The World Bank estimated that global remittances exceeded $714 billion in 2019. This may sound like a tiny percentage of the world economy. However, remittances have far reaching and long term impacts. Let’s find out how remittances contribute to our world’s economy and why they matter so much.
Driver of economic growth
A few hundred years ago the search for food was replaced by economic opportunity as a primary driver of human migration. For decades expats have stimulated economic activity by sending remittances sent back to their home countries. Remittances increased purchasing power, domestic demand, and all-round economic activity. Today tens of nations receive remittances amounting in the billions of dollars.
The more important statistic is that 77% of worldwide remittances, or $550 billion as of 2019, flows to low- and middle-income countries (LMICs). As opposed to large economies like India and China, the impact of remittance inflows for smaller countries is massive. Remittances comprised between 10% and 30% of the national GDP for several nations in Sub-Saharan Africa, East Asia and Latin America. These economies pretty much depend on remittance flows. Without incoming remittances their economic growth would grind to a halt.
Enabler of progress
Millions of people worldwide depend on money transfer operators (MTOs) in regions where there is no access to formal banking. One of the most efficient and popular of these MTOs is Ria Money Transfer. Remittance transfers are the only way that millions of families across the world are able to pay their bills, buy groceries, send their children to schools, and have an acceptable standard of living. In the case of remittances it is not how much, but where they are sent, which accounts for the largest positive economic impact.
Influencer of national policy
The value of remittances is so significant that it influences the economic policy of nations. The best known example of this is tax breaks given to nonresident citizens for the investment of their foreign incomes locally. However, policies designed to facilitate remittances can be much more elaborate. One case in point is the Philippines, where a highly structured program has been put in place by the country’s government to encourage emigration. This program has been active for decades. It aims to increase the count, as well as the earning capacity of overseas Filipino workers (OFWs), primarily toward economic ends. A significant percentage of the county’s educational and vocational training institutions are geared to address the needs of foreign recruiters. The Philippines is not the only example of this. Policies and laws have been fine tuned to facilitate remittance inflows in numerous countries.
Influencer of international policy
Migration occurs not just within the economic, but also social, political, and historical contexts. A holistic discussion on immigration necessitates talking about migration law, labour policies, mobility restrictions, the well-being of migrants, and human rights. Today migration is regarded as one of the most complex issues on the planet. It is one of the most discussed topics at the UN, and receives attention at the highest levels, on par with subjects like international geopolitics, war and terrorism.
The large scale displacement of human populations is hardly a new phenomenon. However, mass migrations in recent years received unprecedented amounts of attention. We live in an age of information. We have high mobility, rapid access to information, and the ability to widely disseminate news (as well as alternative news). Global migration deserves to be addressed in a holistic and structured manner. To this end the UN General Assembly endorsed the Global Compact for Migration (GCM) in December 2018. The UN Strategic Development Goals (SDGs) aim to increase remittance flows and decrease the cost of remittances worldwide. Remittances add to our economies, shape our policies, and influence our decisions as nations, communities, and individuals.