El Salvador’s Remittance Boom: A Look at the Numbers and Regulations

Remittances have become a vital source of income for many families in El Salvador, with the country receiving an average of $170 per person every year from abroad. According to a recent report, over 90% of these remittances come from the United States.

Remittance Statistics

• Average annual household incomes: higher than the general population
• Remittance recipients have:
  • 23% with bank accounts
  • 37% knowing how to use an ATM machine

The Competitive Money Transfer Market

El Salvador’s dollarized economy and the presence of large banks like Western Union and Gigante Express make it one of the most competitive money transfer markets in Latin America. The four largest banks:

• Banco Agrícola
• Banco del Comercio
• Banco Cuscatlán
• Banco Salvadoreño

have branches in the United States that offer money transfers.

Regulation of Remittances

The Superintendencia del Sistema Financiero (SupFin) is responsible for regulating the financial system, including banks, nonbanks, and insurers. The Banco Central de Reserva (BCR) also issues regulations and is consulted in the SupFin’s regulatory process.

• Banking law covers:
  • Deposit-taking
  • Financial intermediation
  • “Other activities carried out by banks”
• Gives the BCR authority to authorize other operations and services

Mobile Phone Industry

According to government statistics:

• 65% of households have at least one mobile phone in use
• Over 6.5 million active mobile phone lines (approximately 94% of the population)

The five major mobile network operators (MNOs) in El Salvador offer high coverage but low reliability in remote and rural areas. Top-ups are done through various channels:

• ATMs
• Merchants
• Phone

Branchless Banking

El Salvador has a favorable regulatory environment for branchless banking, with the SupFin and BCR working together to ensure the stability of the financial system.

• Bank law covers:
  • Deposit-taking
  • Financial intermediation
  • “Other activities carried out by banks”
• Gives the BCR authority to authorize other operations and services
• Superintendencia del Sistema Financiero (SupFin) regulates member-based financial institutions, including savings and loans societies and cooperatives

As El Salvador’s remittance market continues to grow, it will be interesting to see how the country’s regulatory environment adapts to meet the evolving needs of remitters and recipients alike.