Migrants’ remittances

2013-06-20 12:05:16

Migrants’ remittances means the money sent by migrants to their countries of origin. At microeconomic level, this is a form of private savings that differs from Official Development Assistance (ODA) in nature and purpose as it is primarily intended for close relatives who have remained in the home country and allocated for current consumption. At macroeconomic level, migrants’ remittances account for significant amounts of money that supplement ODA and help sustain growth in the receiving developing countries.

Transfers of migrants’ remittances to developing countries rose to US$325 billion in 2010 (US$351 billion in 2011) and, according to World Bank estimates, could reach US$441 billion in 2014 given that the real figure, including transfers through informal channels, is probably very much higher. These flows represent substantial amounts for remittance receiving countries : for example, in 2011 the Philippines received US$23 billion, Bangladesh US$12 billion and Nigeria US$11 billion. Their impact on the economies of developing countries has been acknowledged. In certain cases, remittance transfers account for more than 20% of the GDP of receiving countries (31% in Tajikistan, 20% in Lebanon). They often exceed the amount of ODA.

Transfers of migrants’ remittances are factors for development in that they provide receiving families with the money needed to buy food, health care and send children to school. Moreover, the global amount of transfers to a country increases significantly when that country is the victim of a crisis or of a natural disaster ; transfers therefore have a very positive countercyclical impact. Lastly, this money is increasingly often used for investments.

Yet the cost of transferring remittances remains much too high, in the region of 9% of the amount transferred. That is why the G20, after the G8, made a commitment at the Cannes Summit of November 2011 to reduce the cost of remittance transfers to 5% by 2014, thus contributing to release US$15 billion a year for receiving families. The Leading Group recognizes the important role migrants’ remittance transfers have played over decades in funding the economies of developing countries. These private flows are not as such innovative mechanisms for financing development, yet various ongoing initiatives have helped to mobilize them for development and to make them stable, predictable and additional resources in relation to traditional aid, which thus make it possible to offset the negative impact of globalization.

The Leading Group has played a key role in raising awareness of the contribution of migrants’ remittance transfers to development. The work conducted within the Leading Group, and which brings together governments, non-governmental organizations and international financial institutions, is aimed at exchanging on best practices helping to steer these flows towards productive or social investments in migrants’ countries of origin.

World Bank on migration and remittances

World Bank’s price comparison website

Remittances Gateway

Dilip Ratha’s blog

Leading Group on Innovative Financing for Development