iPolitics Insight: Regulating remittance fees makes sense for Ontario

Last week, Ontario NDP MPP Jagmeet Singh (Bramalea-Gore-Malton) introduced a private member’s bill that proposes to regulate the fees that financial institutions levy on remittances, transfers of money from individuals in Ontario to people around the world.  

Among other requirements, the bill calls for a five per cent cap on these fees, which currently can reach much higher levels, depending on the destination of the funds.

Why should all parties support this bill?

Lowering the cost of sending remittances will enhance the wellbeing of Ontario’s multicultural communities, will improve Ontario’s impact on international economic development, and crucially, will make Ontario a more attractive destination for immigrants.

Last week, Ontario NDP MPP Jagmeet Singh (Bramalea-Gore-Malton) introduced a private member’s bill that proposes to regulate the fees that financial institutions levy on remittances, transfers of money from individuals in Ontario to people around the world.  

Among other requirements, the bill calls for a five per cent cap on these fees, which currently can reach much higher levels, depending on the destination of the funds.

Why should all parties support this bill?

Lowering the cost of sending remittances will enhance the wellbeing of Ontario’s multicultural communities, will improve Ontario’s impact on international economic development, and crucially, will make Ontario a more attractive destination for immigrants.

The bill is consistent with Canadian understandings of fairness. It can also be part of an economic strategy which prioritizes immigrant attraction as a lever of growth and innovation.

A tremendous number of Ontario’s residents are immigrants. Immigrants account for 29 per cent of Ontario’s labour force. These individuals come to Ontario for many reasons. Chief among these is the prospect of economic advancement, both for themselves and their families. In this equation, “family” rarely refers only to immediate families that immigrate together. Family, in this instance, implies a wider circle of relations, many of whom remain in home countries.

How do immigrants in Ontario help their relations back home advance economically? Simple. They do so by sending cash. Currently, too much of this money is captured in institutional fees, as highlighted in the anti-poverty organization ACORN’s campaign for “remittance justice.”

In 2008, the province passed legislation to limit what payday lenders could charge their clients, many of whom are people living with low incomes. Much of the rationale that motivated these rules applies in the case of remittances. Gouging people is never right, least of all when the targeted funds are as important as remittances.

Remittances are a legitimate flow of wealth from richer to poorer countries and an inevitable bi-product of immigration. They’re a kind of peer-to-peer, micro-level tool for economic development. Total remittances in the world are actually three times the size of all official, government-delivered international aid, and arguably more impactful. Canada has the fifth most immigrants of any country in the world and 40 per cent of those immigrants settle in Ontario. Lowering the cost of sending remittances from Ontario to the world will have a real effect on Canada’s overall development impact. Given the importance of remittances to development, the World Bank has recommended that remittance fees be capped at five per cent — exactly the figure proposed in this private member’s bill.

However, the rationale for regulating remittance fees goes well beyond questions of fairness and social justice. This bill can be supported from a perspective of prudent self-interest as well. Currently, no province regulates remittance fees. Sending money home is a major goal for potential immigrants. As a province concerned about continuing to attract immigrants, supporting this bill would send all the right signals.

Guaranteeing that no more than a five per cent fee will ever be levied on funds sent home is a logical and easy step in the right direction. It would improve the value proposition Ontario offers to potential immigrants, distinguishing Ontario among the provinces and also among the immigrant attracting jurisdictions of the world.

Regulation of remittances will help Ontario’s immigrants achieve their economic goals and will enhance Ontario’s attractiveness to immigrants precisely at a time when the province needs to attract more.

When a small and comparatively easy policy change has the potential for such wide, positive impact at zero to negligible public cost, policymakers in all parties should take note. Private member’s bills are not often successful. When they do find sufficient parliamentary support, it is usually because they are finely-focused, draw upon broad consensus, and can yield lasting benefit. Based on these criteria, this one might just have legs.

http://www.ipolitics.ca/2012/06/08/jon-medow-regulating-remittance-fees-makes-sense-for-ontario/