## Section II, lack of awareness of DI may be behind some of these outcomes. ## Source details **Canonical URL:** [Section II, lack of awareness of DI may be behind some of these outcomes.](https://www.imf.org/-/media/files/publications/wp/2017/wp17132.pdf) ## Other formats - [Markdown version](/-/media/files/publications/wp/2017/wp17132.pdf.md) - [Structured JSON version](/-/media/files/publications/wp/2017/wp17132.pdf.json) --- ### Background and motivation - Public awareness of deposit insurance (DI) is a Core Principle for Effective Deposit Insurance Systems (BIS, 2009) and “plays a significant role in underpinning a sound deposit insurance system” (IADI, 2009). - Financial illiteracy and lack of DI awareness may reduce use of the formal financial sector and contribute to dollarization, posing policy challenges for small open economies with fragile financial sectors and large remittance inflows. - Case study: Tajikistan, which in 2014 received an estimated $4 billion in remittances, equivalent to 42 percent of GDP, with a lion share of remittances (up to 90 percent in volume) from Russia. - Remittances from Russia declined by an estimated 25 percent year-on-year in 2015, illustrating remittance volatility and macroeconomic implications. ### Literature survey — links between remittances, DI awareness, and dollarization - Remittances channeled through the formal financial system promote financial development (Aggarwal, Demirgüç-Kunt, and Martínez Pería, 2011). - Formal remittance channels increase transparency, accountability, savings mobilization, and can relieve credit constraints (Hernandez-Coss, 2005; Suki, 2004). - Factors influencing channel choice include cost of transfer, remitter’s legal status, laws/regulations, and financial infrastructure (Siegel and Lücke, 2009; Abenoja, 2004). - No prior empirical study had directly examined the role of DI awareness on use of formal vs. informal remittance channels or on dollarization of remittance use; this paper fills that gap. - DI can have ambiguous effects on bank behavior (moral hazard) and on dollarization: some studies find DI coverage associated with higher lending dollarization (Barajas and Morales, 2003) while others do not (Luca and Petrova, 2003). - Survey evidence reported low DI awareness in several countries: Italy: 70 percent unaware, 23 percent basic knowledge, 7 percent detailed knowledge; Japan: just over half knew of DI in 1996, 7 percent knew detailed contents. ### Tajikistan context and survey data - Financial inclusion (Global Findex 2011): - 2.5 percent of adults over 15 had an account at a formal financial institution. - 0.3 percent saved. - 5 percent had a loan. - Informally, 14 percent saved and 31 percent reported having a loan. - Banking sector characteristics: - Total assets at around 30 percent of GDP. - Credit-to-GDP ratio remaining below 20 percent. - Prior dollarization levels pre-global financial crisis: as high as 75 percent for bank loans and 79 percent for deposits. - Deposit Insurance Fund (DIF) in Tajikistan: - Established in 2003. - Coverage level raised from TS7,000 to TS14,000 in 2015 and TS17,500 in 2017 (approximately $2,100). - At time of the survey DIF provided full coverage of approximately 85 percent of depositors’ savings in member banks, average amount of insured deposits at approximately $100. - Coverage stood at 96 percent at end-2016. - DIF assets over TS260 million ($33 million), reached 6.3 percent of total deposits as of end-2016 (target seven percent). - Deposits in foreign currencies are covered, but repayment of these deposits is done in local currency only. - DIF had communication tools (website, posters, handout) but had not conducted public-awareness surveys. - Survey design and sample: - Conducted by the National Bank of Tajikistan in mid-2014 across 24 administrative regions, roughly 250 people per region. - Respondents were individuals entering commercial bank branches; asked to fill a 2-page questionnaire. - Sample descriptive statistics (sample size varies by variable; Total obs 5,416 unless otherwise noted): - REMITTING VIA BANKS mean 0.6801 (Total obs 5,416) - DI_AWARE mean 0.7851 (Total obs 5,416) - FEMALE mean 0.3760 (Total obs 5,416) - VILLAGE mean 0.5671 (Total obs 5,416) - TOWN mean 0.2530 (Total obs 5,416) - MARRIED mean 0.7941 (Total obs 5,416) - EDUCATION_HIGHER_PLUS mean 0.4850 (Total obs 5,416) - REMITTANCES-TO-INCOME mean 0.1980 (Median 0.150, Minimum 0.100, Maximum 0.300, Std. Dev. 0.075, Observations 4,535) - EMPLOYED mean 0.6491 (Total obs 5,416) - BORROW_FROM_BANKS mean 0.2970 (Total obs 5,416) - NOTRUST_IN_BANKS mean 0.1310 (Total obs 5,416) - REMITTANCES’ ORIGIN: RUSSIA mean 0.791 (Obs 4,702); KAZAKHSTAN mean 0.071 (Obs 4,702); BELARUS mean 0.031 (Obs 4,702); OTHERS mean 0.107 (Obs 4,702) - Note: sample may be biased toward bank users because respondents were captured at bank branches. ### Empirical strategy - Four probit specifications estimated conditional on being remittance-receiving: 1. Remitting via Bank = F(Awareness of DI; Controls | Rem-Receiving=1) 2. Holding Cash in FX = F(Awareness of DI; Controls | Rem-Receiving=1) 3. Holding Deposits in FX = F(Awareness of DI; Controls | Rem-Receiving=1) 4. Borrowing in FX = F(Awareness of DI; Controls | Rem-Receiving=1) - Main policy variable: Awareness of DI (binary indicator, DI_AWARE). - Controls include demographic variables (age, gender, village/town, marital status, education), income and employment, remittances-to-income, borrowing from banks, trust in banks, payment currency preference, reasons for holding deposits/cash, remittances’ country of origin, and regional dummies. - Endogeneity test for DI_AWARE using Rivers and Vuong (1988) approach: - Instrument constructed from response to Question 9.1 (whether at least one reason for depositing money in forex in the bank was checked). - First-stage OLS: instrument significant with correct sign. - Second-stage: residual not significant in probit — authors conclude DI_AWARE is not endogenous in baseline model. ### Main empirical findings — DI awareness, channel choice, and dollarization - DI awareness and use of formal channels: - DI_AWARE has the expected positive sign and is "statistically strongly significant". - "Awareness of DI makes it 28 percent more likely that formal channels for receiving remittances are used." - Other significant correlates for using formal channels (Table 2 baseline, McFadden R-squared 0.24): - LOG(AGE) positive; LOG(AGE)^2 reported as -0.31* (Std. Error 0.19). - FEMALE coefficient -0.14*** (Std. Error 0.05): female recipients more likely to use informal channels. - VILLAGE coefficient -0.26*** (Std. Error 0.06): village residents more likely to use informal channels. - MARRIED coefficient 0.14** (Std. Error 0.06). - EDUCATION_HIGHER_PLUS coefficient 0.18*** (Std. Error 0.05). - LOG(INCOME) coefficient -0.19*** (Std. Error 0.04). - REMITTANCES-TO-INCOME coefficient 1.73*** (Std. Error 0.41). - BORROW FROM BANKS coefficient 0.21*** (Std. Error 0.06). - REMITTANCES’ ORIGIN: RUSSIA coefficient 0.79*** (Std. Error 0.07); KAZAKHSTAN and BELARUS coefficients statistically insignificant. - Subsample excluding individuals with family members who borrowed from banks (70 percent of main sample) yields qualitatively similar results with DI_AWARE coefficient larger (0.39 vs. 0.28), implying greater return to DI awareness when banking connections are weak or nonexistent. - DI awareness and cash dollarization (Table 3; McFadden R-squared 0.31–0.39 across specifications): - DI_AWARE reduces the probability of keeping cash exclusively in foreign exchange: DI_AWARE coefficient -0.38*** (Std. Error 0.06) in Table 3 (first regression). - VILLAGE coefficient 0.16***; LOG(INCOME) coefficient 0.10**; EMPLOYED coefficient 0.14**; REMITTANCES-TO-INCOME 2.41*** (Std. Error 0.41). - Payment preference coefficients strongly associated with cash currency composition: - PAY_PREF_SOMONI coefficient -0.59*** (Std. Error 0.11) - PAY_PREF_USD coefficient 0.51*** (Std. Error 0.11) - PAY_PREF_EURO coefficient 0.86*** (Std. Error 0.23) - PAY_PREF_RUBLES coefficient 0.44*** (Std. Error 0.14) - Addition of payment preference choices improves regression fit without changing sign/significance of DI_AWARE. - DI awareness and deposit dollarization (Table 4; McFadden R-squared 0.32–0.33): - DI_AWARE reduces the probability of holding deposits exclusively in foreign exchange: DI_AWARE coefficient -0.27*** (Std. Error 0.07) in Table 4 (first regression). - Trust and ease of receiving reduce deposit dollarization: - Q9_1_TRUST_BANK coefficient -0.20*** (Std. Error 0.07) - Q9_1_EASY_RECEIVE coefficient -0.24*** (Std. Error 0.09) - Interest-earning motive increases FX deposits: Q9_1_EARN_INCOME coefficient 0.12* (Std. Error 0.07). - LOG(INCOME) 0.15*** (Std. Error 0.05); EMPLOYED 0.13** (Std. Error 0.06); REMITTANCES-TO-INCOME 1.88*** (Std. Error 0.42). - DI awareness and loan dollarization (Table 5; McFadden R-squared 0.22): - DI_AWARE reduces the probability of borrowing exclusively in foreign exchange: DI_AWARE coefficient -0.28*** (Std. Error 0.07) in Table 5. - Other correlates: EDUCATION_HIGHER_PLUS 0.12** (Std. Error 0.05); LOG(MFI) 0.13*** (Std. Error 0.05); EMPLOYED 0.22*** (Std. Error 0.06); REMITTANCES-TO-INCOME 1.65*** (Std. Error 0.42). ### Interpretation of mechanisms - DI awareness appears to increase depositor confidence and the attractiveness of formal channels, thereby: - Increasing probability remittances are channeled via banks. - Reducing cash, deposit, and loan dollarization. - Effects are robust across specifications and when controlling for trust in banks and country-of-origin differences. - DI_AWARE effect does not appear endogenous to channel choice using the constructed instrument and Rivers and Vuong approach. ### Policy recommendations and conclusions - Main empirical conclusion: Awareness of DI is strongly associated with greater use of formal remittance channels and lower dollarization of remittance use in the Tajikistan sample. - Policy recommendations (preserve text and ordering as presented): - Strengthen public relations measures and programs to enhance awareness of DI and the benefits it offers; use bank and MFO branches as primary dissemination windows and public and social media for wider, cost-effective reach. - Disseminate DIF Annual Reports and related press releases and maintain toll-free phone lines for public inquiries. - Expand DI coverage and enhance DIF’s operational/payout capabilities as suggested by joint WB-IMF financial sector assessment (WB-IMF, 2015) to make DI more meaningful and credible. - Develop banking products and services aimed at remitters and their families, including giving account access to both senders abroad and their families at home and offering mobile remittance solutions. - Enhance competition among service providers and permit different types of entities to provide remittance services with proportionate requirements. - Introduce/improve payment infrastructure (e.g., payment card systems and other innovative payment mechanisms) to reduce transaction costs for transfer and disbursement. - Extend geographic coverage of services, allow non-bank providers (MFOs, postal operator, agent-based models) to participate to broaden rural coverage in a cost-efficient manner. - Additional hypothesis and caveat: - Improving the health of, and trust in, the banking sector may act as implicit insurance and further entice remittance senders and receivers to use formal channels, deepening the banking sector and access to financial services. - The survey data were collected prior to the ongoing financial crisis in Tajikistan; remittances and deposit balances have dropped significantly since the start of the crisis in Russia in December 2014, some large Tajik banks were brought to the brink of collapse, and regulations tightened — these developments may change the relationships documented in the paper and warrant caution in extending findings to the present day. ### Appendix I. Questionnaire form: Survey on assessment of foreign currency circulation in the Republic of Tajikistan — Survey metadata and key questions - National Bank of Tajikistan - Questionnaire - Survey on assessment of foreign currency circulation in the Republic of Tajikistan - Conducted: September 22 – October 16, 2014 - Selected questionnaire items (as asked to respondents): - 1.1. Gender: Male / Female - 1.2. Age: 16 - 25 / 26 – 35 / 36 - 45 / 46 - 55 / 56 – 65 / 66 - 75 / 76 and older - 1.3. Place of living: city / small town / village - 1.4. Marital status: married / single / divorced - 1.6. Education: Higher / Ugrad / vocational secondary / elementary vocational / secondary / other / do not know - 1.7. Employment: civil service / public services / economy and finances / catering / agriculture / housewife / trade / other - 2. Monthly income of your family (in TJS): from 100 to 1000 / from 1000 to 2000 / from 2000 to 3000 / from 3000 to 4000 / from 4000 and more - 3. Percentage of family’s total monthly income represent remittances received from abroad: up to 10% / from 10 to 20% / from 20 to 30% / from 30% / more - 5. Remittances mainly from what country? Russia / Kazakhstan / Belarus / Other - 6. How do you receive remittances from abroad? through banks / through company(organization) / through individuals / other way - 8. In what currency do you prefer to have cash? TJS / USD / Euro / RUR / other currency - 9. In what currency do you prefer to have deposits? TJS / USD / Euro / RUR / other currency - 9.1. Reasons for depositing money in forex in the bank: Trust in bank / for income / easy to receive / easy to keep / other - 10. Do you know that the banks that function in Tajikistan provide guarantees for savings of customers? 1) yes 2) no - 11. In what form (cash or noncash) do you keep your money? USD cash / savings in USD / other forex cash / jewelry / gold / silver / TJS cash / savings in TJS / real estate / other - 13. Did your family borrow from the banks of Tajikistan: Yes / No - 14. In which currency do you prefer to borrow? TJS / USD / Euro / RUR / other - 15. In which currency do you prefer to pay? TJS / USD / Euro / RUR / other - 16. The share of forex cash that you had in the last few years: 1) increased 2) decreased 3) did not change - 17. Which currency do you prefer in future to improve your living standards?: TJS / USD / Euro / RUR / other *Source: wp17132 - Section II, lack of awareness of DI may be behind some of these outcomes.* ### Section II, lack of awareness of DI may be behind some of these outcomes. ### Section II, lack of awareness of DI may be behind some of these outcomes. ### Background and motivation - Public awareness of deposit insurance (DI) is a Core Principle for Effective Deposit Insurance Systems (BIS, 2009) and “plays a significant role in underpinning a sound deposit insurance system” (IADI, 2009). - Financial illiteracy and lack of DI awareness may reduce use of the formal financial sector and contribute to dollarization, posing policy challenges for small open economies with fragile financial sectors and large remittance inflows. - Case study: Tajikistan, which in 2014 received an estimated $4 billion in remittances, equivalent to 42 percent of GDP, with a lion share of remittances (up to 90 percent in volume) from Russia. - Remittances from Russia declined by an estimated 25 percent year-on-year in 2015, illustrating remittance volatility and macroeconomic implications. ### Literature survey — links between remittances, DI awareness, and dollarization - Remittances channeled through the formal financial system promote financial development (Aggarwal, Demirgüç-Kunt, and Martínez Pería, 2011). - Formal remittance channels increase transparency, accountability, savings mobilization, and can relieve credit constraints (Hernandez-Coss, 2005; Suki, 2004). - Factors influencing channel choice include cost of transfer, remitter’s legal status, laws/regulations, and financial infrastructure (Siegel and Lücke, 2009; Abenoja, 2004). - No prior empirical study had directly examined the role of DI awareness on use of formal vs. informal remittance channels or on dollarization of remittance use; this paper fills that gap. - DI can have ambiguous effects on bank behavior (moral hazard) and on dollarization: some studies find DI coverage associated with higher lending dollarization (Barajas and Morales, 2003) while others do not (Luca and Petrova, 2003). - Financial literacy is not universal; survey evidence shows low DI awareness in several countries (Italy: 70 percent unaware, 23 percent basic knowledge, 7 percent detailed knowledge; Japan: just over half knew of DI in 1996, 7 percent knew detailed contents). ### Tajikistan context and survey data - Financial inclusion (Global Findex 2011): 2.5 percent of adults over 15 had an account at a formal financial institution, 0.3 percent saved, and 5 percent had a loan; informally, 14 percent saved and 31 percent reported having a loan. - Banking sector characteristics: - Total assets at around 30 percent of GDP. - Credit-to-GDP ratio remaining below 20 percent. - Prior dollarization levels pre-global financial crisis: as high as 75 percent for bank loans and 79 percent for deposits. - Deposit Insurance Fund (DIF) in Tajikistan: - Established in 2003. - Coverage level raised from TS7,000 to TS14,000 in 2015 and TS17,500 in 2017 (approximately $2,100). - At time of the survey DIF provided full coverage of approximately 85 percent of depositors’ savings in member banks, average amount of insured deposits at approximately $100. - Coverage stood at 96 percent at end-2016. - DIF assets over TS260 million ($33 million), reached 6.3 percent of total deposits as of end-2016 (target seven percent). - Deposits in foreign currencies are covered, but repayment of these deposits is done in local currency only. - DIF had communication tools (website, posters, handout) but had not conducted public-awareness surveys. - Survey design and sample: - Conducted by the National Bank of Tajikistan in mid-2014 across 24 administrative regions, roughly 250 people per region. - Respondents were individuals entering commercial bank branches; asked to fill a 2-page questionnaire. - Key descriptive statistics (Table 1, sample size varies by variable): - REMITTING VIA BANKS mean 0.6801 (Total obs 5,416) - DI_AWARE mean 0.7851 (Total obs 5,416) - FEMALE mean 0.3760 (Total obs 5,416) - VILLAGE mean 0.5671 (Total obs 5,416) - TOWN mean 0.2530 (Total obs 5,416) - MARRIED mean 0.7941 (Total obs 5,416) - EDUCATION_HIGHER_PLUS mean 0.4850 (Total obs 5,416) - REMITTANCES-TO-INCOME mean 0.1980 (Median 0.150, Minimum 0.100, Maximum 0.300, Std. Dev. 0.075, Observations 4,535) - EMPLOYED mean 0.6491 (Total obs 5,416) - BORROW_FROM_BANKS mean 0.2970 (Total obs 5,416) - NOTRUST_IN_BANKS mean 0.1310 (Total obs 5,416) - REMITTANCES’ ORIGIN: RUSSIA mean 0.791 (Obs 4,702); KAZAKHSTAN mean 0.071 (Obs 4,702); BELARUS mean 0.031 (Obs 4,702); OTHERS mean 0.107 (Obs 4,702) - Note: sample may be biased toward bank users because respondents were captured at bank branches. ### Empirical strategy - Four probit specifications estimated conditional on being remittance-receiving: 1. Remitting via Bank = F(Awareness of DI; Controls | Rem-Receiving=1) 2. Holding Cash in FX = F(Awareness of DI; Controls | Rem-Receiving=1) 3. Holding Deposits in FX = F(Awareness of DI; Controls | Rem-Receiving=1) 4. Borrowing in FX = F(Awareness of DI; Controls | Rem-Receiving=1) - Main policy variable: Awareness of DI (binary indicator, DI_AWARE). - Controls include demographic variables (age, gender, village/town, marital status, education), income and employment, remittances-to-income, borrowing from banks, trust in banks, payment currency preference, reasons for holding deposits/cash, remittances’ country of origin, and regional dummies. - Endogeneity test for DI_AWARE using Rivers and Vuong (1988) approach: - Instrument constructed from response to Question 9.1 (whether at least one reason for depositing money in forex in the bank was checked). - First-stage OLS: instrument significant with correct sign. - Second-stage: residual not significant in probit — authors conclude DI_AWARE is not endogenous in baseline model. ### Main empirical findings — DI awareness, channel choice, and dollarization - DI awareness and use of formal channels: - DI awareness (DI_AWARE) has the expected positive sign and is "statistically strongly significant". - "Awareness of DI makes it 28 percent more likely that formal channels for receiving remittances are used." - Other significant correlates for using formal channels: - Age: more likely to use formal channels with age but at a declining rate (LOG(AGE) positive, LOG(AGE)^2 negative; LOG(AGE)^2 reported as -0.31* with Std. Error 0.19 in Table 2). - FEMALE coefficient -0.14*** (Std. Error 0.05): female recipients more likely to use informal channels. - VILLAGE coefficient -0.26*** (Std. Error 0.06): village residents more likely to use informal channels. - MARRIED coefficient 0.14** (Std. Error 0.06): married more likely to use formal channels. - EDUCATION_HIGHER_PLUS coefficient 0.18*** (Std. Error 0.05): higher education increases formal channel use. - LOG(INCOME) coefficient -0.19*** (Std. Error 0.04): higher income associated with less use of formal channels. - REMITTANCES-TO-INCOME coefficient 1.73*** (Std. Error 0.41): higher share of remittances increases probability of formal channel use. - BORROW FROM BANKS coefficient 0.21*** (Std. Error 0.06): borrowing from banks associated with formal channel use. - REMITTANCES’ ORIGIN: RUSSIA coefficient 0.79*** (Std. Error 0.07): transfers from Russia are very likely to use formal channels; KAZAKHSTAN and BELARUS coefficients statistically insignificant. - McFadden R-squared reported as 0.24 (Table 2 baseline). - Subsample excluding individuals with family members who borrowed from banks (70 percent of main sample) yields qualitatively similar results with DI_AWARE coefficient larger (0.39 vs. 0.28), implying greater return to DI awareness when banking connections are weak or nonexistent. - DI awareness and cash dollarization: - DI_AWARE reduces the probability of keeping cash exclusively in foreign exchange: DI_AWARE coefficient -0.38*** (Std. Error 0.06) in Table 3 (first regression). - Village residents (VILLAGE coefficient 0.16***), higher income (LOG(INCOME) coefficient 0.10**), employed (EMPLOYED coefficient 0.14**), and higher REMITTANCES-TO-INCOME (2.41*** Std. Error 0.41) are more likely to hold cash exclusively in FX. - Payment preferences strongly associated with cash currency composition: - PAY_PREF_SOMONI coefficient -0.59*** (Std. Error 0.11) - PAY_PREF_USD coefficient 0.51*** (Std. Error 0.11) - PAY_PREF_EURO coefficient 0.86*** (Std. Error 0.23) - PAY_PREF_RUBLES coefficient 0.44*** (Std. Error 0.14) - Addition of payment preference choices improves regression fit without changing sign/significance of DI_AWARE. - McFadden R-squared reported as 0.31–0.39 across specifications (Table 3). - DI awareness and deposit dollarization: - DI_AWARE reduces the probability of holding deposits exclusively in foreign exchange: DI_AWARE coefficient -0.27*** (Std. Error 0.07) in Table 4 (first regression). - Trust in banks (Q9_1_TRUST_BANK coefficient -0.20*** Std. Error 0.07) and ease of receiving (Q9_1_EASY_RECEIVE coefficient -0.24*** Std. Error 0.09) reduce deposit dollarization. - Interest-earning motive (Q9_1_EARN_INCOME coefficient 0.12* Std. Error 0.07) increases likelihood of FX deposits. - LOG(INCOME) 0.15*** (Std. Error 0.05) and EMPLOYED 0.13** (Std. Error 0.06) increase deposit dollarization; REMITTANCES-TO-INCOME 1.88*** (Std. Error 0.42). - McFadden R-squared reported as 0.32–0.33 (Table 4). - DI awareness and loan dollarization: - DI_AWARE reduces the probability of borrowing exclusively in foreign exchange: DI_AWARE coefficient -0.28*** (Std. Error 0.07) in Table 5. - Other correlates: EDUCATION_HIGHER_PLUS 0.12** (Std. Error 0.05), LOG(MFI) 0.13*** (Std. Error 0.05), EMPLOYED 0.22*** (Std. Error 0.06), REMITTANCES-TO-INCOME 1.65*** (Std. Error 0.42). - McFadden R-squared reported as 0.22 (Table 5). ### Interpretation of mechanisms - DI awareness appears to increase depositor confidence and the attractiveness of formal channels, thereby: - Increasing probability remittances are channeled via banks. - Reducing cash, deposit, and loan dollarization. - Effects are robust across specifications and when controlling for trust in banks and country-of-origin differences. - DI awareness effect does not appear endogenous to channel choice using the constructed instrument and Rivers and Vuong approach. ### Policy recommendations and conclusions - Main empirical conclusion: Awareness of DI is strongly associated with greater use of formal remittance channels and lower dollarization of remittance use in the Tajikistan sample. - Policy recommendations (preserve text and ordering as presented): - Strengthen public relations measures and programs to enhance awareness of DI and the benefits it offers; use bank and MFO branches as primary dissemination windows and public and social media for wider, cost-effective reach. - Disseminate DIF Annual Reports and related press releases and maintain toll-free phone lines for public inquiries. - Expand DI coverage and enhance DIF’s operational/payout capabilities as suggested by joint WB-IMF financial sector assessment (WB-IMF, 2015) to make DI more meaningful and credible. - Develop banking products and services aimed at remitters and their families, including giving account access to both senders abroad and their families at home and offering mobile remittance solutions. - Enhance competition among service providers and permit different types of entities to provide remittance services with proportionate requirements. - Introduce/improve payment infrastructure (e.g., payment card systems and other innovative payment mechanisms) to reduce transaction costs for transfer and disbursement. - Extend geographic coverage of services, allow non-bank providers (MFOs, postal operator, agent-based models) to participate to broaden rural coverage in a cost-efficient manner. - Additional hypothesis and caveat: - Improving the health of, and trust in, the banking sector may act as implicit insurance and further entice remittance senders and receivers to use formal channels, deepening the banking sector and access to financial services. - The survey data were collected prior to the ongoing financial crisis in Tajikistan; remittances and deposit balances have dropped significantly since the start of the crisis in Russia in December 2014, some large Tajik banks were brought to the brink of collapse, and regulations tightened — these developments may change the relationships documented in the paper and warrant caution in extending findings to the present day. *Source: wp17132 - Section II, lack of awareness of DI may be behind some of these outcomes.* ### REFERENCES ### REFERENCES ### Bibliographic citations - Abenoja , Zeno Ronald, 2004. Promoting Greater Use of Formal Remittance Systems by Overseas Filipinos.” Mimeo, Financial Market Research Group, Department of Economic Research, Central Bank of the Philippines. Available via link. - Aggarwal, Reena, Asli Demirgüç-Kunt, and Maria Soledad Martínez Pería, 2011. “Do Remittances Promote Financial Development?” Journal of Development Economics, 96(2), November, pp. 255–64. - Anginer, Deniz, Asli Demirgüç-Kunt, and Min Zhu, 2013. “How Does Deposit Insurance Affect Bank Risk? Evidence from the Recent Crisis,” Journal of Banking and Finance. - Barajas, Adolfo, and R. Armando Morales. 2003. “Dollarization of Liabilities: Beyond the Usual Suspects,” IMF Working Paper 03/11, International Monetary Fund, Washington, D.C. - Bank for International Settlements, 2009. “Core Principles for Effective Deposit Insurance Systems,” Basel Committee on Banking Supervision and International Association of Deposit Insurers. Available via: http://www.bis.org/publ/bcbs156.pdf - Bartiloro, Laura, 2011. “Is Your Money Safe? What Italians Know About Deposit Insurance,” Financial Institutions Center, Wharton School, Univ. of Pennsylvania. Available via: http://fic.wharton.upenn.edu/fic/papers/11/11-55.pdf - Bijlsma, M and K. van der Wiel, 2012. “Consumer perception of deposit insurance: Little awareness, limited effectiveness?” Available via link. - Billmeier, Andreas and Johan Mathisen, 2006. “Analyzing Balance-Sheet Vulnerabilities in a Dollarized Economy: The Case of Georgia,” IMF Working Paper 06/173. International Monetary Fund, Washington, DC. Available via link. - Broda, Christian and Eduardo Levy Yeyati, 2003. “Endogenous Deposit Dollarization,” Federal Reserve Bank of New York Staff Report No. 160. Available via link. - Brown, Martin and Helmut Stix, 2014. "The Euroization of Bank Deposits in Eastern Europe," Working Paper 197, Oesterreichische Nationalbank (Austrian Central Bank). - Grigorian, David and Vlad Manole, 2016. “Sovereign Risk and Deposit Dynamics: Evidence from Europe,” Applied Economics (December). Available via link. - Grigorian, David and Tigran A. Melkonyan, 2011. “Destined to Receive: The Impact of Remittances on Household Decisions in Armenia,” Review of Development Economics, 15(1), pp. 139–53. - Hernandez-Coss, Raul, 2005. “A Proposed Framework to Analyze Informal Funds Transfer Systems,” in “Remittances: Development Impact and Future Prospects,” Samuel Munzele Maimbo and Dilip Rathe (eds.), The World Bank, Washington, DC. - Inakura, Noriko, Satoshi Shimizutani and Ralph Paprzycki, 2005. “Deposit Insurance and Depositor Discipline: Direct Evidence on Bank Switching Behavior in Japan,” Institute of Economic Research, Hitotsubashi University, Discussion Paper Series No. 125. Available via: https://ideas.repec.org/p/hst/hstdps/d05-125.html - Inter-American Development Bank, 2004 “Unlocking Credit: The Quest for Deep and Stable Bank Lending.” Available via link. - International Association of Deposit Insurers, 2009. “Public Awareness of Deposit Insurance Systems.” Available via link. - International Monetary Fund, 2016. “Republic of Tajikistan: Financial System Stability Assessment,” Washington, DC. Available via link. - Kireyev, Alexei, 2006. “The Macroeconomics of Remittances: The Case of Tajikistan,” IMF Working Paper No. 06/2. - Kose, Anneke and Robert Vermeulen, 2014. “Migrants’ Choice of Remittance Channel: Do General Payment Habits Play a Role?” European Central Bank Working Paper No. 1683, June. Available via link. - Luca, Alina, and Iva Petrova, 2003, “Credit Dollarization in Transition Economies: Is It Firms' or Banks' "Fault"?”, mimeo, Michigan State University. Available via link. - Lusardi, Annamaria. 2008, “Household Saving Behavior: The Role of Financial Literacy, Information, and Financial Education Programs”, mimeo, Dartmouth College. Available via link. - Narazani, Edlira, 2013, “A Micro Level Perspective of Euroization in Albania”, The WIIW Balkan Observatory Working Paper No. 109. Available via link. - Rivers, D., and Q. H. Vuong, 1988, ‘‘Limited Information Estimators and Exogeneity Tests for Simultaneous Probit Models,’’ Journal of Econometrics, vol. 39, pp. 347–66. - Siegel, Melissa and Matthias Lücke, 2009. “What Determines the Choice of Transfer Channel for Migrant Remittances? The Case of Moldova,” Kiel Working Paper No. 1515, April. Available via: https://www.files.ethz.ch/isn/100017/kwp_1515.pdf. - Strater, Norbert, Markus Cornelissen, and Andreas Pfingsten, 2008. “Deposit Insurance: An Empirical Study of Private Investors' Knowledge and Perception,” mimeo, University of Munster. Available via link. - Stix, H., 2010. “Euroization: What Factors Drive its Persistence? Household Data Evidence for Croatia, Slovenia and Slovakia,” Applied Economics, vol. 42, pp. 1-16. - Suki, Lenora, 2004. “Financial Institutions and the Remittances Market in the Dominican Republic,” Center on Globalization and Sustainable Development, The Earth Institute at Columbia University, New York, NY. Available via link. - World Bank and International Monetary Fund, 2015. “Financial Sector Assessment: Republic of Tajikistan.” Available via link. ### Thematic emphasis from references - Remittances and their impact on financial development, household decisions, and macroeconomics (multiple works: Aggarwal et al. 2011; Grigorian & Melkonyan 2011; Kireyev 2006; Broda & Levy Yeyati 2003; Suki 2004; Kose & Vermeulen 2014; Siegel & Lücke 2009). - Deposit dollarization, euroization, and currency preferences in transition and emerging economies (Barajas & Morales 2003; Billmeier & Mathisen 2006; Broda & Levy Yeyati 2003; Brown & Stix 2014; Narazani 2013; Stix 2010). - Deposit insurance, depositor awareness, and depositor discipline (Bank for International Settlements 2009; International Association of Deposit Insurers 2009; Bartiloro 2011; Anginer et al. 2013; Inakura et al. 2005; Strater et al. 2008). - Financial sector assessments and country studies, notably Republic of Tajikistan (International Monetary Fund, 2016; World Bank and International Monetary Fund, 2015). --- ### APPENDIX I. QUESTIONNAIRE FORM: SURVEY ON ASSESSMENT OF FOREIGN CURRENCY CIRCULATION IN THE REPUBLIC OF TAJIKISTAN ### Survey metadata - National Bank of Tajikistan - Questionnaire - Survey on assessment of foreign currency circulation in the Republic of Tajikistan - Conducted: September 22 – October 16, 2014 ### 1. General information on respondent - 1.1. Gender: Male Female - 1.2. Age: 16 - 25 26 – 35 36 - 45 46 - 55 56 – 65 66 - 75 76 and older - 1.3. Place of living: city small town village - 1.4. Marital status: married single divorced - 1.5. Family members: Person, who was surveyed the first____________ husband brother father son son-in-law relatives wife sister mother daughter daughter-in-law another person Total family members_________(people) - 1.6. Education: Higher Ugrad vocational secondary elementary vocational secondary other_________________ do not know (write) - 1.7. Employment: civil service public services economy and finances catering agriculture housewife trade other______________________ transport (write) - 1.8. Position/post: Employee retired Entrepreneur other___________ Lessee (write) Self-employed do not know - 1.9. Occupation: code: other______________________________ (write) ### 2. What is the monthly income of your family (in TJS)? - from 100 to 1000 from 1000 to 2000 from 2000 to 3000 from 3000 to 4000 from 4000 and more ### 3. What percentage of your family’s total monthly income represent remittances received from abroad? - up to 10% from 10 to 20% from 20 to 30% from 30% more ### 4. What are the sources of money, which represent your family’s income from abroad? - Seasonal works relatives living abroad your children friends - pension help of friends other ### 5. Remittances, which you receive from abroad are mainly from what country? - Russia Kazakhstan Belarus Other ### 6. How do you receive remittances from abroad? - through banks through company(organization) through individuals other way ### 7. How do you spend remittances in forex? - For food and household services to purchase property to purchase a car - For wedding or other ceremonies for business for savings to purchase gold - to purchase shares (other securities) other ### 8. In what currency do you prefer to have cash? - TJS USD Euro RUR other currency - 8.1. What is the reason for having your money in forex? More stable exchange rate is a source of income to develop foreign trade To develop internal trade other ### 9. In what currency do you prefer to have deposits? - TJS USD Euro RUR other currency - 9.1. What is the reason for depositing your money in forex in the bank? Trust in bank for income easy to receive easy to keep other ### 10. Do you know that the banks that function in Tajikistan provide guarantees for savings of customers? - 1) yes 2) no ### 11. In what form (cash or noncash) do you keep your money? - USD cash savings in USD other forex cash jewelry gold silver - TJS cash savings in TJS real estate other ### 12. In your opinion, what prevents you to keep your money in the banks? - Lack of trust in banks Lack of free financial resources - Low interest rate other ### 13. Did your family borrow from the banks of Tajikistan (for example, credit for purchase): - Yes No ### 14. In which currency do you prefer to borrow? - TJS USD Euro RUR other ### 15. In which currency do you prefer to pay? - TJS USD Euro RUR other ### 16. The share of forex cash that you had in the last few years: - 1) increased 2) decreased 3) did not change ### 17. Which currency do you prefer in future to improve your living standards?: - TJS USD Euro RUR other *Source: wp17132 - REFERENCES (pdf).* --- _Source: https://www.imf.org/-/media/files/publications/wp/2017/wp17132.pdf_