Healthy competition boosts remittances in Uzbekistan

October 22, 2010
IDRC Communications

Families of migrant workers in Uzbekistan now have an estimated $50 million more each year in their pockets. That amount comes from reduced fees charged on remittances from abroad. All it took was a little competition and a $40,000 research grant from IDRC.

Case Study: Uzbekistan
Evidence-based recommendations lead to better money transfer services for Uzbekistan’s migrant workers

When Uzbekistan gained its independence in 1992, the country found itself in a very different, very competitive world. One result: Uzbekistan became a major exporter of labour. Soon an estimated half-million Uzbek migrant workers were sending home hundreds of millions of dollars in remittances to support their families.

It was a very profitable situation for Western Union, the first-comer into a new market for transfers. Soon the company cornered 95% of the country’s money transfer business, charging as much as 12% on each transaction.

“Under the Soviet Union we didn’t have any competition,” explains Golib Kholjigitov, who headed the IDRC-supported study carried out by the country’s Antimonopoly Policy Improvement Center. That study looked at the issue of international money transfers and how best to provide a regulatory framework for the system.

As a direct result of the research, the competition law was extended to financial services, new firms came in, and the charges on remittance transfers were greatly reduced. Equally important, Uzbekistan is learning how to manage the market economy. Courses on competition are taught in the universities. And, says Golib Kholjigitov, “We have launched a program to explain to policymakers the benefits of competition. That program is one of our top priorities.”