, out of payments made by MTOs in their own offices, the total is paid
in cash. However, when disbursement is made through an agent, in this case a financial institution,
a bank or a cooperative association, one part of it may be deposited into an account or to pay a
loan, especially in cases for payments made by cooperative associations. The following chart shows
payments conducted by MTOs using the financial entities for payment in cash or deposit into bank
accounts added to the total amounts of banks, showing preference of cash, particularly in clients
of non-banking institutions.
The manner of remittances payment in Honduras per type of intermediary depends on the faculties
regulations permit to each one of them. In keeping with the foregoing, banks may combine different
December 2007
41
ways of payment, as they are authorized to offer current or savings accounts, whereas Exchange
Bureaus mainly conduct payments in cash, because the legal framework prevents them from offering
other types of services in a direct manner.
Graph 31. Cash Payment of Remittances by Paying Agent
Cash payment of remittances has several advantages derived from the simplicity of the process.
However, the need to have at hand enough money11 to settle all of them implies an additional
cost to paying entities that have to acquire the cash from one of the agents authorized within the
exchange market. In this connection, the participation of Exchange Bureaus as remittance payers
is of paramount importance, just as that of banks, as they are acknowledged as authorized agents
that can participate in the exchange market and even serve as a channel for other paying agents in
the market, such as Cooperative Associations and MTOs.
Cash payment allows the beneficiaries to allocate the funds to consumption. In turn, higher levels
of bancarization regarding payment of remittances offers the additional advantage of having access
to financial services such as loans, savings and insurance policies.
5.2. CHECKS
In general, payment of remittances by means of checks is not widely used due to the limited use
of such instruments in the country at all: In the few cases when this instrument is used for settling
remittances, payments are made in banks.
Other entities such as Exchange Bureaus, MTOs or the Cooperative Associations paying remittances
use checks only to make up for the deficiency when they cannot make inter-bank payments or
when they are forced to, due to their client’s needs. In these cases, when a client requests payment
of the remittance charged to another entity’s account, the non-bank payers issue a check against
an account of their own and deposit it in the destination account or deliver it to the beneficiary for
the latter to deposit in an account of his/her own. This process implies that checks should also go
through the Electronic Checks Clearing House, with the inherent delay in settlement. Therefore,
11
Total amount of bills and coins in circulation.
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December 2007
Honduras Report
these transactions are not common and clients of these entities prefer cash payment or direct deposit
to their accounts, or to use the money to pay for loans in the same entity where remittances are
received, as is the case with the Cooperative Associations.
5.3. ACCOUNT DEPOSITS
Direct deposits in bank accounts have been an innovation within the last few years: remittances are
paid directly to the beneficiary’s account, who may dispose of the funds as if they were cash. This
instrument is an exclusive service for those already having some type of account in the financial
system. This is the reason why the modality is not yet in general use. Only 12% of payments of
remittances in 2006 were settled by these means, which is mainly used by banks. It is important to
mention that these types of instruments also include payments made to amortize loans. Due to the
strong participation of banks in the remittance payment business, they are encouraging the usage
of new instruments and financial services among beneficiaries and remittance senders. Among
these instruments, one under special development is the loans granted to purchase or improve
households.
The payments of remittances received in Cooperative Associations are mainly used to pay loans.
Based on data provided one of the Honduran Federation of Cooperative Associations of Savings
and Credit, out of the total remittances received by its associates and clients, 46% is received to be
deposited into an account, 35% to pay-off loans and only 15% is withdrawn to pay for domestic
expenses.
Graph 32. Means of Payment of Cooperative Association FACACH
Source: Data provided by the federation during the mission.
Based on data provided by the federation mentioned above and the study made on activities
conducted by some banks with an important market share in the remittance business, it is possible
to note that these entities are currently working with the aim to widen the financial services offered
among their clients-remittance recipients, offering, not only loans, but also credit and debit cards
that may allow a broader scope of use and consumption to their clients.
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43
5.4. POSTAL INSTRUMENTS
In the past, the use of postal instruments as a means to realize remittances was very important in
Honduras. At present, this instrument lost almost all of its market share and in 2006 it represented
only 1.1% of the total remittances received in the country.
Graph 33. Evolution of the Usage of Postal Instruments
Source: Annual survey conducted by the Central Bank of Honduras (BCH).
A mechanism related to the payment of remittances using post-office channels is the distribution and
payment of remittances using instruments as credit, debit or pre-paid cards that may be acquired
abroad by the remittance issuers and sent to the beneficiaries by mail, for usage thereof in the
country of destination.
5.5. CARDS
With the information currently available regarding the remittance market in Honduras, it is not
possible to determine the percentage of payment of remittances conducted by means of credit, debit
and pre-paid cards. However, there is a wide perspective of the usage of these types of instruments
in the future. Therefore, the authorities in the country will define the best and more accessible
mechanisms to control and provide follow-up to the remittances paid by these means.
5.6. ELECTRONIC MONEY
Usage thereof is still not significant in Honduras.
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6. SYSTEMS AND CHANNELS FOR THE TRANSFER
AND PAYMENT OF REMITTANCES
As outlined, most of the remittance operations in Honduras are conducted through Banks, Exchange
Bureaus and MTOs. Although MTOs are not formally Authorized Exchange Agents, they participate
in the business in two ways: paying out remittances in Honduras directly at their main local offices
and paying them by means of agreements with other payers in the country, including banks,
Exchange Bureaus and other entities such as cooperative associations.
Just as it happens in most of the cases within the region, the relationship between MTOs and
payers in the local segment correspond to negotiated arrangements where payment to the
beneficiary is conducted a few minutes or hours after beginning the transaction abroad, based
on the information received from the MTO. However, the MTO will reimburse the resources
paid by the local agent afterwards, when the agent requests payment for a batch of remittances,
usually in T+1 or T+2.
Figure 1. Operation of Remittances within the Payment System
In this connection, payers usually make disbursements to beneficiaries between 24 to 72 hours
before receiving the disbursement of funds from the MTO. Therefore, local payers are exposed to
exchange and credit risks that are usually addressed by means of a guarantee fund and policies
mitigating the impact of a delay or default of payment of the funds delivered to the remittance
beneficiaries in an anticipated manner.
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45
Almost all payers of local remittances maintain agreements with some MTOs abroad to collect the
remittances in the place of origin. Some banks in Honduras have agreements with more than one
MTO. Only in those cases where the remittance payment agreement is conducted by means of
Western Union, there is some degree of exclusiveness from the remittance local payer.
This scheme for payment of remittances also requires the operation of other systems allowing the
transfer of both information and funds towards the final beneficiary. Those systems are local, foreign
and trans-border ones. Despite the possibility of envisaging many alternatives to collect remittances,
the reality is that agents conduct these transactions for MTOs abroad. Likewise, although it may be
possible to conceive many options for payment of remittances in Honduras at different types of
institutions, supermarkets, drugstores etc., in general, they only work as agents of the remittancepaying companies. In order to simplify the description of the remittance collection, transfer and
payment process, the agents both, from the collection and the payment side, are included within
the structure of MTOs abroad or the local payers. Therefore, it is possible to summarize the process,
considering that the sender of a remittance may send it through an MTO agent or by means of
a financial entity (usually a bank) and receive it through one of the authorized agents or a local
window of the MTO.
6.1. INFORMATION TRANSFER SYSTEMS
In general terms, the information transmission is almost immediate, once the remittance issuer
is at the bank’s cashier or that of an MTO agent abroad; the sender provides information about
himself, the beneficiary and the amount to be delivered, etc. The basic information about the
transaction is processed by the communication means, or through SWIFT12 (remittances among
banks) or proprietary networks of other MTOs and reaches the counterpart in Honduras, that may
be a bank, exchange bureau or the MTO’s own agency. This information is indeed processed very
fast, and once received by the payer, the beneficiary may collect the funds at any time. However,
it is important to mention that the speed of the means is directly proportional to its cost, and that
most MTOs offer different products at different costs, depending on the speed of the process that
may be required.
Figure 2. Information Transfer Scheme
TRADUCIR
12
Society for Worldwide Interbank Financial Telecommunication.
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December 2007
Honduras Report
Some MTOs offer within their range of services, some type of communication to the beneficiary
upon reception of the funds, as sending a fax, an e-mail or even in some cases, the remittances
may include a phone call to the issuer abroad to inform his relative of the money sent.
6.2. SYSTEMS ABROAD
In general terms, the following graphs summarize the remittance collection and transfer general
schemes from RSPs abroad to the local payers in Honduras. The issuer may begin the remittancesending process by means of different instruments, such as cash.
Figure 3. Remittance Transfer as Cash Deposits to Collection Agents
In the event the issuer sends the money by means of a bank, once the cash is deposited at the
counter, the transaction is done. On the other hand, if the money is deposited at an agency, there
may be different series of mechanisms by means of which, the agency may convey the money to
the MTO: it may be sent in cash through a wire transfer or a check.
In case the transfer or check belongs to the same bank of the MTO, this part of the process ends
right there. On the other hand, if the transfer or agent’s check is not directed to the same financial
entity where the MTO keeps its accounts, these instruments may go through a clearing house before
being received and settled in the MTO´s account.
In other situations, the remittance issuer may begin sending the remittance by means of instruments
different from cash, for example, a check, a wire transfer, a debit or credit card or through postoffice instruments sent to the MTO, as described in the figure below.
In this case, if these instruments are received at the same bank where they were issued, they may
hit directly the MTO or bank account. Otherwise, if the instruments are issued by other financial
institutions, they may pass through some of the clearing houses before being available at the MTO
or Bank´s account to, in turn, be sent.
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Figure 4. Transfer of remittances with Instruments other than cash
at the collection points
These types of transfers may be processed in batch instead of on an individual basis as they are
received, depending on the system and operation framework of every bank and MTO with their
corresponding agents, branches and other counters collecting remittances.
6.3. CROSS-BORDER SYSTEMS
Cross-border systems allow the transfer of monetary funds from abroad into the country and viceversa. In Honduras, remittances may be paid either in foreign currency or Lempiras, depending
on the issuer and recipient’s instructions. In this connection, if payment is made in Lempiras, they
may be exchanged through one of the ACs, independently from the place where the remittance
was originated or who the final payer is in Honduras. Such agents include Banks and Exchange
Bureaus that, in turn, are remittance payers themselves. Other payers such as MTOs and Cooperative
Associations of Savings and Credit, should deal with one of the ACs to exchange the foreign currency
received into Lempiras in order to pay the remittances in local currency or can, if so requested by
the issuers, pay the remittances in foreign currency.
When one of the ACs needs to exchange the foreign currency into Lempiras, they should send and
sell the currency to the Central Bank of Honduras.
Foreign Currency Public Auction System (SAPDI)
SAPDI is a system operated by the BCH to perform daily foreign currency auctions. Although ACs
are considered as direct participants, they do not have access online to make offers to purchase
foreign currencies. Offers are submitted by sealed envelope. As of present date, the design and
implementation of a system that will make it possible to electronically send and award foreign
currency purchase and sale offers to BCH from different market participants through electronic
means is still in development.
This is a net liquidation system in deferred time that basically performs high-value transactions
where ACs can participate. The applicable regulation determines that the ACs can participate
on behalf of their clients in amounts ranging from USD 10,000 to USD 300,000 per day for an
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December 2007
Honduras Report
individual and from USD 10,000 up to USD 1,200.000 per day for a business entity. In turn, the
Authorized Exchange Agents in the market may also obtain additional foreign currency amounts on
a daily basis (banks up to USD 300,000 and Exchange Bureaus and savings and credit associations
up to USD 100,000) to fulfill requirements of their clients in amounts lower than USD 10,000.
Amounts that are not sold to the public become part of their foreign currency daily holdings as
long as their balances in foreign currencies do not exceed the maximum limits authorized by
the BCH. The amounts exceeding such limits may be brought back to the BCH at the reference
exchange rate prevailing in the inter-banking market.
On the other hand, ACs are authorized to maintain deposit accounts abroad, where they can keep
funds in foreign currencies collected in the country or receive payments for the remittances collected
at origin from RSPs abroad. But since such collections are delivered to the beneficiaries in domestic
currency, they are considered as a purchase of foreign currency and the law determines that such
currency must be transferred or sold to the BCH. In this connection, if an Exchange Agent receives
foreign currency from abroad as remittance, it should exchange it into Lempiras to pay the designated
beneficiaries. The exchange will be conducted upon selling the currency to the BCH, transferring
the funds of the Exchange Agent accounts abroad to the BCH accounts in foreign territory. BCH
will immediately credit Lempiras into the accounts the ACs keep in this bank in domestic currency.
For remittances that do not need to be exchanged into Lempiras as they come with an instruction
to be credited in foreign currency accounts, the banks only conduct the relevant transfers to the
remittance beneficiary’s accounts.
Figure 5. Structure of Remittances per Border System
Those agents paying remittances within the country that are not classified as ACs conduct the
procedure described above, using the accounts abroad of ACs in the BCH to receive the remittances
paid locally, both in foreign currency and Lempiras.
December 2007
49
6.4. LOCAL SYSTEMS
Within the local systems used to process remittances in Honduras, it is possible to distinguish
between high-value and retail payment systems. The high-value systems allow settlement of crossborder operations and domestic transactions of high value or urgency, whereas retail payment
systems usually settle local transactions, although in some cases they may generate transnational
obligations. For instance, in those cases, where participants or entities represent institutions abroad:
credit, debit and pre-paid cards, used in local ATMs and POSs.
6.5. LARGE VALUE PAYMENT SYSTEM
The large value payment system allows ACs in the remittance market to settle their operations
and transactions by means stated in the regulation for public trading of foreign currencies in the
exchange market. Moreover, it allows them to acquire the notes and coins necessary to pay out
remittances in Lempiras and to settle their positions in the clearing houses, in which the ACs
participate. At the present time, large value transactions conducted via the BCH are carried out
with written payment orders that are settled by means of the accounting procedures of the Issuing
Agent. Here it is important to note that the current system allows operations in foreign currency (US
dollars) and Lempiras, by keeping, the financial institutions’ bank accounts in both currencies at
BCH. At present, BCH working on modernization of the high-value payment systems and anticipates
upgrading its operations to a more developed system by incorporating technological elements that
will allow it to operate in real time gross settlement processes.
6.6. LOW VALUE PAYMENT SYSTEM
The low value payment systems in Honduras allow the transfer of funds from collecting entities to
transferring agencies of remittances abroad. In the local part, low value payment systems permit
transfers of funds from collecting companies to payment locations or the beneficiaries themselves
when using no cash instruments that should be paid off in accounts different from those of the
collecting entities.
With regard to the retail payment systems, up to December 2006 the Check Clearing House existed,
but then it converted to ACH to enlarge operations to settlement and liquidation of electronic
transactions besides checks.
Likewise, BCH although the Resolution No. 374 10/2006, approved the Regulation for Settlement
and Payment of Electronic Transactions with the aim to regulate transactions and the performance
of the payment systems and participants thereof. The legal and operational framework follows
the banking and computing safety standards that were assessed and authorized by the National
Commission of Banks and Insurance Companies.
In Honduras the institutional payers may disburse remittances in cash or by means of deposit into
an account. When remittances are deposited in an account to be settled, it is also possible to use
other instruments, mechanisms and financial services such as checks, credit cards, debit cards,
wire transfers, etc.
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December 2007
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Figure 6. Large Value Payment System
Deposit into an account, in turn, requires the usage of different channels and systems depending on
the location of the beneficiary’s account and that of the payer’s RSPs. When the remittance is paid
by a bank, deposit into an account may be conducted directly at the beneficiary’s account, so long
as he/she has an account in the same entity, which is the most common scenario for remittances
received with deposit instructions in Honduras. On the other hand, if the account is with another
financial entity, it will be necessary to use other systems to enable the transfer, including checks
(less frequently) or inter-bank transfers (that should go through the ACH to become effective).
When the payer is not a bank, for instance an Exchange Bureau or an MTO paying at its own offices,
the deposit into an account may be effected through an inter-bank transfer, depositing a check or
the cash itself directly into the beneficiary’s account. In the event the beneficiary has an account in
an entity that is different from the paying one, this transaction (whether by check or transfer) should
also go through a clearing house before becoming effective. On the other hand, due to the recent
development of ACH, electronic transfers are still not widely used for such purposes, although
Cooperative Associations receiving remittances do use the internal systems of their federations to
carry out the transfers to entities taking part of their systems This enables them to use their payment
counters to settle remittances received, making it possible for the beneficiary to collect remittance
funds at any counter in any cooperative affiliated with their Federation.
Clearinghouses for checks and other Payment Instruments
The Honduran Electronic Clearing House (CCEH) has been in operation since 2000 and is managed
and operated by Interbank Processing Center (CEPROBAN). Since inception, CCEH only settles and
pays checks in domestic currency for its 18 participants, BCH included. Surveillance thereof is
responsibility of the issuing entity. Check settlement is a service provided at national level and is
conducted only by CCEH. Since CEPROBAN belongs to the banks association, its participants only
include banks, and no other market agents have access to this system.
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At present, the Check Clearing House conducts transactions with 45,000 checks a day on average,
amounting to 1.5 billion Lempiras. The processing and exchange of paper checks is expensive and
inefficient for the participating institutions as it does not allow the appropriate usage of automatic
processing systems. Therefore, in December 2006, CEPROBAN decided to open a new system for
settlement and payment of wire transfers, transforming the CCEH, into ACH PRONTO, capable of
settling not only checks but also wire transfers, and thus decreasing the use of checks in favor of a
gradual transition to wire transfers as a means to conduct inter-bank funds transfers.
Clearinghouses for Electronic Transfers (ACH-PRONTO)
BCH made official the operations of the Clearinghouse of Electronic Transfers Settlements,(ACH
PRONTO) in February 2007 by means of Resolution No.461 12/2006 dated December 7, 2006,
which authorized CEPROBAN to manage and operate this Clearing House. The ACH PRONTO
system has been used by the public and private banks as an alternative to the issuance of checks,
diminishing their usage as those entities participating at ACH PRONTO have encouraged the use
of wire transfers, causing the number of checks settled to decrease.
The initiation of ACH PRONTO operations requires CEPROBAN to not only settle checks but
also to settle and pay wire transfers. Surveillance of operations conducted by ACH PRONTO is
the responsibility of the Audit Department of the National Commission of Banks and Insurance
Companies.
The rule specifies that transactions sent through ACH be delivered to beneficiaries at the latest by
the following bank working day. Credit transfers and direct debit are among the products offered.
By June 2007, ACH PRONTO conducted more than 6,000 transactions daily.
Wire transfer operations by means of ACH PRONTO are easy for consumers to access. The client only
needs to maintain a business account, register it on the Internet, sign the agreement for electronic
payments and provide the bank with the list of clients to be paid, including the name, ID number
or RTN and the format to accept payments.
Clearinghouses for Automatic Teller Machine, International Credit,
ebit and Prepaid Card Networks
The use of alternative new or innovative instruments within the remittance market is increasing,
especially those cross-border ones that allow permanent contact among the fund sources and
remittance beneficiaries. Credit, debit and prepaid cards are the instruments developed the most
and with more generalized usage.
The use of cards in the remittance market begins with the issuance of the debit or credit card ordered
by the sender (generally linked to an account at the bank of origin), or with the purchase of a prepaid
card. Credit and debit cards need the senders to have legal status. Therefore, they are out of reach
for senders who have not legalized their residency at the host country. In turn, prepaid cards have
the advantage of needing less formality in the purchase and loading process. Therefore, they will
become the most widely used instruments by emigrants that have no legal residency abroad.
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Once the sender buys the card, it (or a copy, which is sometimes provided) needs to be physically
sent to the beneficiary for the latter to use it in ATMs to withdraw money in local currency or at
POS to purchase goods and services. In Honduras, the sending and delivery of cards in the future
will be conducted by mail after the introduction of the Post-Cash system.
Figure 7. Usage of Cards to Send Remittances
Once the cards are used at the POS or ATM, the values of purchases and withdrawals made goes
to the clearing house for credit and debit cards, generating a liability to the country’s International
Cards Administrator. This position is settled by means of the ACs in SAPDI with the issuing bank
or the international card seller.
The issuer may increase the funds in the debit card account, pay the funds spent with the credit
card or reload the prepaid card, periodically, in such a way that the beneficiary maintains access
to the funds balances.
6.7. OTHER SYSTEMS AND CHANNELS
Besides the channels typically used by the institutions rendering international remittance services,
there are other mechanisms that allow the emigrants to transfer funds towards their home countries,
such as the messengers or sending the funds through relatives or friends, or even the act of carrying
the remittances personally during the visits migrants make to their countries during the holidays.
Almost all mechanisms are based on the use of cash as a basis for remittances.
The market and mechanisms to transport cash described above are expensive, especially due to
the costs inherent to the exchange of currencies and transportation itself, making this channel to
be considered as of little usage.
In all cases, the issuer delivers the money to another person that may be a messenger, a relative or friend.
Likewise, the sender could carry it himself to his country of origin. Once the currencies enter the country,
they are delivered to the beneficiaries who should exchange them into local currency. This exchange
of currency can only be conducted by means of the ACs, that exchange the currency at BCH based on
the stated in the Regulation for the Public Trading of Foreign Currencies in the Exchange Market.
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7. COSTS, TIME AND ACCESS
In general, remittances represent an important source of funds for developing countries, and become
a multiplying factor in the economy as they encourage internal demand extending the purchasing
power of the families benefited from them. Therefore, it is important to encourage the wider
acceptance of net funds, a fact that necessarily leads to the analysis of costs structures. Additionally,
aspects such as access and timing necessary for the beneficiaries to dispose of their remittances are
factors of hidden costs that should also be assessed and taken into consideration.
7.1. THE COST OF REMITTANCES
Transaction costs of remittances are related to the number of agents involved in the transfer chain
and the eventual payment of the wire transfer. The total cost to the consumer is compound by an
explicit cost: commissions and other implicit costs related to the exchange differential. The explicit
cost per remittance commissions are imposed by the remittance issuing entities abroad (MTOs and
their agents) and, only in some cases, the paying entities, especially when they have receiving
offices abroad.
In the Honduran scenario, remittances may be paid in Lempiras or foreign currency. For the latter,
there is no exchange differential, since the remittance is paid in the currency of origin and, therefore,
their costs include only the commission. In this connection, the commission charged in the place
of origin may be shared with the remittance payer, depending on the agreement between them.
Usually, the lowest percentage corresponds to payers at the remittance destination, accounting for
8% to 30% of the total commission paid.
In connection with remittances paid in Lempiras, disbursing institutions make payment at the
reference exchange rate determined by BCH applicable on the day when the transaction is conducted.
Therefore, possible costs for the exchange differential were not detected, even more so considering
that the stability of the exchange rate in Honduras in the last few years does not allow or costs in
this connection, even in those cases when the remittance is paid several days after it was sent.
7.2. COMMISSION CHARGES
In the Honduran case, the level of commissions collected depends on factors such as the remittance
country of origin, its value and the type of transmission agents participating in the reception,
transmission and payment chain.
In general, based on the information from the remittance companies, the costs for sending remittances
from US $1 to US $100 vary from 8% to 14%. For amounts up to US $300, commissions charged
range from 3.3% to 6.0%, and for higher amounts, the commission diminishes from 2.4% to
6.9%.
In general, the higher costs are registered for remittances conducted by means of MTOs when they
are paid in proprietary offices in Honduras, such cost reaching an average of 11.66% for a typical
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remittance in the amount of US $300. On the other hand, commissions for remittances paid by
banks vary between 8.00% and 11.66% depending on their origin. It is important to mention that
when the bank has agreements negotiated with MTOs, costs are higher than in those cases when
the bank has correspondent agreements with other banks, or when it uses its own offices abroad
to collect the remittances.
On the other hand, Exchange Bureaus paying remittances in Honduras register costs varying from
5% to 9%13, commission that also depends on the agent collecting the remittances abroad. Finally,
Cooperative Associations paying remittances affiliated with one of their federation networks,
would have lower costs, since the collection abroad is conducted through entities related to the
Cooperative movement, with costs ranging from 3.33% to 11.66%, in this last case when their
agreements include MTOs as collectors of remittances abroad.
Chart 11. Evolution of Commissions Collected by Remittance Issuers
Agent
Minimum
Maximum
MTOs
11.99%
12.95%
Commercial Banks
8.0%
11.66%
Exchange Bureaus
5.0%
9.0%
3.33%
11.66%
Cooperative Associations
Source: Own Elaboration.
In general, the commission is determined at the point of origin. Therefore, in regards to domestic
payers, costs are similar if working with the same collectors. Derived from the foregoing, from the
perspective of local payers, costs of remittances will depend on the type of agreements and the
entities with which they conduct their business abroad to collect the remittances.
7.3. EXCHANGE RATE DIFFERENTIAL
The exchange rate differential is the difference between the exchange rate received by the agents
where the remittance transaction is conducted and the one that would be received by other
alternative exchange agents. In the Honduran case, this is the difference between the official
exchange rate of the authorized exchange agents and the rate offered in the non-official market or
by agents that are not subject to supervision.
As mentioned above, the bi-monetary character of the Honduran economy, as well as the stability
of the exchange rate, make the exchange rate differential to be insignificant in the total cost of
remittances. Indeed, the nominal exchange rate grew by an average rate of 16.4% over the period
1991-96 and by 4.7% in 1997-2004, but with depreciation of only 1.4% in 2005 and experiencing
no further changes up to mid-2006. The foregoing evidences little change of this index, mostly
due to the extraordinary income of remittances that has allowed a relative stability of the Lempira
within the last few years.
13
Information published on the Internet.
December 2007
55
According to the BCH, the stability in the last two years in the nominal exchange rate has promoted
a reduction in the margin between the official exchange rate and that of the non-official one. To
such an extent that for some months of 2007, the rate in the non-official market was lower than
the official market level.
Graph 34. Evolution of the Monthly Exchange Rate US Dollar-Lempiras
The stability of the exchange rate and the practice of institutional paying agents of always using the
BCH-s reference rate for remittance payments allow one to conclude that, at least at present, the
exchange differential is not relevant to remittance receivers in Honduras. Therefore, the trading for
remittance payments between local payers and collectors abroad are focused on the distribution of
commissions, which is the same for each collector abroad, independently from the paying entity
in Honduras. The determination of this is thus out of the reach of local payers, who must adhere
to the commissions imposed by their partners abroad.
The stability of the exchange rate and the lack of control over commissions by Honduran paying
agents also force market participants to constantly look for alliances with remittance entities with
lower cost abroad, as a way to improve their position in the local market.
7.4. TAX COSTS
There are no specific taxes levied over remittances arriving or leaving Honduras.
7.5. ACCESS COSTS
An important cost for remittance receivers, and one that is not always acknowledged, is generated
from deficiencies in the access locations where these funds are settled. In the Honduran case, due
to the great participation by different institutions in remittance payments, beneficiaries have many
locations to pick up their remittances.
56
December 2007
Honduras Report
The Honduran financial sector includes banks, savings and credit associations and Exchange
Bureaus, these have infrastructure and coverage all over the country. This allows RSPs to offer
access points in more than 561 offices and a shared ATMs network representing in total 1,338
points of immediate access to remittance beneficiaries. In this connection, the number of offices
and agencies of commercial banks afford access for many remittance receivers, for them not only
to enjoy payment of the remittances received, but also to access more financial services in these
bank branches. This wide access offered by the system has encouraged reduction in remittance
reception costs, because beneficiaries do not need to travel to distant locations to collect the funds
sent by their relatives in other countries.
Chart 12. Access Points for Reception of Remittances in Honduras
Number of Offices and ATMs per Type of Institution
Institution
Branches
Agencies
No. of total
offices
ATMs(a)
Commercial Banks
Banco Atlántida, S.A.
16
87
103
101
Banco de Occidente, S.A.
8
96
104
102
Banco de Los Trabajadores, S.A.
7
17
24
8
Banco Mercantil, S.A. BAMER
1
46
47
90
Banco Hondureño del Café, S.A. BANHCAFE
1
33
34
300
Banco del País, S.A. BANPAIS
2
49
51
132
Banco Financiera Comercial Hondureña, S.A. FICOHSA
1
32
33
300
Banco de América Central Honduras, S.A. BAC/CREDOMATIC
1
27
28
106
HSBC (Antes Banco Grupo el Ahorro Hondureño, S.A. BGA)
2
44
46
151
2
24
26
48
41
455
496
1338
21
n.a.
Roble Viejo, S.A.
1
n.a.
Corporación de Inversiones Nacionales, S.A. COIN S.A.
2
n.a.
41
n.a.
65
n.a.
561
1338
FICENSA
Total Access Points in Banks
Exchange Bureaus
Divisas Corporativas, S.A. DICORP
Servigiros, S.A.
Total Access Points of Exchange Bureaus
Total Institutions, Offices
Source: Own elaboration based on entities public information.
Note: The number of ATMs includes Drive-through Teller Machines, the number of offices includes local and external
agencies as well as counters.
(a)
“Others” mainly include Drive-through Teller Machines and ATMs.
In connection with the ATM network, there are more than 1,300 access points around the country
supported by the network of BANET, the network of ATMs in Honduras, made up by: Red Interactiva,
Banred24, Unibanc and Red Total. Therefore, access for remittances beneficiaries in Honduras is
favored by this connection between networks, which is also used by commercial banks acting as
access points for the agencies sending remittances as Western Union.
December 2007
57
Chart 13. MTOs: Access Points by Type of Institution
Type of Institution
Number of Acces Points
Commercial Banks
71
Exchange Bureaus
6
Cooperative Associations of Savings and Credit
13
Proprietary
11
The RSPs abroad have not only taken advantage of the infrastructure of commercial banks
and, to a lesser extent, Exchange Bureaus, but have also used the Cooperative Associations
of Savings and Credit as a channel to reach remittance beneficiaries, institutions with a broad
presence in Honduras. In this connection, the existence of one of the federation made up by
more than 90 Cooperative Associations of Savings and Credit has facilitated remittance payments
in locations where no commercial banks exist, improving even more the costs related to the
access of remittance reception points and the cross-sale of other financial products that may be
of interest to remittance beneficiaries. For example, the Federation of Cooperative Associations
has developed a product called “UniRemesas” that allows remittance beneficiaries not only to
have access to the funds received but also enables access to other products such as housing and
consumer credit. Notwithstanding that the participation in the market of this type of entities is
even smaller than commercial banks or Exchange Bureaus, a sustainable growth is forecasted
in the future, since the profile of remittance receivers is similar to that one of the Cooperative
Association partners.
7.6. COST, TIME AND ACCESS TO NON-INSTITUTIONAL CHANNELS
The remittance market by means of non-institutional channels such as messengers and cash
transportation of travelers imply different costs related mainly with the time it takes for them to
pay the remittance and the risk associated to these kinds of channels. These kinds of channels are
very limited since they can not be found anywhere and depend on the communication networks
among the emigrant’s community.
The usage cost of the messengers to transport remittances in cash is higher than costs in the formal
market making it less attractive to the user and it is translated into a mainly formal market where
remittances sent by means of banks, Exchange Bureaus and MTOs reach 96% of the total. In
general, these informal channels, due to the dominance of the formal channels and their failure
to diminish costs, are opting to change their business, traditionally oriented to send remittances
in cash toward the transport of remittances in kind, by carrying goods and merchandise from
Honduras to emigrants abroad.
58
December 2007
Honduras Report
8. MEASUREMENT METHODOLOGY
8.1. RESPONSIBILITY AND COORDINATION
The Central Bank of Honduras is responsible for the measurement and disclosure of the information
related to remittances. The Law confers on BCH the right to obtain information from the Authorized
Exchange Agents, as well as from other public authorities. This information necessary to carry out
the statistics compilations about remittance flows. In this case, BCH has full authority and strength to
compile this data, and it can make any changes it considers as pertinent, based on its measurement
methodologies.
The Honduran authorities have reinforced their capacity to control and monitor the system with
the enactment of new laws and regulations applicable to market agents, especially those belonging
to the financial system. Decrees No. 106/2004, 129/2004, 45/2001 and 111/2004 approve the
reforms to the Law on the National Commission of Banks and Insurance Companies, the Financial
System, the Anti-money Laundering and the Banco Central de Honduras law, making up the new
legal framework regulating the financial sector. These amendments determine the role of each one
of the control, supervision and surveillance authorities, as well as the procedures and obligations
of participants in the exchange market related, whether directly or indirectly, with the remittance
market. Therefore, all transactions conducted in the Honduran exchange market, including the
sending and reception of remittances, are subject to control and regulations of the BCH and other
authorities, and bind all Authorized Exchange Agents to prepare and send reports in the formats
and times defined by the authorities.
Likewise, the legal framework determines that only ACs are authorized to purchase and sell foreign
currencies in the country, both in cash and as checks or any other instrument that may exist in the
country, and it obligates them to report all these operations to the BCH International Department
where figures are compiled to determine the flow of remittances into the country. However, there
are other participants in the remittance market that are not currently subject to this regulation, as
they are not considered as Exchange Agents and therefore, have no access to the BCH system to
conduct currency exchanges. These agents should exchange currencies by means of ACs, and it
is then when their movements are recorded and added up to the figures related to remittances.
Those “pocket remittances” paid in foreign currency that are not recorded by the currency exchange
system are estimated based on the surveys conducted by BCH and the Statistics National Institute
(INE), as well as the remittances in kind.
In order to define remittances, BCH follows the IMF MBP5 recommendations: Remittances from
workers consist of current transfers made by emigrants working in another economy where they
are considered as residents. Therefore, an emigrant is someone traveling to another economy and
who stays, or is estimated for him/her to be there, for a year or more.
8.2. MEASUREMENT BY CHANNELS
In Honduras, most remittances flow through institutional channels (close to 96%). BCH has a wide
coverage of the records registering these flows. Among the institutional channels, it is possible to
December 2007
59
distinguish those recorded, providing information in a formal manner within the terms and forms
required by BCH and making up the ACs14, as well as those non-registered institutions, such as
MTOs15 that submit a voluntary report. As they are not considered as ACs, BCH cannot force them
to report information about their transactions on a regular basis.
As can be noted in the following chart, it is possible to divide remittances in two big groups:
Institutional and Non-Institutional, also called “Informal” in some cases. By definition, the former
flow through registered financial institutional channels or outside the BCH exchange system, whereas
the informal ones correspond to all other channels16. Only a small part of remittances flowing in
formal channels are not easily measured, whereas remittances flowing by means of informal channels
are impossible to measure in an accurate manner. Therefore, BCH uses indirect methods, such as
surveys conducted by the Central Bank staff or INE to estimate these flows.
Chart 14. Transmission and payment of remittances in Honduras, per channel
Institutional
Registered
Banks and
Associations
of Savings
and Credit
Data
Source
Report
Frequency
Item
Coverage*/Share
in Total
No registered
CC
Exchange
Agents
Exchange
Agents
Exchange
Balance
Daily
ATM
MTO’s
Exchange
Balance
n.a.
By means
of Exchange
Agentes
Daily
n.a.
Daily
85.5%
Cash
Postal
Instruments Others
Surveys
Surveys
conducted at conducted at
Household Household
EPHPM
(2006)
EPHPM
(2006)
All their operationsare
classified as Remittances Remittamces Remittances
Remittances Remittances
100%
Informal
100%
100%
n.a.
9.5%
Informal flows
included
Flows included
in the AC’s
reports
n.a.
n.a
n.a
n.a
n.a
4% pursuant to the surveys
conducted in Households
by BCH and INE
As mentioned above, the results suggest that approximately 4% of family remittances arrive through
different means than those offered by the institutional channels. Therefore, 4% approximately is added
to the data of the Balance of Payments as informal flows which are not directly measurable.
14
Including banks, Associations of Savings and Credit and Exchange Bureaus remitting information on the purchase-sale
foreign currency formats that make up the main source of information about remittances.
15
Transactions of MTOs, those that are not conducted by means of ACs as agents, are included in the ACs’ reports with
which MTOs conduct their purchase-sale of foreign currencies transactions.
16
This distinction does not imply the existence of accurate methods to measure all flows, neither institutional nor informal
ones. For instance, as discussed later, remittances passing through ATMs that clearly flow by means of institutional
channels, are beyond measurement. On other hand, remittances sent by courier (not only postal checks but also money
orders or in envelopes) are classified as informal since the postal service is not considered as an AC.
60
December 2007
Honduras Report
The Honduran measurement system is based in the exchange control system for statistical
compilation of remittances, which is complemented with data from surveys conducted by INE
and BCH.
8.3. REGISTERED INSTITUTIONAL
BCH keeps control over the exchange market, forcing all other agents that may want to purchase or
sell foreign currencies to be registered and authorized by the Central Bank. Similarly, the regulation
establishes limits for the holding of foreign currencies, any foreign currency that exchange agents
may hold over those limits should be sold to BCH. Despite the foregoing, individuals and business
entities may conduct transactions in foreign currencies in the country, and therefore, in many cases
people keep foreign currencies in cash. However, if they want to change such funds into Lempiras,
the only way for them to exchange them is to go to Exchange Agents authorized by the BCH, who
are in turn bound to sell them to BCH only.
Within this framework, remittances arriving in foreign currency and paid in Lempiras should
necessarily be changed by one of these ACs through the BCH. Notwithstanding the channel through
which foreign currency arrives, whether formal or informal, they must be changed into Lempiras
to be used inside the country. Therefore, the exchange process chain will end up going through
one of the ACs.
Derived from the above, the remittance statistical compilation system in Honduras is based on
the control and mechanisms developed for the follow-up provided to transactions conducted by
ACs.
Reports of Authorized Exchange Agents
The measurement system of exchange operations conducted by ACs, including sending and
reception of remittances, involves all authorized institutions such as exchange agents which
participate in SAPDI, these include banks, associations of savings and credit and Exchange
Bureaus. With regards to remittances, Exchange Bureaus and banks are the most relevant
ones.
The exchange operations measurement system is based on the “formats” (specific forms) to
be filled in by the ACs per individual transaction of purchase or sale of currencies, including
family remittances sent or received. Originally, those “formats” were created to record exchange
transactions with the aim to estimate the Balance of Payments and record all transactions
entailing income and outflow or foreign currency that take place in the country. To date, this
is the only source to gather direct information about the flows of remittances conducted in a
specific period, and 4% is added considering the remittances going through informal channels.
For this reason, data in the Balance of Exchange and the Balance of Payments accounts show
similar figures.
December 2007
61
Figure 8. Foreign Currency Sale Form
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62
December 2007
Honduras Report
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6(59,&,26),1$1&,(526&20,6,21(6
6(59,&,26'(,1)250È7,&$(,1)250$&,Ï1
5(*$/Ë$6<'(5(&+26'(/,&(1&,$)5$148,&,$6
3URYLHQHGHUHWLURGHODFXHQWD'HSyVLWRVHQ'yODUHVGH'LVSRQLELOLGDG,QPHGLDWD
&2035$6$/6,67(0$),1$1&,(52
&2035$6$/%$1&2&(175$/
6(59,&,26(035(6$5,$/(6
&2035$6&255,(17(6
'(&2035$9(17$5(35(6(17$&,21(6
$55(1'$0,(172<(;3/27$&,Ï1
&+(48(6
352)(6,21$/(6<7e&1,&26
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38%/,&,'$'(,19(67,*$&,Ï1'(0(5&$'2<(1&8(67$
75$16)(5(1&,$6
275266(59,&,26
27526$80(1726
6(59,&,263(5621$/(6&8/785$/(6<5(&5($7,926
$18/$&,Ï1*,526(;75$9,$'26
$8',29,68$/(6<&21(;26
75$16)(5(1&,$6(175(68&856$/(6
6$/8'(16(f$1=$<27526
&2175$3$57,'$6
75$16)(5(1&,$6(175(&255(63216$/(6
75$16$&&,21(62),&,$/(6
(;3257$&,21(63$*2$17,&,326
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(0%$-$'$6<&2168/$'26
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25*$1,6026,17(51$&,21$/(6
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'(3Ï6,726(1021('$(;75$1-(5$'(',6321,%,/,'$',10(',$7$
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5(0(6$6)$0,/,$5(6
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5(081(5$&,Ï1'((03/($'26
),50$'(/9(1'('25
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275$6)8(17(6(;7(51$6
),50$(03/($'2'(/$*(17(&$0%,$5,2
December 2007
63
When an ACs receives a remittance order, upon paying it or making the deposit of the money into the
beneficiary’s account in Lempiras, it fills in one of the “formats” with code 03-03. If the remittance
is paid out or deposited in an account in US dollars, the AC must write code 08 03, thus creating the
records to be sent over to the BCH. Entities paying remittances which are not ACs, should obtain US
dollars from an AC when selling them. The AC then fills in a “format” accounting for the sale, and
that is when the item for which a family remittance is sent abroad is defined. On the other hand,
if an individual received a remittance in cash, for instance in US dollars, and wants to exchange
them for Lempiras, he/she should go to an AC and, upon exchanging the money, the AC will fill in
a “format” and will record the transaction under item 03-03, making sure the person conducting
the transaction confirms that the origin of such foreign currency is a family remittance.
In general, remittances that arrive in Honduras and are paid in Lempiras are registered by means
of the foreign currency formats. Those transactions paid in foreign currency will be recorded upon
being exchanged into Lempiras or when they are deposited in foreign currency accounts. Due to
the low acceptance of foreign currency in every day transactions, and due to the fact that most of
the remittances are used for consumption purposes, eventually all of them will be exchanged into
Lempiras and therefore, recorded in the system.
The reporting “forms” were designed with the aim to gather information about different types of
transactions in the foreign currency market, among which remittances are only one fraction thereof,
but are part of the statistical chart subject to tabulation and analysis.
The form is to be filled with at least with the following data about the remittance:
•
Name of the Exchange Agent.
•
Foreign currency country of origin.
•
Department in Honduras.
•
Means of payment.
•
The original currency, exchange rate applied and the amount payable in Lempiras.
•
Origin or destination of the currency (specifying if they are remittances or another type of
transaction).
As mentioned above, the format identifies as family remittances those transactions entailing foreign
currency that are recorded under code 03-03 and under code 02-01 for payment of employees, both
in the form used to record foreign currency purchase or sale transactions. In the reports resulting
from these figures originated from the foreign currency purchase or sale forms, it is possible to
observe that many transactions correspond to typical remittances average amounts (USD 300 to
USD 500). However, there are also much higher figures corresponding to consolidated remittance
transactions conducted by some paying agents which are exchanged into Lempiras globally with
64
December 2007
Honduras Report
the AC. In these cases, BCH conducts a thorough revision of these types of uncommon transactions,
to make sure they are properly recorded as remittances. For such purposes, the Central Bank asks
the remittance payers, besides filling in the report form to BCH, to also fill in individual receipts of
the paid remittances, in order to prove that the aggregated data reported by ACs correspond to the
sum of individual figures of each receipt paid by entities different from the ACs.
There are not upper or lower thresholds for the filling in and submission of individual forms.
Therefore, the system is structured to capture all remittance transactions passing through institutions
(ACs), except for disbursements from ATMs and POSs networks.
Other remittance payment forms apart from cash, such as deposits into accounts, are included in
statistical records as well: the “form” is necessarily filled in for the remittances to be deposited.
Therefore, the system records the remittances notwithstanding the means of payment.
8.4. NON-REGISTERED INSTITUTIONAL
A certain portion of remittances is handled by MTOs. Most of these entities work under negotiated
agreements with domestic agents in charge of disbursing these transactions. However, some part
of the MTOs remittances is paid directly by a proprietary office of the MTO itself, which is not an
AC. Therefore, these are institutional payments made by a non-registered entity.
Similarly, the Cooperative Associations of Savings and Credit are institutional payers, as well as
other institutions that also make payments based on agreements negotiated with other remittance
collecting entities abroad. These entities, despite having a license to operate in Honduras, are not
part of the Authorized Exchange Agents and therefore, could also be considered as non-registered
remittance payment entities.
In connection with disbursements made by means of ATMs or POS through foreign cards that to
some extent constitute remittance transactions, these are conducted by means of International
Card Administrators (ATI) that assume the responsibility over the positions and final settlement of
transactions conducted by means of this type of cards. It is important to observe at this point that
the sense of “registered” here refers to the registration as an entity authorized within the exchange
market, since ATIs are registered and authorized to conduct their transactions. However, they are
not included in the universe of entities registered with the Central Bank as ACs and therefore, are
included in this report as non-registered entities.
Reports of MTOs (Money Transmitting Operators)
Since MTOs and other paying entities are not authorized as ACs by the BCH, these institutions are
not required to fill in and submit the individual formats per foreign currency exchange transaction
or remittance payment in local currency. However, when these entities need to exchange foreign
currency into Lempiras, they should do it with an AC and when that happens, the AC fills in a
“form” to register the operation. In this exchange transaction, neither the MTO nor the AC conduct
transactions on an individual basis, but in a consolidated manner, as a group of remittance operations
December 2007
65
whether payable or receivable, and it is until such moment when the currency exchange actually
takes place that the transaction is reported as a remittance. Therefore, the amount seems to be
much larger than the typical remittance operation.
For that reason, BCH requires that entities paying remittances record every transaction so the
consolidated data reported by ACs can be matched ex-post with the information from remittance
receipts, also sent to BCH.
International Card Administrators
The remittances received by means of prepaid cards 17 and others paid through ATMs or spent
at POSs, which are part of the formal channels, are not identified by the recording system.
Currently, family remittances transferred by means of prepaid cards (conceptually included
in the household surveys as part of remittances received through informal means) do not
seem to represent a big part of the total flows, but they will surely increase in years ahead.
At present, however, data stored in such cards is not enough to distinguish among several
types of transactions, among which, only a small part of them may be personal remittances.
Other market innovations, such as remittances sent by means of cell phones abroad, which
are another prepayment means going through known channels that are analytically similar,
are also beyond recording.
Chart 15. Measurement of Remittances Conducted by Means
of International Cards in ATMs and POSs
Even though the magnetic bands in debit, credit or prepayment cards would allow, the information therein
does not distinguish if a withdrawal made from an ATM indicates a remittance or not. Based on the information
obtained from most of the companies owning ATM networks, it is known that the stripes have space and capacity
to store information that would allow to distinguish remittances from other types of usage (a). However, the
data currently stored in tracks 1, 2 and 3 available to store data, does not provide a lot of information about
the exact type of the account supporting such cards. The situation gets even more complicated as neither the
ID of the card issuing bank nor the primary account number allocated to the card or the signs of a collective
account with individual sub-accounts of purchasers of such cards are useful to distinguish one type of cash
withdrawal from the other. Therefore, in connection with the remittances settled by means of prepaid cards,
the only alternative today is to base the estimations on household surveys. On the other hand, it seems unlikely
that the prepaid cards will reach great importance in the near future. Despite the speed and attractiveness of
this mechanism from the technical point of view, the costs and charges in some cases are significant and may
hinder the initial enthusiasm towards the usage of this method as a way to realize remittances. (b)
For example, it is probable that a prepaid card purchased in the US and used in a Latin American country corresponds
to a family remittance and not to a withdrawal of Money from the account of a tourist or others.
(a)
Typically for example, there are charges to purchase one or two cards, also to “load” or “reload” the card’s value.
Also, there are additional charges for the issuance of statements of account, withdrawals and other transactions.
In some cases, there are even monthly fees. Currently, there may even be charges are made if the card is not
used within certain periods of time. These costs are related to the different actors taking part of the payment
chain of these means, including the company selling the cards, the IMC company sponsoring the network, the
bank keeping the accounts resulting from prepayments and obviously, the automatic teller machine network
owners and managers.
(b)
17
Stored Value Cards (SVC).
66
December 2007
Honduras Report
8.5. NON INSTITUTIONAL
Remittances going through informal channels are estimated to be 6% out of the total: this has been
determined based on the semi-annual surveys conducted by BCH in the Tegucigalpa and San Pedro
Sula airports. These surveys include around 1000 participants per semester, many of whom have
lived outside the country in the last few years and return during Christmas and other holidays to
spend time with their families. On the other hand, the estimations based in household surveys
conducted by INE were similar to those gathered by BCH staff, thus reinforcing the results found in
studies conducted at the airports. Based on these surveys, the main non-institutional mechanisms
to realize remittances are deliveries of cash, the post office, the usage of international cards and
informal operators.
Cash
Remittances arriving in cash (usually US dollars) and exchanged into Lempiras through the
ACs are added to the measurement of remittances when they are recorded by means of the
foreign currency purchase and sale “forms” filled out by ACs. Depending on the place where
the currency is exchanged, the report may not be accurate. For example, if the currency
exchange is made directly by the beneficiary, the information gathered will be “first hand”
and more reliable than if the beneficiary makes the exchange with another institution, different
from an AC and then, this entity is the one conducting the aggregated exchange of currency
for several transactions. In this last case, it could be difficult to define the exact origin of funds
that are exchanged (remittances or others). Therefore, they will be allocated based on what
the foreign currency seller defines, information that is not “first hand” and that could present
some certainty issues.
Some of these remittances may not be exchanged into Lempiras at all, at least upon receipt, and
even if the exchange takes place afterwards, they escape the current recording method. Therefore,
based on the evidence coming from households surveys conducted together with INE, BCH estimates
this type of remittances and adds them up to the remittance general figure as an additional 6% to
the total obtained from the surveys.
Postal Instruments
Although couriers were an important channel for the flow of remittances into Honduras in the
past, their usage has diminished: remittances received by means of the postal office are very small,
with no statistical relevance. As also happens in other countries, there are no mechanisms different
from the surveys of remittance recipients that permit estimation of transactions conducted by
means of checks or postal money orders included in the envelopes sent by mail. Information from
the authorities suggests that the use of post-office orders, different from Money Orders is almost
zero, but this does not mean that the use of the postal office with other means and instruments
has disappeared entirely. However, the risk associated with this remittances transmission channel,
compared to the efficiency, safety and diminishing costs of the formal mechanisms, explains the
reasons why usage is less frequent. In any event, these remittances are estimated by means of the
BCH surveys as part of the 6% mentioned above.
December 2007
67
8.6. VALIDATION AND CONTRASTING
In Honduras statistics about migration and the number of Honduran residents abroad is varied and
the data reported by INE is sparse compared to the data available from other sources. This is why
the statistics drafted based on this information are not reliable, neither for comparisons with figures
gathered by other means, nor for the exchange system used by BCH.
Today, the only comparison conducted from the information received is subject to verification of
the information received by ACs documented by the “forms” that include the information received
directly from MTOs and other institutions reporting the receipts of remittances paid.
8.7. TRENDS, PROGRESS AND CHALLENGES
At present, BCH is analyzing the possibility of further improving the methodical arrangement
of the data reports from the ACs and of including, as part of the universe of reporting entities,
other agencies realizing remittances in the country, thus significantly improving the compilation
methodology in regards to remittances. Likewise, the possibility of amending the formats used to
document transactions is also under study, in order for them to broaden the information available
and improve comprehension and analysis of the data related to remittances.
68
December 2007
Honduras Report
9. TRANSPARENCY AND THE PUBLICATION
OF INFORMATION
9.1. OFFICIAL INFORMATION
In Honduras, BCH is the official source of statistics on the Balance of Payments, of which international
remittance flows are one component. In this connection, BCH staff publishes the information about
current transfers in the Balance of Payments and the Balance of Exchange on a regular basis, as
well as the results of the semi-annual survey conducted at the main airports. Likewise, BCH is the
authority in charge of submitting public information to various international organizations, such as
the IMF, for inclusion in the corresponding compilations and it is acknowledged as the only institution
authorized to produce official information about remittance flows involving Honduras.
BCH also makes public the methodology used in the gathering and estimation of the Balance of
Payment data as part of its participation in the IMF’s General Data Dissemination Standards (GDDS18).
BCH publishes a general description of the methodology in use and the sources of data used to
calculate the information of the Balance of Payments and remittances. The information sent by
BCH to IMF includes other types of credit and debit transfers which are even smaller, and this can
be read in the detailed information published by the IMF. Methodological information is available
in the GDDS section of the IMF website.
Today, BCH and other entities such as INE and the Cancillería issue occasional and periodical
publications about information related to remittances (costs, time, exchange rate and others),
especially related to the airport surveys and surveys of households receiving remittances. This
activity allows BCH staff to monitor the market on a constant basis, and to disseminate research
results among the public and provides the necessary space to compare its findings and information
with the rest of actors. However, this is consolidated information that does not allow consumers
to assess the specific services of a particular actor. In this connection, there is neither a public nor
private entity as of this date that offers information to the consumers that would allow them to
select a particular remittance service.
With regards to consumer protection, as mentioned in section 54 in BCH Law, the Central Bank,
in coordination with the National Commission of Banks and Insurance Companies, are in charge
of organizing and regulating the Payment Systems with the aim to protect the interests of financial
and banking service users. In turn, the Consumer Protection Agency does not have a special unit
or department specialized in receiving consumer complaints within the financial system or of any
other type of remittance service providers. This role is performed by CNBS by means of the Client’s
Defender, a unit in charge of investigating claims related to financial entities only. Additionally,
some banks have created a specific position within their organizations that performs the informal
role as Ombudsman in order to respond to the client’s claims.
As of this day however, there is no dedicated service to hear the claims of clients who may be
victims of non-supervised remittance services, and the only remedy for them is to file a claim with
the Consumer Prosecutor Office.
18
General Data Dissemination Standards.
December 2007
69
9.2. INFORMATION PROVIDED BY THE ACS
As happens in other countries within the region, in Honduras transparency about the total cost
of remittances being sent is not complete due to the practice of paying the beneficiary in local
currency, Lempira, however, although remittances can be paid in foreign currency, the differences
in applying the exchange rate are practically non-existent, and remittances paid in Lempiras are
always paid using the reference exchange rate published by BCH.
Exchange stability during the last few years allows neither frequent variations nor significant ones
related to the reference exchange rate, which is applied to the payment of remittances and other
types of payments nominated in foreign currencies. Therefore, there are no additional gains to payers
related to a differential in the exchange rate. Nonetheless, there is no certainty if this exchange
rate is disclosed to remittance senders abroad upon engaging remittance service providers to send
funds into the country.
The current legislation does not establish any obligation at all to RSPs to make transparent any
information related to the remittances paid or collected, and it is not common practice among
authorized exchange agents or other remittance payers in Honduras. The latter neither issues any
type of publication on prices or commissions, nor discloses the characteristics of services provided,
such as availability of locations to collect remittances or the time they take to settle payment.
Some of the largest remittance service providers, such as the banks, have internal rules or similar
practices to provide basic information to the consumers, about the transfer services, including the
time that funds will take to reach Honduras and be made available. In most of cases, the agents
act only as payment agents for other international MTOs or for other banks and no corresponding
banks. Therefore, they are not acquainted with commissions collected at the origin or if the clients
abroad know the exchange rate applied upon payment and other charges related to these remittance
transfers.
70
December 2007
Honduras Report
GLOSSARY
The Information Improvement Program and Central Bank Procedures regarding Remittances,
the objective of which is to improve and uniform the information and procedures of collection,
gathering and presentation of remittance information from regional central banks has contributed
with valuable technical documents for consultation in the remittance market field, within which,
the “Glossary in Spanish and English” contains all the terminology related to such market. This
glossary is available at: http://www.cemla-remesas.org
There is a few terminology exclusive to the context of the Honduran remittance market and it is
not included in the Glossary mentioned above.
Authorized Exchange Agents – ACs
Financial institutions authorized by the Central Bank of
Honduras (BCH) to purchase and sell foreign currency. In
Honduras, the financial institutions authorized to operate
in the exchange market are commercial banks, Exchange
Bureaus and associations of savings and credit which
are enabled to deal in foreign currencies in the domestic
territory. Authorized Exchange Agents can maintain a
deposit account in foreign currency to conduct their
transactions within the exchange market.
Commercial Banks – CBs
Financial institutions, whether domestic or foreign,
supervised by the CNBS that act as financial intermediaries
in a regular and systematic manner, thus conducting lending
or investment transactions with funds obtained from the
public as deposits, bonds, securities, loans and other
obligations.
Foreign Currency Purchase-Sale Form Document sent electronically to BCH where the Authorized
Exchange Agent records foreign currency purchase or sale
transactions, showing the origin or destination thereof,
allowing to identify the type of transaction by means of
a series of data required that classify the category per
transaction. For instance, the purchase of foreign currency
related to salaries is recorded in the item Income – Payment
to Employees, and identifies income related to salaries
received by residents derived from labor of a non-resident
of the same country, including the income of seasonal
workers in another country.
Exchange Bureaus
December 2007
Entities in the financial system, property of Honduran
individuals with the sole purpose of purchase and
sale foreign currencies in the non-bank market using
notes, traveler checks, wire transfers and other payment
instruments nominated in foreign currencies.
71
Remittance Payment Receipts
Form evidencing payment of remittances, issued by an
entity which is not considered an Authorized Exchange
Agent. Such format completes the process of reception
of a remittance and shows the information related to the
remittance issuer as well as its amount, payable only in
Lempiras since this type of entities can not take part of the
exchange market.
RTN
National Taxpayer’s ID
FACACH
Honduran Federation of Cooperative Savings and Loans
Associations.
72
December 2007
Honduras Report
ANNEX
STATISTICAL TABLES
A.1. Basic Statistics ............................................................................................................. 74
A.2. Population and Migration ............................................................................................ 75
A.3. Remittance Flows ........................................................................................................ 76
A.4. Remittance Characteristics ........................................................................................... 76
A.5. Remittance Recipients Characteristics .......................................................................... 77
A.6. Use of Remittances at Recipient Households ............................................................... 77
A.7. Remittance Service Providers ...................................................................................... 78
A.8. Remittance Payment Instruments ................................................................................. 78
A.9. Cost of Remittances Per Type of Issuer ........................................................................ 79
December 2007
73
A.1. Basic Statistics
(By the end of the year)
2002
2003
2004
2005
2006(a)
2007(b)
GDP (USD millions)
7,861.7
8,255.4
8,869.1
9758.3
10,839.4
12,321.5
Net National Income
(USD millions)
6,374.8
6,675.8
7,119.9
7,843.5
8,763.4
10,033.8
Final Household Consumption
(USD millions)
5,727.7
6,041.5
6,517.7
7,314.0
8,285.3
9,620.0
National Consumer Price Index
125.1
134.7
145.7
158.5
167.4
179.0
End of year
16,923
17,748
18,632
18,895
18,895
18,895
Average
16,421
17,335
18,190
18,764
18,895
18,895
4,286.8
4,345.2
5,178.6
5,747.6
5,880.8
6,344.3
3,744.9
3,754.0
4,533.9
5,048.0
5,195.0
5,594.3
542.0
591.1
644.8
899.6
685.8
750.0
5,113.5
5,527.3
6,676.1
7,473.4
8,301.0
9,593.6
4,381.6
4,774.1
5,827.2
6,544.6
7,317.1
8,556.3
731.9
753.2
848.9
928.8
983.9
1,037.2
Total Net Current Transfers
(USD millions)
846.3
991.2
1,265.3
1,895.1
2,450.3
2,821.8
Foreign Direct Investment
(USD millions)
268.7
390.6
552.9
598.8
673.6
814.9
Reserve Claims
(USD millions)
-105.8
96.5
-51.4
-346.3
-310.0
108.6
Nominal Exchange Rate
Exports (USD millions)
Goods
Services
Imports (USD millions)
Goods
Services
Source: National Accounts-Balance of Payments. Central Bank of Honduras.
Reviewed according the results of the implementation of the Fifth Balance of Payment Manual and the System of
National Accounts.
(r)
(a)
Preliminary.
(b)
Estimated.
74
December 2007
Honduras Report
A.2. Population and Migration
2002
2003
Total Population (thousands)
6,694,761
6,860,842
Economicaly Active
Population (PEA) (thousands)
2,444,807
Working Age Population
(PET) (thousands)
Average Unemployment Rate
Diary Minimun Salary by
Ordinary Labour Day
Minimun Salary
Emigrants (thousands)
Men
women
2004
2005
2006(a)
2007(b)
7,028,389
7,197,303
7,367,021
7,537,952
2,556,484
2,592,187
2,851,283
2,811,812
2,860,866
4,806,513
4,985,045
5,126,456
5,382,995
5,551,251
5,680,998
3.8
5.1
5.9
4.1
3.1
3.1
63.8
69.9
76.7
84.2
92.0
100.8
1,913
2,098
2,302
2,525
2,760
3,025
n.a.
n.a.
n.a.
n.a.
730,000
n.a.
n.a.
n.a.
n.a.
n.a.
513,920
n.a.
n.a.
n.a.
n.a.
n.a.
216,080
n.a.
United States of America
n.a.
n.a.
n.a.
n.a.
693,500
n.a.
Canada
n.a.
n.a.
n.a.
n.a.
23,360
n.a.
Spain
n.a.
n.a.
n.a.
n.a.
8,760
n.a.
Rest of the World
n.a.
n.a.
n.a.
n.a.
4,380
n.a.
Inmigrants (thousands)
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
Source: Department of Labor and Social Security (Minimun Salary). Encuesta Permanente de Hogares de Propósitos
Múltiples (INE).
n.a.: not available.
(a)
Preliminary.
(b)
Estimated.
December 2007
75
A.3. Remittance Flows
2002
2003
2004
2005
2006(a)
2007(b)
Total Remittance Income
765.3
842.3
1,138.0
1,775.8
2,328.6
2,561.4
Personal Remittances
765.3
842.3
1,138.0
1,775.8
2,328.6
2,561.4
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
Net Employee’s Income
Current Personal Transfers
711.3
842.3
1,138.0
1,775.8
2,328.6
2,561.4
Capital Transfers among Households
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
Other Current Transfers
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
Resident Employees Remittances
Social Benefits
Total Expenditure per Total Remittances
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
(a)
Preliminary.
(b)
Estimated.
A.4. Remittance Characteristics
(By the end ot the yeark, in %)
2004
2005
2006(a)
2007(b)
Monthly
73.2
58.6
56.6
68.2
Quarterly
8.4
8.1
9.4
7.8
Frequency of Remittance Reception
Semesterly
5.0
4.5
2.3
1.9
Occasionally
5.0
2.7
2.0
1.2
United States of America
n.a.
n.a.
91.4
95.0
Canada
n.a.
n.a.
2.2
1.3
Countries of Origin
Spain
n.a.
n.a.
2.1
1.1
Rest of the World
n.a.
n.a.
2.4
2.6
Central America
n.a.
n.a.
1.9
n.a.
Source: Central Bank of Honduras.
76
(a)
Preliminary.
(b)
Estimated.
December 2007
Honduras Report
A.5. Remittance Recipients Characteristics
2006(a)
Gender
Male
48.5
Female
51.5
Age
From 10 to 18 years
42.8
From 19 to 29 years
30.5
From 30 to 44 years
16.5
From 45 and more
10.1
Studies
None
14.5
Elementary Education
55.8
Secondary Education
23.2
Higher Education
6.5
Income Level
?
Low Income Level
n.a.
Medium Income Level
n.a.
High Income Level
n.a.
Source: Households Survey. INE. Remittances
Section 2005.
(a)
Módulo de Remesas – 2006.
A.6. Use of Remittances at Recipient Households
2006(a)
2007(b)
83.4
71.2
Non Revolving Expenses
5.9
8.6
Investment
1.3
5.8
Basic Expenses
Housing (acquisition)
3.8
3.4
Business or Micro-Business
n.a.
n.a.
Other Expenses (please describe)
5.6
11.0
Source: Semester Remittances Survey. Central Bank of Honduras (BCH).
December 2007
(a)
Preliminary.
(b)
Estimated.
77
A.7. Remittance Service Providers
Number of
Institutions/
Branches
Categories
Number of annual
Transfers. Millions
of Transfers
Transfers
Annual Value
US million
Average
Value
Direct institutional providers
Registered
22
249,253
248,598,212
32,188.00
Banks
16
248,929
238,479,592
958.02
6
324
10,118,620
31,230.00
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
Exchange Bureaus
Non-registered
Non-Institutional Providers
A.8. Remittance Payment Instruments
2006
Number of
Annual
Transfers
In %
Transfers
Annual
Value*
Cash
n.a.
248,598,212
Deposits in bank accounts
n.a.
n.a.
Órdenes de pago
(cheques, giros, etc)
n.a.
n.a.
Tarjetas de débito
n.a.
n.a.
Tarjetas de crédito
n.a.
n.a.
Other
n.a.
n.a.
Categories
78
December 2007
Honduras Report
A.9. Cost of Remittances per Type of Issuer
(to Transfer Remittance Equivalent to 300 USD)
Commission %
Issuer
Recipient
Fixed Rate (US$)(a)
Issuer
Recipient
Time of
Transfer
(days)(b)
Exchange
Rate
Differential(c)
Other
Costs %
or fixed
Registered Direct Institutional
Providers
Specialized (MTO)
Banks
Exchange Bureaus
11.66%
From 1
to 2 days
8-11.66%
Maximum
2 days
5-6%
Less than
24 hours
(a)
Only if there is a fixed rate on top of the percentage commission.
(b)
Time taken by the remittance upon being sent by the sender until it is received or is available to be delivered to the
receptor.
(c)
Difference between the exchange rate used to pay the receptor and the highest exchange rate in the market.
December 2007
79

International Remittances in Honduras

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