There are 232 million international migrants in the world. If there was a country made up of only international migrants, that would be larger, in population, than Brazil. That would be larger, in its size of the economy, than France. Some 180 million of them, from poor countries, send money home regularly.
Those sums of money are called remittances. There are millions of people who migrate each year. And they have a dream: having a decent job somewhere and can send money home and help the family. This is a fact: 413 billion dollars was the amount of remittances sent last year by migrants to developing countries. «Importance of remittances by migrants which quadrupled between 1990 and 2004» (John Ravenhill «Global political economy»).
True, people send 200 dollars per month, on average. But, repeated month after month, by millions of people, these sums of money add up to rivers of foreign currency. So India, last year, received 72 billion dollars, larger than its IT exports. In Egypt remittances are three times the size of revenues from the Suez Canal. In Tajikistan, remittances are 42 percent of GDP. And in poorer countries, fragile or conflict-afflicted, remittances are a lifeline, as in Somalia or in Haiti. No wonder these flows have huge impacts on economies and on poor people.
So in Nepal, the share of poor people was 42 percent in 1995, the share of poor people in the population. By 2005, a decade later, at a time of political crisis, economic crisis, the share of poor people went down to 31 percent. In El Salvador, the school dropout rate among children is lower in families that receive remittances. (Richard H. Robbins: “Global Problems and the culture of capitalism”)
Migrants send money home for food, for buying necessities, for building houses, for funding education, for funding healthcare for the elderly, for business investments for friends and family. Much as these flows do all that good, there are barriers to these flows of remittances. Foremost among them is the exorbitant cost of sending money home. The global average cost of sending money is eight percent. That means you send 100 dollars, the family on the other side receives only 92 dollars. To send money to Africa, the cost is even higher: 12 percent. And then there is the case of Venezuela, where, because of exchange controls, you send 100 dollars and you are lucky if the family on the other side receives even 10 dollars.
And what is worse, many developing countries actually have a blanket ban on sending money out of the country. Many rich nations also have a blanket ban on sending money to specific countries.
So, what can international organizations and social entrepreneurs do to reduce the cost of sending money home? First, relax regulations on small remittances under 1,000 dollars. Second, governments should abolish exclusive partnerships between their post office and the money transfer company.
The development community should set a goal of reducing remittance costs to one percent from the current eight percent. If we reduce costs to one percent, that would release a saving of 30 billion dollars per year. Thirty billion dollars, that’s larger than the entire bilateral aid budget going to Africa per year. That is larger than, or almost similar to, the total aid budget of the United States government, the largest donor on the planet…
Remittances empower people. It would be wise to make remittances and recruitment safer and cheaper because remittances don’t know the crisis.
- John Ravenhill «Global political economy»- 2011- Oxford University Press: Labour migration/Migrants’remittances pp 289-290
- Robert O’Brien and Marc Williams: “Global Political Economy” 2013- pp189-90, p 233-34
- Richard H. Robbins: “Global Problems and the culture of capitalism” pp 158-159: The Economics of Immigration- Remittances Data
- AfricaRenewal Online: October 2005- by Gumisai Mutume Available: http://www.un.org/africarenewal/magazine/october-2005/workers’-remittances-boon-development
- IFAD Data: Investing in rural people http://www.ifad.org/remittances/maps/africa.htm
- The Guardian Interactive team- January 2013 ‘How much money do migrants send home ?’ Available: http://www.theguardian.com/global-development/interactive/2013/jan/31/remittances-money-migrants-home-interactive
- The Guardian ‘Global remittance industry choking billions out of developing world’ by Mark Anderson- August 2014 Available: http://www.theguardian.com/global-development/2014/aug/18/global-remittance-industry-choking-billions-developing-world
- The Economist- August 2014- By S.H. Remittances and growth ‘Gone missing’Available: http://www.economist.com/blogs/freeexchange/2014/08/remittances-and-growth
- The Huffingtonpost: ‘The Dark secret of the Money transfer Industry’- 2013 Available: http://www.huffingtonpost.co.uk/dr-ismail-ahmed/dark-secret-of-the-money-transfer-industry_b_3183390.html