The International Financial System (IFS)

Responsible Organizations: The Universal Postal Union (International Organisation) ILO Regions: Africa; Americas; Arab States; Asia; Europe Country(ies): Global coverage Theme(s): Labour migration and development Start date: 2005

Objective
Lower remittance transfer costs, improve transfer services and expand individual choice through development of a worldwide network for electronic funds transfers as part of the IFS.

Funding sources

The UPU provides some financial to help Posts setup the IFS. Least developed countries receive a 50 per cent discount.

Description
Activities, processes and steps involved
As part of its commitment to the Connect the World initiative, the Universal Postal Union (UPU) is currently working to build a worldwide postal financial network that provides easy access to secure and affordable electronic money transfers through its International Financial System (IFS) application, responding, in many rural and isolated areas, to a need that other financial institutions have been unable to meet. The UPU has developed its network through a focus on regions and migratory flows. It creates corridors between groups of countries where the potential for exchanges exists. UPUs IFS replaces paper money orders with electronic transfers and gives postal customers easy access to affordable financial services. Transactions are usually performed within two to three days. The IFS is a technical infrastructure with a network for secure electronic data interchange (EDI) between designated users, based on UPU standards. In addition, it is also a software solution to meet the needs of small to large users and for small to large transaction volumes.

Target beneficiaries
Migrant workers sending remittances and their families; remittance recipients.

Partnerships

The UPU works closely with national postal services to install the IFS, as well the International Telecommunications Union and international organizations like International Organization for Migration. It is also looking into possible partnerships with central banks and identifying sources of funding with the World Bank, regional development banks and the European Union.

Main outcomes
Using the IFS, UPU has connected 36 countries to the electronic transfers network. In addition, some 60 other countries are testing the application prior to joining the WEPN. UPU and Eurogiro have connected their networks for the transmission of tele-money orders. This programme began with approximately 30 postal administrations in both industrialized and developing countries, using UPUs electronic data interchange to send money order data and with nearly 50 post offices and banks using Eurogiro for cash and account transfers. Spain and the UPU also concluded the IFS Agreement. Under this instrument, Spain, through the postal operator Correos, will connect will connect with Latin America through UPUs electronic payments transfers network.

Relevant criteria for assessment

1. Respect for migrant worker rights
By offering affordable and secure channels to send remittances, the UPUs WEPN enables migrant workers to benefit from migration and contribute to their families left behind. The ILO Multilateral Framework on Labour Migration encourages, in its guideline 15.6, the reduction of the cost of remittance transfers, including by facilitating accessible financial services, reducing transaction fees.

2. Relevance
Most formal banking and financial institutions often fail to cater to the needs of remote and rural communities. The practice addresses an important challenge confronting migrant workers by providing them with access to fast, low-costing money transfer services. It reaches hard-toaccess communities, including those without accessing to banking services and those living in rural communities. Most rural locations have access to postal offices.

3. Potential for replication and extension (adaptability)

The IFS is adaptable and can be installed in remote areas.

4. Innovativeness
This is one of the strongest points of this practice. The UPUs IFS simplifies the paperwork and other procedures required for migrants to send money, while offering to migrants more

competitive services, which are rapid and reliable and cheaper than other private transfer operators. In addition, it represents an efficient way to reach to recipients who live in rural or hard to reach areas in origin countries. Therefore, services delivered by post offices through the IFS network represent an innovative alternative.

5. Broad-based and participatory

UPU works with international organizations and other relevant stakeholders to identify the challenges international migration presents, as well as the opportunities for development that it promotes.

6. Effectiveness
The practice responds to the problems of high transfer fees borne by migrant workers, when sending remittances to their families. In some cases, fees can reach 20% of the amount transferred. The WEPN effectively reduces these costs and provides migrants with more choice to as when and how they will send their remittances. For example, sending an electronic money for 200 euros from France to an African country by post costs 10 euros, whereas this fee is 25 euros through a private agent. However, there is limited information on the effects produced. In general, there is a need to document the results and impacts of the remittances on the development of origin countries. Moreover, it would be relevant to further analyse how financial services, including remittance transfer services are affected by the current economic crisis and whether these services help migrant workers adapt to this new reality by making the process more accessible and affordable. UPUs WEPN presents as a very interesting alternative in this context to traditional wire transfer and banking services.