Of all the programs launched by credit unions to assist immigrants, few have been more successful than the International Remittance Network, better known as IRnet.
Launched in 1999 by the World Council of Credit Unions (WOCCU) and with support from both the California and Texas leagues, it allows immigrants working in the United States to send money to family members in their native countries via a wire transfer at fees significantly lower than those that had been in place prior to its launch.
David Grace, Legislation and Regulation Affairs Manager for WOCCU, told The Credit Union Journal IRnet's philosophy from the beginning was to be in line with other CU services.
"The fees are lower than other financial institutions, and our exchange rate is better," he said. "By offering this type of service, we allow credit unions to reach out to immigrant communities. People do not have to be members to use IRnet, but if credit unions earn their trust and get them used to walking in the door, hopefully, they will become members and open accounts."
At stake is a huge global market. Last year, all transfers from the U.S. to Mexico-including wire transfers, checks, money orders and cash- totaled $10 billion. People sent $4 billion to the Philippines, while the Dominican Republic and El Salvador received $1.9 billion each, and $1.4 billion was sent to Ecuador.
"The $10 billion sent to Mexico was the second largest export for the Mexican economy, behind oil and ahead of tourism," he said.
According to Grace, if you send $400 to Honduras by Western Union the fee on the transaction is $40. On IRnet, the fee to Honduras is $10 for a transfer of up to $1,000. The fees and exchange rate for IRnet, as well as competitor wire transfer services, vary by amount sent, origination location, and receiving country.
"We disclose our exchange rate for all countries. With the competitors, you don't know what your mother is getting," said Grace. "With us, your mother will receive more money."
Hard-Earned Dollars Lost In Fees
Far too often, Grace said, the scenario for immigrants unfolds this way: people with no checking or savings account cash their paycheck at a storefront check-cashing location (paying a substantial fee for the service), then go to Western Union to pay another fee to wire money to family in their native country.
At this point, immigrants head home with a couple hundred dollars cash in their pockets to stick in their mattress, which leaves them vulnerable to muggings and robberies. Indeed, Latino Credit Union in Durham, N.C., was founded in part in response to the many attacks against Latinos working in North Carolina, he said.
"Many people believe immigrants don't have checking or savings accounts because they don't trust financial institutions, but it goes beyond that-it is what many of them are used to," explained Grace. "In Nicaragua, 90% of the population is unbanked, and you see similar rates across Central and South America. In Mexico, 65% of people are unbanked. People in these countries have little knowledge or experience with financial institutions, and they don't realize the benefits of having an account."
The first IRnet transaction took place in September 1999, with El Salvador and Guatemala serving as pilot nations for the project.
"There were just a handful of transactions in 1999, and in 2000 we were still in pilot mode. In 2001 and 2002, IRnet really took off. It has exceeded our expectations," he said.
In 2001, the first year of full operations, $4.2 million was transferred via IRnet. In 2002, that total leaped to over $50 million-an amount that exceeded WOCCU's projections by 65%.
WOCCU anticipated that a few niche CUs that catered to immigrant communities in Los Angeles, New York City, and parts of Texas would participate in IRnet. Instead "a lot of credit unions have signed up for this service," said Grace.
"We are using IRnet as a tool for credit unions to reach out to immigrants in the United States," he continued. "People can send money to 42 countries. Most transfers are to Mexico, Central and South America, but we also see large amounts going to Poland, the Philippines and the Ukraine."
IRnet includes 170 U.S. credit unions in 28 states. It soon will add Jamaica as a wire transfer destination, Grace said, allowing CUs to offer a service to an estimated 1.5 million Jamaicans living in the U.S.