International Forum on Remittances 2007 Washington D.C., 18-19 October 2007

1. International Forum on Remittances 2007Washington D.C., 18-19 October 2007 Euro-Mediterranean remittances: Partnerships and Investments Pedro J. F. de Lima

2. Remittances in Mediterranean Partner Countries (MPC)and EIB support • Workers remittances to developing countries are private flows in excess of 200bn USD in 2006. • Remittances play an important economic role in many of those countries: mostly consumption, but also investment. • Can an institution like the EIB enhance the developmental impact of remittances? • Typically, the EIB -- the financial arm of the EU -- operates in countries outside the EU financing investment projects that promote economic development • strenghtening the private sector • deepening the financial sector

3. Remittances in Mediterranean Partner Countries (MPC)and EIB support • EIB has long standing relationship with Mediterranean countries • In Barcelona in 2002 the EIB received a new mandate (FEMIP) … • increase in finance (EUR2 billion per year), technical assistance, policy dialogue. • priority on private sector development

4. Remittances in Mediterranean Partner Countries (MPC)and EIB support • … reinforced in 2004 with the introduction of a special FEMIP envelope to enhance private sector lending (extended risk-sharing operations) and the creation of a Trust Fund to support initiatives in priority sectors • For the 2007-2013 period, FEMIP mandate renewed at EUR 8.7 billion by the European Council to finance private sector, regional integration and socio-economic infrastructures.

5. Reduce transfer costs Disseminate information, promote best practices Promote efficiency and interconnection of payment systems Channel remittances to formal sector; increase access to banking The FEMIP-EIB contribution

6. Information dissemination and promotion of best practices

7. $ local currency Bank: Hard currency € $ Securitization of remittances flows Remittances as collateral for the issuance of bonds/notes (future flow securitization): banks transfer the foreign currency flows to an SPV set-up in an offshore financial centre. €

8. Securitization of remittances flows Remittances as collateral for the issuance of bonds/notes (future flow securitization): banks transfer the foreign currency flows to an SPV set-up in an offshore financial centre. SPV: issues notes, Proceeds to bank local currency Bank: Can extend Finance at lower Costs € $ $

9. Securitization of remittances flows • Risk to international investors gets reduced: • Willingness to pay issues are settled • Transfer and convertibility issues are tackled • Particularly appealing for countries with sub-investment ratings • In 2005, five SPVs issued more than 4 billion USD in Turkey securitized by diversified payment rights (SWIFT transfers MT-100, MT-102, MT-102+, MT-103, MT-103+…, corresponding to transactions such as cash-against-goods, cash-against-document transactions, letter of credit transactions, cheques, as well as workers’ remittances)

10. EIB support to first remittance securitization operation in Lebanon • EIB’s role: catalyst as well as provider of TA • Lebanon: a good candidate. • Stable remittances • Economy with high T&C risk • Sophisticated financial sector and favorable regulatory environment (securitization law) • SPVs should deliver savings on funding commensurate with improved ratings

11. EIB support to first remittance securitization operation in Lebanon • First SPV operation: • EIB to buy notes, leading other (institutional) investors to participate • But also providing TA funds to support the setting up of the first SPV – a public good, easily replicable by subsequent SPVs