The Innovation of the Central Bank of Ecuador and its Influence to the Remittance Market Structure

After the Ecuadorian crisis in 1999, the country showed deterioration in the economic, financial, social, and labor sectors. These conditions encouraged a significant number of the unemployed and sub-employed population to make the decision to migrate to other countries. This decision was taken basically in order to find new income sources. According to the Ecuadorian Foreign Affairs Ministry, there are around 2.83 millions Ecuadorians spread around the world who send remittances to their relatives. This made a lot of business for Couriers companies in Ecuador who charged high commissions for this service. Due to this scenario it was important to design structural policies in the finance industry in order to involve the banking system in the remittance process. The Central Bank of Ecuador (CBE) in conjunction with local banks designed a strategy that allowed remittances transfers at a minimum cost. Using information and bulletins from the CBE, market investigations and other's research, the paper describes the effects of the government involvement and financial innovation through the CBE in the Ecuadorian remittance market which was considered an oligopoly market.