Dominican Republic 2017 | ECONOMY | FOCUS: REMMITANCES

More than USD5 billion in remittances arrive from emigrant Dominicans every year, and banking officials seek to use new technologies to turn these foreign inflows into a more powerful economic driver.

Remittances form the Dominican Republic's third-largest source of foreign income, a figure that only begins to represent how key they are to the economic and cultural fabric of the nation. With more than one out of every eight Dominicans living abroad, the inflows of foreign currencies from abroad are essential to the lives of millions of citizens. Most recipients receive their remittances in cash, which reflects the country's low banking penetration. In light of this, banking and industry officials are working to employ technologies to allow the billions of dollars in inflows to fully impact the Dominican economy.

Emigration from the Dominican Republic first began in earnest during the late 19th and early 20th centuries, when more than 5,000 Dominican immigrants entered the US through Ellis Island. Political instability following the assassination of dictator Rafael Trujillo in 1961 spurred another wave of Dominican migration, with the US' military occupation of the Dominican Republic making it easier for Dominicans to attain visas. Persistently high unemployment and inflation produced a steady stream of Dominican emigrants through the 1990s, mostly to the US. Though the rate of emigration has slowed with the improving economic fortunes of the Dominican Republic in recent years, today nearly two million Dominicans, or about 12% of the population, live abroad. The 2010 US Census estimated that there were 1.4 million Dominicans living in the US, making it easily the largest destination for expats. After the 77% of expats in the US, 12% of the Dominican expat population lives in Spain and 2.1% in Italy.

As the Dominican diaspora has grown and formed communities of its own in other countries, it has maintained cultural and economic ties to its home. The most important financial element of emigration has been the practice of remittances, or sending money back to the Dominican Republic. A major source of income for small or developing countries with high rates of emigration, Latin American and the Caribbean saw USD69.3 billion in remittances in 2015, a 4.8% increase on the year before. In 2016, the World Bank reported that remittances in the region rose to USD72 billion, an additional 6.3% rose over 2016.

The second most populous country in the Caribbean, the Dominican Republic led the region with USD5.2 billion in remittances in 2015. The World Bank reports that in 2016 remittances were up 7.8% over the same period in 2015. USD5.2 billion also represented 7.63% of the Dominican Republic's GDP in 2016, down from its peak of 11.35% in 2004 but well above global and regional averages. Remittances are second only to exports and tourism as the nation's largest sources of foreign currency, and represent a larger share of the economy than FDI.

In 2012, the average of nearly 18 million remittance transfers was USD215.20 per transaction. The Dominican Republic is unique in that it receives the majority of its remittance transfers as cash deliveries; just 3.5% of Dominican remittance recipients receive their funds as direct deposits. While convenient for Dominican consumers, this speaks to the low penetration of the Dominican banking sector. Financial institutions such as Banco de Ahorro y Crédito Unión have worked to open savings accounts for remittance recipient clients, but the work is slow going. The majority of remittance recipients receive their cash via home delivery, which means that efforts to open savings accounts have primarily affected only those who were already receiving their money from a bank.

Dominican banking industry leaders are well aware of the importance of increasing savings account usages, and are working on using mobile phone applications to facilitate easier access to banking accounts. One such program aims to combine text-messaging capabilities with the remittance delivery system to allow Dominicans to make bank transactions from home, combining the ease of delivery with the utility of a bank account. Dominican officials recognize that these efforts will take time; banking penetration was at only 29% in 2012, and these technological efforts will require considerable amounts of training and development before any real impact is felt. That being said, the reward of turning the Dominican diaspora into an even more potent economic driver for the island is well worth the effort.