90901 Finance & PSD Impact JUNE 2014 The Lessons from DECFP Impact Evaluations ISSUE 27 Our latest note summarizes a proof of concept trial of a new product designed to allow migrants to send remittances for educational purposes. Will Migrants Remit More if They Can Channel Payments Directly for Education? Lab-in-the-Field and Proof of Concept Trial Results Giuseppe De Arcangelis, Majlinda Joxhe, David McKenzie, Erwin Tiongson and Dean Yang Migrant remittances are one of the A lab-in-the-field experiment was largest international financial flows to then used to examine how remittances developing countries, exceeding US$400 respond to differing degrees of control over billion in 2012. One common use of these how remittances are used for education, in funds is to fund the schooling of the the process providing information on which migrant’s children and other relatives in the features of the EduPay product appear most home country. important for stimulating remittances. However, migrants may differ from Migrants were told that they were remittance recipients in their preferences for entered into a lottery to win a 1000 € prize, how money sent should be used, with and asked how they would like to allocate physical separation and limited information any winnings between themselves, and making it difficult for migrants to ensure between one or more other people in the money is used the way they intend. Philippines. They were asked to make this In such a context, financial choice under four different scenarios, with instruments which provide migrants with the order randomized: greater ability to monitor and control how 1) Standard remitting: a simple dictator funds are spent could have positive take-up game, in which they choose how by some migrants, and may lead to an much to send to people in the increase in how money is remitted. Philippines. We test this idea in two ways with 2) Education labeling: the option to Filipino migrants in Rome: 1) through a lab- label funding as being for the in-the-field experiment which tests explicitly education of someone in the whether migrants will remit more when household. given the ability to direct this money for 3) Direct payment: the option to have educational purposes; and 2) through money sent straight to a school to piloting a new product called EduPay that pay directly for school expenses. allows migrants to directly pay for school 4) Direct payment + performance fees in the Philippines. monitoring: the option to send money to the school and also receive Lab-in-the-Field Experiment attendance and grades directly back. A sample of 501 Filipino migrant This was a real, not just hypothetical lottery, workers in Rome was recruited through with the winner’s choices implemented intercept-point sampling. To be included in exactly as described, providing an incentive the sample they had to have a relative aged 5 for the migrants to answer honestly. to 22 living in selected regions of the The Figure below shows the results. Philippines. The sample is 73 percent Migrants remit 15 percent more (93 €) when female, aged 42 on average, and 70 percent given the option to label some of the money have tertiary education. sent for education, while offering further Do you have a project you want evaluated? DECRG-FP researchers are always looking for opportunities to work with colleagues in the Bank and IFC. If you would like to ask our experts for advice or to collaborate on an evaluation, contact us care of the Impact editor, David McKenzie (dmckenzie@worldbank.org) control in terms of offering direct payment option during the game were significantly to the schools does not have any significant more likely to take up the EduPay product: differential effect on top of labeling. A one standard deviation increase in the Total Remitted vs Ability to Direct to amount chosen to be remitted via direct Education Uses payment option in the game was associated 800 with an 8.7 percentage point higher take-up Amount remitted out of 1000 euros 700 600 rate. Likewise individuals who remit more 500 under direct labeling than the basic choice 400 were more likely to try to take-up the 300 product. In contrast, demand for direct 200 payment versus education labeling did not 100 predict take-up. 0 Unfortunately many of the Standard Remitting Education Label Direct Payment Direct Payment + Monitoring individuals who signed up were unable to use the product since the schools their relatives attended were too slow in Piloting EduPay providing bank account details, so only 11 Using a Development Innovation individuals from this sample actually Ventures (DIV) Stage 1 grant from USAID, completed an EduPay transaction. we worked with the Bank of the Philippine We opened up the product to more Islands (BPI) and the Philippine Association migrants, and a total of 178 EduPay of Private Schools, Colleges, and payments were made for 55 students in the Universities (PAPSCU) to develop and pilot Philippines. a new remittance product, called EduPay. This product allows migrants to Implications channel tuition payments for particular The results suggest that migrants can students directly to those students’ be willing to increase the amount they remit educational institutions in the Philippines for education if given the ability to exert from a BPI remittance branch in Rome. some soft control over its use. Following the lab-in-the-field experiment, There also appears to be some this product was explained to the migrants. demand for a product that allows payment Migrants who were interested in directly to schools, but logistically this is using the product signed a request letter to difficult to operate at a small scale – our the school, asking them to release the proof of concept trial shows it is feasible, students’ identification number, make but also identified constraints to doing this available an invoice for payment to the which may be less of a problem at a larger school, provide details of the bank account scale. of the school, and also release the grades of However, our results suggest the student. Overall 132 individuals out of education labelling alone may be enough, 487 offered the product signed this letter of suggesting also the need for future pilots of intent (27.1 percent). products that provide this feature without We find that individuals who choose requiring direct payment to the schools. to remit more money via the direct payment For further reading see: Giuseppe de Arcangelis, Majlinda Joxhe, David McKenzie, Erwin Tiongson and Dean Yang (2014) “Directing Remittances to Education with Soft and Hard Commitments: Evidence from a Lab-in-the-Field Experiment and New Product Take-up among Filipino Migrants in Rome”, World Bank Policy Research Working Paper no. 6896. Recent impact notes are available on our website: http://econ.worldbank.org/programs/finance/impact