Local Money Transfer - July 2020
July 2020
Background
One of the Financial Access objectives is to improve the understanding and make better policies based on accurate and timely financial inclusion statistics and reports. To this end information on the financial services provided by Local Money Transfer services between Tongatapu and the outer islands to assist with assessing individual’s access to finance. This financial inclusion information would in support policies on inclusive economic growth as well as promoting a sound an efficient financial system. Local Money transfer refers to money that is sent or transferred to another party within Tonga. This financial service is a cross payment between Tongatapu and the outer islands including the Ongo Niuas and vice versa.
In 2018, about six Money Transfer Operators (MTOs) carried out the local money transfer services in Tonga and they are Fexco Limited, Island Flexi Transfer (IFT), T & T Money Transfer, Manatu ‘Ofa Limited, SAV Transfer and Fietokoni Financial Services. Data was collected from the abovementioned MTOs on local money transfer. However, in late 2019 and to date only 3 MTOs continue to carry out the local money transfer services. These MTOs are Fexco, SAV Transfer and Island Flexi Transfer. T & T Money Transfer and Fietokoni Financial Services ended their services on local money transfer due to the impact of de-risking which forced Fietokoni to voluntarily surrender their license and T&T to cease its local money transfer as COVID19 started in March 2020. However, Manatu ‘Ofa Limited is currently working on completing their local money transfer report, the delay is due to staff constraints.
Local Money Transfers – increase over the month but decline over the year
Over the year ended July 2020, the local inward transfers rose by T$0.1 million (by 13%) to T$0.5 million over the month but declined by T$0.5 million (by 52%) compared to July 2019 (refer Table 1). The rise in the local inward transfer is mainly due to a rise in family support, gift transfers and local kava proceeds over the month (refer Figure 1). On the contrary, the decline in the local money transfer over the year was driven by the fall in the family support and gifts which outweighed the rise in the local kava proceeds. Tongatapu and Vava’u were the major contributor to the rise in the local inward transfer over the month. This is consistent with the rise in remittances received from overseas during the month. The bulk of the local inward transfer to Tongatapu was from Ha’apai and from Tongatapu to Vava’u. The inward transfers to Tongatapu from Ha’apai was mainly for restocking a local store in Ha’apai and transfers to Vava’u from Tongatapu was mainly local kava proceeds.
Table 1: Summary of Local Inward Transfers
| Local Inward Transfers To |
Local Inwards Transfer (T$m) |
MoM (T$m) |
MoM Change (T$m) |
YoY (T$m) |
YoY Change (T$m) |
Contribution for July 20 (%) |
||
| Jul 20 | Jun 20 | Jul 19 | ||||||
| Tongatapu | 0.19 | 0.12 | 0.33 | 0.07 | 57.1 | -0.14 | -41.9 | 38.7 |
| Vava'u | 0.19 | 0.18 | 0.44 | 0.01 | 7.2 | -0.25 | -56.1 | 38.3 |
| Ha'apai | 0.06 | 0.08 | 0.15 | -0.02 | -28.4 | -0.09 | -60.1 | 12.0 |
| 'Eua | 0.05 | 0.05 | 0.11 | 0.00 | 2.7 | -0.06 | -52.8 | 10.1 |
| Niuatoputapu | 0.00 | 0.01 | 0.01 | 0.00 | -34.0 | -0.01 | -59.2 | 0.7 |
| Niuafo'ou | 0.00 | 0.00 | 0.00 | 0.00 | -20.8 | 0.00 | -2.5 | 0.2 |
| Total Inwards | 0.50 | 0.44 | 1.04 | 0.06 | 13.3 | -0.54 | -51.8 | 100.0 |
| Source: Non-Banks Department | ||||||||
In contrast, Ha’apai was the main driver of the increase in the local outward transfer over the month followed by the Niuas (refer Table 2). The majority of the local outward transfer from Ha’apai to Tongatapu and from Niuas to Tongatapu was re-stocking of their local store in both Ha’apai and Niuas. Despite Ha’apai being the main driver of the increase, Tongatapu remained the main bulk of the total local outward transfer with 60% of the total outward transfer. On an annual basis, Tongatapu and Vava’u was the main contributor to the decline in the local outward transfer compared to July 2019. This was mainly due to a decline in the family support, gifts and local kava proceeds over the year. The COVID19 pandemic may have contributed to the decline given some of the economic sectors such as the tourism sector is winding down thus people have become unemployed in Tongatapu and have less income to send to their family in outer islands. In addition, the outward transfer from Vava’u reflecting that the majority of the seasonal workers from Vava’u received their funds directly in Vava’u then later transfer the funds to other islands for family support.
Table 2: Summary of Local Outward Transfers
| Local Outward Transfers From |
Local Inwards Transfer (T$m) |
MoM (T$m) |
MoM Change (T$m) |
YoY (T$m) |
YoY Change (T$m) |
Contribution for July 20 (%) |
||
| Jul 20 | Jun 20 | Jul 19 | ||||||
| Tongatapu | 0.301 | 0.303 | 0.69 | -0.002 | -0.7 | -0.39 | -56.1 | 60.0 |
| Vava'u | 0.04 | 0.05 | 0.16 | -0.01 | -22.6 | -0.12 | -74.4 | 8.2 |
| Ha'apai | 0.11 | 0.05 | 0.12 | 0.06 | 103.2 | -0.01 | -11.5 | 21.6 |
| 'Eua | 0.034 | 0.030 | 0.061 | 0.003 | 11.5 | -0.03 | -45.2 | 6.7 |
| Niuatoputapu | 0.006 | 0.001 | 0.002 | 0.004 | 363.5 | 0.004 | 201.5 | 1.1 |
| Niuafo'ou | 0.011 | 0.001 | 0.001 | 0.01 | 878.2 | 0.01 | 727.3 | 2.3 |
| Total Outwards | 0.50 | 0.44 | 1.04 | 0.06 | 13.3 | -0.53 | -51.5 | 100.0 |
| Source: Non-Banks Department | ||||||||
As per Figure 2 below, it reflects a 50% decline in local transfers over the year and that Tongatapu dominates the local outward transfers. On the other hand, Vava’u is the top receiver of funds as it always has a net inward local transfer every month. This is due mainly to the majority of kava proceeds sent back to Vava’u as well as other crops.
Local Money Transfers – Fees and Charges
On the fees & charges, IFT remained the main FED with the highest cost of sending money locally. However, with the variety of channels for sending money to outer islands is via banks other digital means such as digicel money wallets which is not captured in this report and could also contribute to the decline in the local money transfer. On the other hand, Fexco has the highest local money transfer receipts due to the lower cost on local money transfers as well as Fexco is the only FEDs that has an agent in all the outer islands including the Niuas, with 18 access points (refer Table 3).
Table 3: Summary of the Fees & Charges of Local Transfers by Money Transfer Operators – July 2020
| Money Transfer Operators |
Amount ($) |
Fees & Charges |
Total Transfer - Jul 20 (T$) |
Total Transfer - Jun 20 (T$) |
Total Transfer - Jul 19 (T$) |
| Fexco (18 access points) |
1 - 1000 | $5.00 | 374,512 | 341,396 | 549,068 |
| 1000+ | $6.55 | ||||
| Island Flexi (2 access points) |
1 - 999 | $5.00 | 110,866 | 73,119 | 12,221 |
| 1000 - 1499 | $10.00 | ||||
| 1500 - 1999 | $15.00 | ||||
| 2000 - 2499 | $20.00 | ||||
| 2500 - 2999 | $25.00 | ||||
| 3000 - 3499 | $30.00 | ||||
| 3500 - 3999 | $35.00 | ||||
| 4000 - 4499 | $40.00 | ||||
| 4500+ | $45.00 | ||||
| 1000+ | $6.00 | ||||
| 2000+ | $8.00 | ||||
| 3000+ | $10.00 | ||||
| 3500+ | $15.00 | ||||
| SAV Transfer (5 access points) |
1 - 100 | $4.00 | 16,428 | 28,334 | 30,604 |
| 101 - 999 | $5.00 | ||||
| 1000+ | $10.00 | ||||
| TOTAL | 501,806 | 442,849 | 1,035,098 | ||
Conclusion
Over the month, the inward transfers from Ha’apai to Tongatapu was mainly for restocking of the retail stores in Ha’apai and the transfers from Tongatapu to Vava’u was mainly local kava proceeds. The local money transfer showed a downward trend over the year to July 2020 mainly due to a decline in the family support, gifts and local kava export proceeds. This reflects the impact of COVID19 restrictions that led to unemployment in the tourism and trade sectors and the cancellation of major events such as church conferences that drives the flow of funds amongst the islands. Tongatapu and Vava’u are the two main islands that dominate the local money transfer.
The Reserve Bank will continue to monitor and liaise with non-banks in terms of gauging the level of local money transfer in Tonga and the usage of existing financial services in Tonga.
