Monday, 27 November 2017
Send Money Home: Contributing to the sustainable development goals, one family at a time. Highlights from the IFAD report: Sustainable Development Goals
“…remittances are believed to directly touch the lives of 1 billion people on earth..”
Global remittances to developing countries increased by 51 per cent, while the number of migrants from these countries increased by 28 per cent and the populations of those countries of origin increased by only 13 per cent.
Remittances to, and migration from, the Asia-Pacific region reflects dynamic change during this period. Inflows to the region increased much faster (87 per cent) than its migration (33 per cent).
There are about 200 million migrants from low and middle income countries, who send money to their families back home.
Remittance flows have grown over the past decade at a rate averaging 4.2 per cent annually, from US$296 billion in 2007 to US$445billion in 2016. This growth occurred despite economic dislocations, first caused by the 2008 financial crisis, and more recently by reduced revenues to oil-producing countries and currency market fluctuations.
This overall growth pattern is associated primarily with the continued need for immigrant labour from developed countries due to their ageing populations and improved reporting of remittance flows.
Migrant workers and their relatives have demonstrated remarkable resilience and resourcefulness in adapting to economic downturns in order to maintain a relatively steady level of support for their families. These flows account for more than three times the combined official development assistance from all sources, as well as more than the total of foreign direct investment to almost every low- and middle-income country. Remittances sent from developed countries account, on average, for substantially less than 1 per cent of their individual GDP. Total migrant worker earnings are estimated to be approximately US$3 trillion annually, of which about 85 per cent remain in the sending countries.
Remittance flows... on the receiving end
An estimated 800 million people worldwide are directly supported by remittances.
Taken together – senders and their families back home – 1 billion people are directly involved with remittances: one out of seven people in the world.
Remittances typically represent about 60 per cent of household incomes.
Forty per cent of total remittance flows go to rural areas, which benefits the agriculture economy, improves food security and generates employment opportunities, particularly for young people.
The cost of sending money
The average cost of sending remittances is now at 7.45 per cent, a measurable decrease from 9.8 per cent since 2008. However, transaction costs have remained essentially at over the past few years and are unacceptably high in many low-volume corridors.
By reducing average costs to below 3 per cent globally, remittance families would save an additional US$20 billion annually.
Remittance service providers (RSPs)
Over the past decade: Cash-to-cash remains the most common form of transfer (90 per cent), although more remittances are starting to come from accounts.
The type of RSP most used has shifted significantly towards money transfer operators (MTOs) in almost all sending countries.
MTOs are generally much less costly than banks to send remittances. The number of RSPs has grown dramatically to over 3,000 worldwide. Almost all this increase is due to small RSPs that do business in one or two countries.
“De-risking” is the term used to describe the process of banks terminating relationships with many small MTOs. In doing so, banks are actually exacerbating anti-money laundering (AML) and combating nancing of terrorism (CFT) concerns by driving remittance ows into informal channels that are much more dif cult to track.
Technological advances have made remittance transactions faster, cheaper and more convenient, making it possible to reach even into the “last mile” of many remote areas.
There is a concentration of market share, currently at 35 per cent, in three global MTOs (MoneyGram, RIA, and Western Union) and two regional MTOs (UAE Exchange and Unistream).
Payout locations have increased over 400 per cent in the top 23 remittance-receiving countries (from 350,000 to 1.5 million), extending the reach of MTOs to many more corridors. Informal transfers through non-licensed channels have declined significantly, as costs decreased and payout locations became more convenient. However, informal transfers still remain a common method in South-South transactions as well as in other low-volume corridors.
Over the past decade, attention has focused primarily on the “sending side,” particularly the aggregate volumes and transaction costs of sending family remittances, essentially from developed to developing countries (North-South). The global dimension of this phenomenon is impressive: over US$450 billion is projected to be sent this year, more than three times of official development assistance (ODA).
UN DESA estimates that more than 250 million people currently live outside their countries of origin. Less than 10 per cent of these individuals are estimated to work in the “high end” of the international economy, and were mostly born and/or educated in developed countries. In comparison, there are almost ten times as many migrants from developing countries who leave home to generally take on the often “dirty, difficult or dangerous” jobs available at the “low end” of the international economy.
Taken together, remittances are believed to directly touch the lives of 1 billion people on earth. It is these remittance families who collectively form the “human face of globalization.”
1/7 people in the world either SEND or RECEIVE international remittances.
Despite the focus on the aggregate flows of remittances, in reality it is the individual US$200 or US$300 sent home regularly, which, if leveraged, can most effectively improve the living standards of migrant families and their communities back home.
Over the past decade, remittances to Asia and the Pacific increased by 87 per cent, reaching US$244 billion, while migration grew by only 33 per cent in comparison. Asia remains the main remittance-receiving region, with 55 per cent of the global flows and 41 per cent of total migrants.
In 2015, Samoa was the 4th most reliant country on remittances - as a percentage of GDP it comes in at number 4 globally.
Remittances represent a tangible demonstration of the commitment of the senders to the future of their families back home.
The aggregate numbers are massive: about 200 million people sending remittances to their families in developing countries totalling almost US$450 billion each year with a cost of sending well over US$30 billion annually.
However, the amount that matters the most is not measured in millions or billions. To a remittance receiving family it is the US$200 average monthly amount that counts.
To find out more on the IFAD recommendations on the contributions of migrant workers to the Sustainable Development Goals, please follow this link: https://www.ifad.org/documents/36783902/4a5640d9-e944-4a8c-8007-a1bc461416e6