In 2007, I flew to the Guyanese capital Georgetown for the Cricket World Cup. Though it is in South America, Guyana is considered part of the West Indies. I expected Georgetown to be a Caribbean delight with swaying palm trees on the sidewalk and piña coladas for breakfast.

Instead, I found a decaying and sterile town. The tallest building is just three storeys high. The Ministry of Education was the size of a Singapore shophouse. The streets were not lined with palm trees but with money transfer bureaus. The city may have more Western Union outlets per capita than any other in the world.

Guyana lives on foreign remittances. The former British colony has an English-speaking workforce that is dispersed in the UK, US and Canada. These overseas workers are employed as domestic helpers, cleaners, nurses and computer programmers. The country’s 700,000 inhabitants are dwarfed by the one million strong Guyanese diaspora.

In 2015, Guyana received foreign remittances of US$438 million ($610.16 million), which is US$595 per capita and some 15% of its GDP. Guyana receives more in remittances than it earns through the export of rice, sugar and timber combined.

Guyana isn’t the only country whose fortunes rest on foreign workers. Haiti is even more dependent on foreign remittances than Guyana. Without this income stream, these countries would face a balance of payments crisis.

Remittances cut poverty and boost consumption much more effectively than aid. When poor families receive remittances, they build houses and educate their children. In 2015, remittances to poor countries were US$440 billion, which was twice the foreign aid that these countries received. Unlike foreign aid, foreign remittances circumvent the corruption and bureaucracy of emerging markets.

Remitting money is not only a vast enterprise with an economic purpose, it is also lucrative business. The big daddy among the Money-Transfer Operators (MTOs) is NYSE-listed Western Union, which has a fifth of the global market.

Western Union was founded in 1851 as New York and Mississippi Valley Printing Telegraph Company. It was a pioneer in providing telegraph services. It adopted the name Western Union in 1856 and built the first transcontinental telegraph line in 1861.

Western Union’s killer app was the use of communications technology for instant money transfer. In 1871, Western Union introduced money transfer that could be verified promptly through the telegraph. Over 145 years later, this innovation still forms the bedrock of this corporation’s US$5.6 billion revenue.

Pioneering technology is not Western Union’s sole asset. It has also built an awesome network of 500,000 agent locations in 200 countries. Western Union has increased the number of agents by fivefold in the last decade. Through this network, any one of the world’s seven billion residents can send funds to another.

Western Union also has enormous pricing power and is immensely profitable. It boasts gross margins of 28% in most of the large markets. Western Union dictates prices according to location and the amount to be sent. For instance, to send US$200 from Dallas to Dhaka costs US$11. Sending the same amount from New York could cost US$21. In 2009, the G8 nations said they would aim to halve the global average cost of remitting funds from 10% in five years. Seven years later, the cost cuts are not even halfway there. It costs 7.7% on average to transfer money.

Despite the fat margins, the big banks are involved in less than 10% of this field. Banks avoid the money transfer field because their systems are built for the transfer of large amounts rather than the small sums that foreign workers transfer. Banks emphatically discourage small transfers by imposing charges on both the sender and receiver.

Western Union has a few rivals, though. There is Nasdaq-listed MoneyGram International, which transfers about US$20 billion a year, and generates annual revenue of US$1.4 billion. There is another regional player in the Gulf called UAE Exchange, which is slightly larger than MoneyGram.

Xoom Corp is a feisty San Francisco-based upstart which charges a flat fee of US$5 per transaction. Most transactions are made from bank accounts. It handles about US$2 billion in revenue, but has grown rapidly. The rest of the market consists of small money-transfer agents and services such as PayPal.

Shares in Western Union and MoneyGram have tumbled because of the global meltdown. Western Union is down nearly 30% from its peak, while MoneyGram has collapsed 90%. But, the business model is sound and they are hard to dislodge. At nine times earnings, Western Union is trading at the bottom end of its price-to-earnings valuation band. The dominant MTO is also an income play with a dividend yield of 3.6%. MoneyGram is 5.7 times earnings, which is close to its all-time low. As I found on the streets of Georgetown in Guyana, there is big money in small transfers.

Nirgunan Tiruchelvam is director, research at Religare Capital Markets.

This article appeared in the Corporate of Issue 715 (Feb 15) of The Edge Singapore.