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World Bank Working Paper
Box 2.2. Ficohsa Express: Expansion of a Honduran MTO in the United States Following five years of growth, Ficohsa Express operates 15 MTO branches in seven U.S. states—Florida, Georgia, Louisiana, New Jersey, New York, North Carolina, and Virginia. In 2006, the branch in Tampa, Florida observed a 32 percent increase of remittances (up to US$45 million) and a 34 percent increase in the number of transactions. The MTO estimates that about 35 percent of remittances sent to Honduras are received in cash, 35 percent to beneficiaries’ bank accounts, and 30 percent to the migrant’s account in Honduras. In addition to remittance services, Ficohsa Express provides other services for the migrants such as purchase of flight tickets, shipment of goods, telephone service, and bill payments.
Source: Staff interviews, and Ficohsa website http://www.ficohsa.com/2007/banco/fexpress.html.
Disbursing agents in Honduras receive the least share of commission paid by sender. Depending on the arrangement, the disbursing agent charges 8 to 30 percent of commission paid by the sender. The remainder is usually divided among the capturing agent and the provider of the payment network/platform. Forty percent each for capturing agent and intermediator and 20 percent for the disbursing agent is the breakdown negotiated by one of the largest providers of remittances to Honduras. Such a breakdown of commission may explain the incentives of some disbursing agents in Honduras to integrate vertically and upwards the industry’s value chain, and to set up networks of capturing agents in the United States (Box 2.2). The reverse downward trend can also be observed by foreign capturing agents’ expansion in Honduras as independent disbursing agents and owners of proprietary payment platform solutions. The actual exchange rates applied to remittance transfers sent from the United States often deviate from the official rate determined by BCH in its daily auctions. The lempira to U.S. dollar exchange rate operates under a “crawling band” regime and has stabilized in recent years. It became practice for remittance service providers to refer to the official exchange rate, thus making the interest rate cost insignificant to senders and receivers. Some service providers however do not follow this practice or are not aware of the Honduran foreign exchange regime and so adjust the foreign exchange rate arbitrarily to lempira. Since only banks and exchange houses are authorized to deal in foreign exchange, other market participants (cooperatives and microfinance institutions) may expect to pay an additional commission.
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