Business development is one of the most difficult obstacles Moldova must tackle in today’s unstable environment. Approximately 45% of Moldovans currently work abroad, due to a lack of employment opportunities in country, and transmit remittances home to help support their families. In 2012, remittances totaled a whopping 38% of GDP, which is the second largest percentage in the world. The continued brain drain that has impacted Moldova has created extra income for families, but a greater problem exists: apathy. The problem has spawned international financiers to invest in business incubators and development agencies and to provide non-profit organizations and governmental bodies with capital as a stimulus for economic activity. Regardless of these efforts, business growth is still stagnant due to the lack of authorization and permits to import goods, high barriers to entry, and deficiency of available credit. The remittances being sent home are being utilized for the wrong reason, consumption. In fact, only 6% of remittances are being used for business development and a mere 12% of Moldovan households have bank accounts. If used correctly remittances could be funneled through formal financial channels and used for private development. What would result would be business creation then increased employment, slowly reversing the trends of migration. Moldovan banks need to get on board in increasing their efforts to educate and to offer suitable transfer services to migrant workers. For example, Banca de Economii (#1 in Moldova) only offers transfer services at 1/3 of their banking branches. This is not acceptable in today’s digital world.

One key foreign market for remittances to Moldova has been Italy. The country currently employs over 500,000 Moldovans (3.5 million is the active population) in the fields of manual labor, healthcare, and service industries. Moldovans earn between 500-4,000 euros monthly and 71% of the workforce send more than 50% of earnings home. The total of remittances is staggering. It outweighs foreign direct investment. Wherein lies the problem. Moldova has not created a secure, trusted, and suitable banking platform in the minds of their migrants. Lack of financial education for migrants is an incredible opportunity for banks to leverage. Simple lessons of banking and savings could turn into increased income for financial channels and Moldovan citizens. Just think how much safer, quicker, and cost-effective proper channels would be. Remittances for social initiatives could be created in order to increase skills, improve infrastructure, and instill confidence in aspiring entrepreneurs. Many Moldovans working abroad do not know what their rights are as employees and do not know where or how to access international bank accounts. The lack of information on the reduced costs of banking and the language barrier on resources (i.e. lack of Russian/Romanian in Italian banks and in newspapers) also contribute to banking inactivity.

The deficiency has caused migrants to create local organizations gathered at cafes in order to trade financial secrets. Most point fellow migrants towards monetary transfer operators (MTOs), which forces Moldovans to pay approximately 5-16% per Money Gram or Western Union transfer. 73% of remittances are wired though MTOs due to their speed, ease of use, and monopolization amongst existing alternatives. With an improved financial channel for savings and enhanced education, Moldovans could begin to change their decision to investing income rather than to transferring it via MTO. A responsibility Moldovan financial channels must assume is to improve communication with legal migrants and send them suitable information for economic investment in the countries where they are employed. Sending Moldovan banking advocates to inform migrants abroad of their options would lead to improved investment.

Based on the recommendations of Moldovan colleagues, migrants in Italy also contact drivers of transport vans and private drivers to hand-deliver their remittances and gifts to family members at home. Each Sunday buses from Italy to Moldova are scheduled to transport passengers and goods. According to local sources, drivers normally receive 3% on cash payments or 1.5 euros per kilogram for deliveries across the border. The buses can provide convenient shipping to the doorsteps of recipients but in some cases leave the providers susceptible to theft and robbery. Moldovan law is beginning to take notice of the transfers and have been reportedly “cracking down” on money and goods smuggling. Whether that means stopping the transfers or involving themselves in the transactions has yet to be evidenced.

Another threat posed to migrants is their employers. Moldovans working illegally have had issues fending off exploitation from their employers, which further discourages them in trusting foreign advice.

I spoke with a rural Moldovan whose wife works in Italy and transfers him income and gifts monthly. All monetary transfers of 2,000 euros receive an affordable .05% transfer fee through their Moldova Agroindbank account and when she sends him boxes of clothes or food they pay a small fee to the driver of a private microbus. When asked why he thinks the majority of Moldovan migrants do not utilize formal financial channels he pointed to a lack of information and financial education. The banks simply do not work hard enough at educating their citizens. His wife had been abroad illegally and it took her a long time to not only apply for legal working status and to earn a salary off the black market, but also to understand the correct channels of where to invest her income. She had to do her homework and speak to a lot of acquaintances to identify the benefits of investing in formal financial channels. It would be naive to think that the Moldovans working abroad are all legal and are all as savvy as this man’s wife. Therefore, they need to be receiving better financial education. Some recommendations include: financial trainings or private meetings in their country of employment, signing up for a bank sponsored emailing list, newsletters, mobile alerts, social media, blogs, or in other creative methods. This responsibility falls directly on the Moldovan government and its banks.

What is most painful in all of this it that it continues to create a dependency for Moldova to look outward for income. Being a volunteer in country for the past year and a half has been a struggle, especially when it comes to developing local businesses. The lack of ingenuity amongst the majority of owners and pure motivation to cultivate business knowledge is lacking. It builds apathy. The current position leaves the majority of Moldovan professionals with two options: wait for their organizations to receive foreign investment or purchase a one-way ticket to employment.

Government reforms on pro-investment need to be implemented more effectively in order to give business owners and their migrant family members a chance to prosper. Without significant changes in the banking system, Moldova will continue to wait for the rest of the world to feed it.

Sources:

1) http://www.worldbank.org/content/dam/Worldbank/document/Moldova-Snapshot.pdf

2) http://www.migrationpolicycentre.eu/docs/migration_profiles/Moldova.pdf

3) http://www.iom.md/attachments/110_2009_09_11_moldovan_migr_italy.pdf