The Malaysia-Indonesia Remittance Corridor: Making Formal Transfers the Best Option for Women and Undocumented Migrants (World Bank Working Papers)

In Malaysia, Indonesian migrants are showing an increasingly clear preference for informal transfer mechanisms compared to their counterparts in other countries. A little less than half of all Indonesian migrants overseas thought to be around 2 million are working in Malaysia. An increasing number of migrants are women, and the corridor is also marked by a high number of undocumented migrants. Despite the increasing flows of migrants, only about 10 percent of the estimated flow of remittances into Indonesia from Malaysia is transferred through the formal system. The extent of the preference for the informal sector is unique in this corridor. Indonesian migrants in other countries are using the formal sector far more than the migrants in Malaysia. In addition, Indonesian women and undocumented migrants in Malaysia especially find formal sector transfers either hard to access or inappropriate for their needs. To this end, the study assists policymakers efforts to increase the impact of remittances on economic development and poverty reduction in Indonesia and to investigate options for attracting more migrants to use the formal financial sector. The report provides a descriptive overview of the Malaysia Indonesia remittance corridor and suggests policy avenues for improving access to formal remittance transfer channels; increasing the transparency of the flows and the cost structure; and facilitating remittance transfers, particularly for undocumented and female migrant workers.