Joachim Arrey, Tunis-Belvedere, Tunisia
Remittances that were once only heard in local everyday conversations among migrants and their families are now on the minds and agendas of most governments, members of the civil society, the international community and, to some extent, even the private sector. Despite the growing importance and interest in remittances across the globe, this new form of investment funding and direct capital flow to many growing economies, there is still a wide gap in terms of what is known and what could be done to give these invaluable resources the place they deserve in today’s world.
Remittances are a substantial and increasingly important source of external finance that is growing not only nominally, but also relatively to other transfers to developing countries. Though high-income countries remain the dominant sources of remittances, a non-negligible portion originate from developing countries. 2005 World Bank estimates indicate that remittances to developing countries rose to $167 billion, a 73 percent increase from the 2001 figure of 72.3 billion.
According to World Bank figures, India topped the list in 2005 with a "spectacular" reported remittance flow increase of US$18 billion, closely followed by China, Mexico, and the Philippines. The World Bank highlights how remittances more than doubled in the past decade with the quantity of remittances going to developing countries doubling in the past five years. Even Sub-Saharan Africa, long at the bottom in terms of remittance receipts, officially registered almost US$ 8.1 billion in remittances in 2005, a 72 percent increase from the 2001 figure of US$ 4.7 billion.
The increasing volume of global remittances has impressed policymakers and social scientists alike. Besides outpacing official development assistance and private capital flows, remittances have turned out to be regular and counter-cyclical. They represent an essential non-debt creating, safety-net administered by extended families and local communities rather than provincial and national governments. The development impact of remittances can be significantly enhanced through complementary macroeconomic policies in labor exporting countries and financial innovations in remittance transmission. Enhanced policy coordination on temporary transnational worker migration can prove instrumental in helping remittances offset the traditional brain drain besetting developing economies.
Migrant remittances are an increasingly important source of development finance and now constitute the second largest inflow to developing countries, exceeding even international aid. The World Bank estimates that US$225 billion was remitted to the developing world in 2005. Latest estimates indicate that remittances to Africa are now in the realm of $30-40 billion per year and are increasing as the earning power of the Diaspora continues to grow. Often, they contribute as much as half of the recipient household’s annual income and help raise financial inclusion and alleviate poverty. Furthermore, they have a valuable positive impact on the economy of the receiving country.
However, much more needs to be done to leverage these resources, particularly, to provide transnational families with access to the financial system and more options to use their funds. Despite the unprecedented levels of interest in remittances, a variety of historical, legal, regulatory, and cultural obstacles continue to prevent the financial sector from successfully integrating remittance senders and receivers. The basic economic principle of remittance flows throughout the world is quite simple: developed countries need migrant labor, whiles families back home need the money that comes from their earnings. Each year, migrants leave their villages and hometowns to seek jobs and better lives for themselves and their families. The equation over the years has not changed as millions of people move to rich countries of the North, while money moves to poor, low-income countries of the South by the billions.
In many cases, what drives migrants is the genuine feeling of pride and affection for their home countries, though many of them have a negative opinion about their economic management. The great majority of migrants to rich countries of the North go there with the objective of making life better for their immediate families, but the little sums of money they remit to their countries of origin are going a long way in transforming lives and entire nations as this money is invested in many ways.
Many countries across the globe have understood the growing importance of remittances to their economies. Most of these countries are now seeking ways to maximize the benefits from having a large pool of citizens living abroad. Some of these countries are now offering incentives to attract remittances into local savings and investment funds. Brazil, Mexico, India, the Philippines, Morocco, Tunisia, Cape Verde, for example, have set up migrant pension plans, offer preferential loans or grants for business ventures using remittances and provide access to capital for recent returnees.
Some African countries have also begun developing strategies and policies that enhance the flow of remittances. Burkina Faso, Senegal and Mali have set up structures to enable the Diaspora to open up bank accounts at home, enabling more of the remittance flow to move from the informal to the formal sector. Zambia has adopted a really innovative policy to encourage migrant workers in Botswana to invest in property by setting aside plots of land in specific cities for the country’s Diaspora. Ghana has set up an entire ministry just for its Diaspora and many other African countries are giving the Diaspora an important place in their development efforts.
Remittances to Africa are also helping to reverse some of the adverse effects resulting from the transfer of embezzled funds from the African continent. Speaking recently to the Africa Report, African Development Bank Group President, Donald Kaberuka, underscored the importance of these direct transfers from rich countries of the North to Africa. Far from justifying the reckless transfer of funds from the continent, the Bank Group boss used his interview to highlight how some of the adverse effects of these transfers from the continent were being reversed as a result of the commendable job that the continent’s Diaspora was doing.
"......I am interested in the other side of the balance sheet, with increased remittances to Africa. Last year alone, recorded remittances were $12 billion of which $6.5 billion went to Sub-Saharan Africa. In some countries like Uganda and Ghana, the remittances are up to $1 billion. ……Now we are working at the Bank to see how to reduce the cost of those transactions and how to securitize some of those remittances to provide long-term sustenance,"
Remittances are gradually getting into the global agenda. Some African countries are designing new and innovative ways to make remittances from their Diaspora have a huge development impact in their countries. Rather than consider remittances as help for impoverished families, some African countries are helping themselves by devising means of tapping into these resources as a way of carrying out some important development projects for their people. If African countries can come up with new ways of managing this new money, many lives on the continent will be changed for the better.
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I agree with you that "Though high-income countries remain the dominant sources of remittances, a non-negligible portion originate from developing countries." And remittances are widely used.
-urieqo-
Posted by: remittance philippines | March 18, 2009 at 11:00 PM