Cross-border remittance between emerging economies: an institutional perspective

Abstract

Purpose The purpose of this paper is to investigate how institutional mechanisms operate within both formal and informal channels of cross-border remittance. Design/methodology/approach Face-to-face interviews were conducted with Myanmar migrants mostly working in Thailand. Thematic coding was used to analyze field notes and identify themes in channel member perceptions and institutional environmental process. Findings Informal money transfer channels have achieved higher levels of legitimacy when compared to formal channels. Channel legitimacy is a more important attribute than efficiency. Lack of financial infrastructure, such as bank branches and ATM machines particularly in rural or outlying areas of Myanmar, the requirements for formal documentation and language and communication are the major institutional constraints that encourage the development and use of multiple channels in Myanmar. Formal money transfer channels develop with stronger regulative institutional processes, whereas informal money transfer channels develop with stronger cultural-cognitive and normative institutional processes. Research limitations/implications Using convenience sample of remitters mainly from one area of Thailand and other channel members from Yangon, the financial capital of Myanmar, may limit the applicability of the findings, which calls for future research. Practical implications Banks and money transfer offices need to improve legitimacy perception within migrant communities by building stronger networks with local banks and international banks. They could provide Myanmar speaking front-line service personnel and include brochures in the Myanmar language to improve the communication process. The findings and recommendations from this study are also applicable to informal channels and formal financial institutions in other ASEAN countries that are preparing to make investments in Myanmar. Moreover, Myanmar banks should also consider opening branches to cater for Myanmar workers in ASEAN, especially in Thailand, Singapore and Malaysia. Originality value This paper applies institutional theory within channels, investigates the context of a financial channel rather than a product channel, addresses the importance of institutional environmental mechanisms and constraints in influencing channel behavior and is embedded in the situational context of Myanmar, a newly opened South-East Asian economy where little prior research has been conducted.