Through regulated channels to faster and safer money transfers: Remittances from abroad (1)

The Central Bank of Bosnia and Herzegovina (CBBiH) has, in the past few years, initiated, independently and in cooperation with partner organizations, a series of activities aimed at raising financial literacy and inclusion of the population in Bosnia and Herzegovina. The reason why the CBBiH insists on placing this topic in focus is the fact that the CBBiH chairs the Standing Committee for Financial Stability and coordinates the activities of entity banking agencies, thus playing a significant role in maintaining financial stability in the country.

All these bodies, along with the Deposit Insurance Agency of Bosnia and Herzegovina, represent the financial stability network in the country, and within their mandate, they are obliged to do everything to maintain that stability. One of the increasingly important segments of these activities is financial education and inclusion, which are prerequisites for the population to make rational financial decisions. Such activities result in ensuring additional stability for the entire system. An integral part of this process are activities aimed at improving cooperation with the media, which the CBBiH considers the most important
intermediary in the process of informing and raising public awareness.

Financial education touches on many segments of money management and the use of financial services, and this time the focus will be on remittances from abroad, which is a current topic for BiH citizens and the economic picture of BiH. When it comes to money transfers, at the end of April, a presentation of the results of a study conducted by the World Bank, with the support of the Swiss Government, on the financial habits of senders and recipients of remittances was held in Gradačac. Although the study was conducted on a limited sample, it showed that remittances represent a regular and very significant source of income for users.

Nevertheless, many citizens in Bosnia and Herzegovina are not sufficiently financially included, so they receive remittances from relatives and friends exclusively in cash, even though all banks in Bosnia and Herzegovina offer international payment services through an open account. Also, having mobile or internet banking is increasingly necessary today, assuming the person has an open bank account, and without this, it is increasingly difficult to imagine the life of a modern person.

The study showed that the price, speed, security, and accessibility of money transfer services are key factors influencing the decision on how money will be sent, through regulated or unregulated channels. Although 70% of respondents in the study stated that regulated channels have more advantages than unregulated ones, 50% said they do not use regulated channels
regularly. To change this ratio in favor of regulated channels, commercial banks can play a major role by expanding their offerings to help direct money sending through regulated channels. By opening a bank account, the client gets the possibility of international money transfers, which is enabled by the IBAN, used for the unique identification of the open account.

The introduction of the IBAN, i.e., the international standard for account numbering, has enabled banks in Bosnia and Herzegovina to join the system of automatic processing of foreign payment orders within the European Union. The advantages are obvious. However, reluctant abandonment of habits, fear of new technologies, financial illiteracy, and insufficient transparency of information on service provision methods are common reasons cited by senders and recipients when opting for the use of cash.

Also, a large number of citizens who participated in the study did not understand other basic financial concepts, possibilities, and advantages of using accounts, the way payment systems function, which opens space for financial service providers to better, more transparently, and more accessibly promote transfer services through accounts.

From this brief overview of just one selected segment, it is clear how important it is to know and understand the basic concepts of financial services available on the market, and how necessary financial literacy is for the safe, economical, and smart management of one's own money.

In addition to planned activities on financial education of remittance users, in cooperation with the World Bank's remittances and payments project, the CBBiH is currently implementing activities on financial education and inclusion in cooperation and with the support of the European Fund for Southeast Europe – Development Facility (EFSE DF).

PR CBBiH