Sending money home: global remittances flows to developing nations amount to US$ 300 billion

In October 2007, the International Fund for Agricultural Development (IFAD) and the Inter-American Development Bank (IDB) released a study showing that in 2006 migrants working in industrialized countries sent more than US$ 300 billion to developing nations.

The driving force behind this phenomenon is an estimated 150 million migrants worldwide who typically send US$ 100, US$ 200 or US$ 300 at a time, through more than 1.5 billion separate financial transactions.

These funds are used primarily to meet immediate family needs (consumption) but a significant portion is also available for savings, credit mobilization and other forms of investment. As the study explains, “the world’s largest poverty alleviation program could also become an effective grass roots economic development program, particularly in the rural areas that present some of the greatest challenges to financial inclusion.”

According to IFAD and the IDB, three aspects could further enhance this development:

• Improvements in data collection
• Reduction in transaction costs
• Increased efforts to leverage remittance flows for greater development impact

The report comprises a worldwide remittance map that compiles the best available information drawn from data collected on migrant populations, percentage of migrants sending remittances, average amounts remitted annually, as well as the average frequency of annual transfers. Central banks and other official government sources, money transfer companies, international organizations and academic institutions were used for reference support. The map covers 162 developing countries – many for the first time – and, together with the accompanying analysis and data tables, it provides comparative indicators to measure the relative importance of remittances among twenty subregions of the developing world.

Remittances in a Latin American context

Until recently, the United States was the main destination; however, increasing migration to Europe and intraregional mobility has changed this pattern. Italy and Spain are two of the main destinations in Europe, whereas Argentina, Costa Rica and the Dominican Republic are the main intraregional places of destination.

Latin America and the Caribbean (LAC) received US$68 billion in remittances in 2006, mostly going to Mexico, which received US$24.3 billion - see the pictured map here. Transfers are on average 20% of income per capita, although in some Central American countries such as El Salvador this number is higher. On a macro level and as a country’s average in LAC, remittances equate to 3% of GDP and 13% of exports.

Money transfers to LAC today are predominantly, if not exclusively, processed by licensed money transfer operators. Over the past three years other competitors (within the United States and Spain to Latin America corridors) such as banks and card-based operators have emerged as players offering account-to-account transfers. However, within intraregional corridors, significant informality in fund transfers still exists. The cost of sending remittances to this region is among the lowest in the world, averaging 5% to send US$200, largely because of the extent of competition.

As in other parts of the world, financial access in LAC is relatively poor, even among recipients of remittances who tend to save more; and, with some exceptions, there is little access to formal banking institutions. Credit unions and microfinance institutions are stepping in to offer services to recipients and thus increase the cross-sale of financial products. The end result is greater financial intermediation and transformation among clients. Examples include Mexican rural banks (Cajas Populares), or Jamaican building societies, which benefit thousands of clients.

With regard to LAC, the following statistics emerge from the report:

• Total number of migrants: 30,403,472
• Total remittances in LAC (US$ million): $68,062
• Annual average remittances per capita: $688
• Annual average remittances per migrant: $2,1281
• Remittances as percentage of GDP: 3%
• Remittances as percentage of exports: 13%
• Ratio of remittances per capita and GDP per capita: 20%
• Top 5 LAC recipients by volume received (US$ million)
  Mexico: $24,354
  Brazil: $7,373
  Colombia: $4,516
  Guatemala: $3,557
  El Salvador : $3,328

More information

• In October 2007, Western Union, which provides money-transfer services through a network of more than 312,000 agent locations in more than 200 countries, sealed a deal with the GSM Association, the main mobile phone operators’ body, under which mobile operators will be able to offer customers the ability to send and receive low-denomination, high-frequency money transfers via a conventional and regulated system using their handsets. The first commercial services are expected to be rolled out at the beginning of the second quarter of 2008. 35 mobile operators with 800 million customers in more than 100 countries have signed up to take part in the GSMA Mobile Money Transfer pilot scheme led by Sunil Mittal, managing director of Bharti Airtel. Other participants include MTN, Orange, Orascom, Smart, Telenor and VimpelCom.
• In February 2007, Vodafone and Citigroup announced their plan to launch a Vodafone-branded mobile-based international money transfer service targeting the global remittance market worldwide. The new service will provide senders and receivers of money with a superior method for sending money home that is convenient, cost-effective, secure, transparent, and easy to use.
• Video 1: On 23 October 2007, Riz Khan of Al-Jazeera network spoke to Matthew Wyatt, Assistant President External Affairs Department of IFAD and Donald Terry, Manager of the Multilateral Investment Fund of Inter-American Development Bank. The interview is available online.
• Video 2 – IFAD documentary on remittances – Elmer, Hector and Dalila Cortez have left their home and family in El Salvador to work in the United States. They’re part of a huge global movement of migrant workers who travel to rich countries to find jobs so they can send money home to support poor families. What impact does this cash flow have in the fight against poverty? The documentary tells the story of the Cortez family in the United States and El Salvador and explores the role development can play in spreading the impact of the remittances flow.

Comments

[remittance Philippines]

Yeah we can really expect that! almost all nations have a remittance in different nations.

-urieqo-

[remittance philippines]

I've been looking for the topic like this and of course the customer's looking for the affordable remittance and at the same time easy to send and received.

missy