Thailand Migrant Workers Remittance Challenges
An outdated banking infrastructure
- Fees charged by remittance services are very high.
- Approval times at banks are long.
Local currencies are not supported by remittance services
- It costs extra to exchange local currencies.
- Currency exchange points are rare.
- Users have difficulty exchanging currencies.
The availability of remittance services is limited
- Underground money transfer services are used by many people.
- Remittances through underground networks are illegal and expensive.
Based on the number of migrants in Thailand. Over 90% of all migrants are low-skilled migrant workers from Cambodia, Laos, and Myanmar. Only 10% are professional and high-skilled workers.
Over the past year, Thailand's migrant worker population has grown from 1.5 million in 2016 to 3 million in 2017, and the amount is expected to grow even more in the coming years.
Thailand's migrnat worker populartion (2018)
A majority (52%) of migrants use informal channels (Hawala, broker systems, and money transfer operators)
Among migrants, 34% use formal institutions (banks and money transfer services).
An additional 14% used other methods (physically transporting the cast across the border, carrying it themselves, or sending it to a friend).
Migrant worker's remittance channel from Thailand to Cambodia, Lao PDR and Myanmar
Lao PDR or Laos
Many Lao migrants working in Thailand use informal money transfer agents as their main method of remittance. Typically, the agent is someone who has a Thai bank account in a town just across the border from the home community. They send their money to this account and inform the account holder of the transfer. Agents cross the border to collect the money, after which the migrant calls her family to tell them to collect the money from the account owner.
Private agents in Thailand are the most common method of transferring money among Khmer migrants. Upon contact with an agent in Cambodia, that agent will reach out to the recipient household directly or via a relative or village chief. After that, the Cambodian agent will arrange a meeting with a member of the family. During the same time the money is being transferred, the agent in Cambodia will give it to a family member. The migrant or the recipient's family member can pay the transfer, travel, and phone fees.
80% of Myanmar migrant still using informal agent to transfer money. Most of them do not trust banking system they face the dictatorship of the government that seizes everyone's money in bank accounts. And in some areas they also prefer to hold baht and dollars instead of the local currency. In withdrawing money to the country of destination, agents seem to do better than remittance services because the recipient lives in a rural area where there is not even a bank or a remittance services branch.
While the formal flows from Thailand to Cambodia, the Lao People’s Democratic Republic, Myanmar, and Viet Nam are valued at USD 2.8 billion, it is more challenging to estimate the informal financial flows. Under the assumption that remittances received through informal channels are similar in size and transaction frequency and given that about 65 percent of recipients received money from unregulated channels, it is estimated that the informal remittance flows in Thailand–CLMV corridors are potentially double the size of the formal flows and have the potential to contribute between USD 6–10 billion to the formal economies of CLMV countries (UNCDF, 2017). This means that there may be significant market opportunities in the digitization of Thailand’s outward remittances.
From the survey of migrant workers in Thailand. They pay fees more than $5-20 of the amount to send money home, which is 4-10% of 200 USD they sent the minimum
According to the data, most of the migrants sent home approximately $730
From the information of formal remittance services. Banking system fees are higher than 15% of the amount sent. And it takes more than 3 days to receive the money. Remittance service provider can send money immediately but there is still a limitation of the cost of up to 3-15% of the minimum amount sent 200 dollars.