Our guest from India orders a large pot of tea, perfect to stay warm indoors and away from the rolling thunder.
As the storm gains momentum outside, Muhammed tells us about how he emigrated to London over 18 years ago. Like so many before him, Muhammed left behind a family in search of the financial means to provide for them.
“I have four children. Two boys and two girls. They’re all living in India.”
Muhammed’s voice fills with pride as he tells us about his daughters, who are 21 and 24 years old. One is studying for an MBA in Aviation Technology. The other is studying for a BTEC in Information Technology.
“University is very expensive in India. My daughter has to travel 150 km to get to the nearest university. She has to stay in a hostel nearby, so I pay for the hostel and her food.”
Now that his daughters are of age, there are matrimonial expenses to consider.
“I want my two daughters to get married, but you need £52,000 to get just one daughter married.”
Our mouths drop open, astounded by the whopping, non-negotiable figure.
“I’m a Muslim, so we need to pay a dowry, which pays for jewels, a home, a car…”
In India, it’s common practice to expect or even demand a dowry from the bride’s family. A dowry refers to an amount of money, or tangible assets, that a bride offers the bridegroom and his family. Without it, the groom’s family may not accept the marriage proposal.
After getting his daughters married, Muhammed tells us his next challenge is providing for his sons’ education. At the time of the interview, his sons are 11 and 13. It’s the same situation as with his daughters: tuition, transportation, and lodging fees. These are expenses he’ll need to save up for before moving back to India.
When asked if he’d stay in the UK, he answered, “The people in London are very polite. It’s very neat and clean. It’s a safe country. The only problem is money… If you don’t have any savings, you can’t do anything.”
Muhammed’s vision for his future seems as clear as day. He knows exactly what he wants to do, when, and how.
“After two or three years, I’ll go back to India… I want to start a traditional biryani restaurant.”
Biryani, a fragrant rice dish cooked with spiced meat and vegetables, is popular in India. Muhammed’s native town of Tamil Nadu is no exception, located on the south Indian coast where he plans to set up shop.
According to Muhammed, it’s cheaper to run a restaurant business in India. However, his biggest motivation for moving back is the work-life balance.
“Here [in London], I wake up, go to work, go home and go to sleep… that’s it! But in India, if you start a business, you have enjoyment. You can go out with your family. You can go to parties.”
Even though Muhammed wants to move back, he’s encouraged his children to give London a chance. Thanks to their education, Muhammed is confident that they’d have a bright future in England.
At Ria, we are proud to support migrant workers like Muhammed. Through his hard work, he’s provided his children with an education and the means to create a better life for themselves.
We believe being apart is already a steep price to pay, so we put great care into providing the most efficient service for our customers.
If you’re living abroad and looking to send money to India, you can check out our payout locations here.
Close to five millionpeople leave their native countries every year in search of a better life. Sometimes, people immigrate to earn a college degree or to learn a language. Other times, to gain international experience in their field. But, more often than not, people move to lift themselves and their families out of poverty.
Currently, there are around 272 million migrants across the globe. That’s one in every 30 people overcoming language barriers, uncertainty, and even discrimination. Yet, their motivation is unwavering. In the end, migrant workers must rise above it all to provide for their families and communities back home.
But, how can migrant workers support their families from far away? They rely on money transfer services like Ria to send remittances back home. Remittances refers to the funds migrant workers send back to their countries of origin.
In 2020 alone, migrants sent US$554 billion to low- and middle-income countries (LMICs). While these may sound like impressive numbers, they represent a lifeline for millions.
A steady flow of funds from abroad goes a long way for recipient households. For one, their children are more likely to stay in school. Families have more options for health coverage. Whole communities can also thrive thanks to GDP contributions. In countries like Haiti, remittances are as much as 37%of the national GDP.
Unfortunately, migrant workers and their families must overcome an extra hurdle this year. The COVID-19 pandemic and its aftermath threaten the livelihood of many.
Lockdowns and restrictions have halted economic activity worldwide, resulting in job losses. This is compounded by the fact that many visas are only granted depending on the applicant’s employment status. The possibility of forceful returns is also met with travel restrictions. With moving plans delayed, those displaced by climate change or political unrest must wait longer.
At the same time, migrant workers still employed are likely performing first-necessity tasks. This could mean they’re risking their health without proper insurance. If there’s one thing this pandemic has taught us, it’s that the most vulnerable are often the most exposed.
Now more than ever, the road to financial inclusion is not straight-forward. Curveballs like COVID-19 can derail or slow down the process. However, the livelihood of thousands of families is at stake. Bringing down the global cost of remittances can help fight poverty and encourage access to financial services.
Ria is committedto providing a service that is affordable, convenient, and safe. But we can’t do it alone. Hundreds of non-compete clauses around the world keep average prices high. This refers to clauses signed by remittance service providers that restrict them from working with other partners. In other words, fewer competitors mean less price competition, resulting in higher or stagnant prices.
If you represent an organization that can help us facilitate affordable remittances for migrant workers, we encourage you to keep reading. The same goes for anyone interested in learning more about the benefits of remittances on receiving households.
In this report, we will explore the impact of money transfers and what we can do to propel and protect them.
As of 2020, remittances provide LMICs with three times thefunding received through foreign aid. The same is true for private capital flows and foreign direct investment (FDI). The money received by recipients of money transfers means greater domestic consumption.
In turn, this generates more tax revenue for the receiving country. The economic boost from remittances can be used by states to pay off their foreign debt and cover costs for building new schools and hospitals.
By increasing spending power in countries with limited cash flow, remittances help revitalize economies. The impact is so great that these funds represent over 10% of the GDP in 30 countries. For some, like Nepal and Tajikistan, the percentage is as high as 25%.
It’s no surprise that the United Nations made it a goal for 2030 to lower the global cost of remittances. This is part of its Sustainable Development Goals for 2030 (SDG) plan. In the next 10 years, the average cost should be down to 3%. Currently, the average sits at 6.8%.
There are three main channels for migrant workers to send money home: banks, post offices, and money transfer operators (MTOs). As of March 2020, banks remain the most expensive option, averaging 10.51% in fees. On the flipside, MTOs continue leading the race to lower transaction fees, at5.99%. Mobile money operators charge remittance fees averaging 3.37%, but they remain a small share of transactions made.
Every quarter, the World Bank publishes a Remittance Prices Worldwide report. Here, they share the average cost of remitting money per region and remittance corridor. The latter refers to the bilateral channel of money transfers between one country and another. The report tracks 48 sending countries and 105 receiving countries. That’s a total of 367 corridors.
Armed with the results of the World Bank’s reports, governments and businesses can reassess their strategies to stimulate remittances. For instance, there is a section dedicated to the average cost of sending money in G8 and G20 countries. G8 member countries average a 6.57% cost over the sum remitted, but the figure varies from country to country. While Japan averages 9.40%, the Russian Federation is already below 2%.
At the same time, global averages of remittance costs can be misleading as there is no “standard fee.” While sending fees for sending money to South Asia are the cheapest (4.95%), fees for remittances to Sub-Saharan Africa remain sky-high at 8.9%. It is clear that this African region needs the most attention to facilitate affordable remittances for working migrants.
The key takeaway is that dropping sending costs to 3% is vital. By empowering more migrant workers to send money home, we’re lifting entire communities out of financial hardship. And, for those who can already afford to send money home, we’d be unlocking a little extra for the education, healthcare, and micro-investments of their loved ones.
2. Powering education through remittances
As mentioned above, remittances allow families to cover vital expenses. Such is the case for education, be it primary or secondary.
In global terms, the number of children who drop out of primary school has drastically decreased since 1970. At the same time, the inflow of remittances has risen from US$35.8 billion to US$689 billion in the past thirty years. Thus, it’s likely that the rise in funding correlates with more children in school getting the education they need.
While these facts alone aren’t enough to establish a direct correlation, a recent study conducted by UNESCO (United Nations Educational, Scientific, and Cultural Organization) confirmed the positive impact of remittances on education.
The study found that families in Peru, Guatemala, and the Philippines used remittances to triple their spending on education. At the same time, recipient households in rural India and Morocco designated an extra 17% of their savings to education on average.
There are cases in which migration can affect family dynamics. For example, a younger child might quit school to take over for their expatriated sibling. This may include household chores or helping out with the family business.
However, the situation changes when remittances start to come in. For instance, in the Philippines, higher inflows of money to Filipino households helped cut unpaid child labor by three hours a week.
In 18 countries across Sub-Saharan Africa and Asia, remittances boost education spending by an average of 35%. In Latin America, the average is a whopping 53% of household income spent on education for the family.
With these education budgets in mind, what would happen if we were to lower the global cost of remittances to 3%? UNESCO estimates that, if we made this happen, an extra US$1 billion would go to education spending. Plus, it’s not only tuition money that counts towards keeping children in school. When there are more funds to go around, families don’t need to rely on their children’s labor.
2. Improving health coverage through remittances
Medical emergencies can happen at any time. They can range from a broken bone to life-or-death surgery.
In high-income countries, many people have access to public healthcare. Others can afford private insurance to cover their medical bills. However, sanitation is not as accessible in low- and middle-income countries. For one, medical infrastructure is limited. In many LMIC countries, public healthcare systems are often not robust enough to provide equal healthcare for all of its citizens. While private insurance is an option, it tends to be too expensive for many families.
This is where migrant workers come in. Having an expatriate parent or sibling can help in three ways. The first is by sending money back home via money transfers. The second is to pass on healthcare knowledge. Each country will have different healthcare practices that the expat can learn from to look after their wellbeing and that of their loved ones. The third is through community outreach programs.
Through hometown associations (HTAs), migrant workers can give and receive support in collaboration with their fellow expatriated countryfolk. These associations, formed by expatriates from the same community, help raise funds to pay for communal needs back home. Examples include building a new hospital or donating supplies to a local school.
But, when cash is sent to individual households, how is it spent? The North South University in Bangladesh surveyed recipient families in the local village of Hasanpur to determine how they spent the money they receive from abroad. The study found over 25% of remittances are spent on education and health, as can be observed in the graph below:
Health spending, as with education, will depend on each country and its public systems. But, even if health investments vary, indirect spending on food and infrastructure also comes with health benefits. Things like keeping a balanced diet or sleeping on a better mattress can improve health.
To protect the most vulnerable, the World Health Organization (WHO) is pushing for universal health coverage. The goal is to ensure that every person in the world has access to medical assistance.
While the WHO presses on with its projects, remittances continue to play an important role in health spending. It’s up to us, the international community, to help accelerate the journey towards universal health coverage.
4. Remittances and micro investments
In the 1970s, the microcredit business boomed in Southeast Asia. These lines of credit started as small loans for poverty-stricken populations. If you couldn’t qualify for a bank account or loan, microcredits were still an option. Borrowers would then use the funds to start a small business to support their families. However, microcredit institutions have faced a lot of backlash since their dawn.
Although microcredits can do a lot of good when done correctly, they come at a price. The borrower still needs to return the money with interest. Thus, the borrower risks getting stuck in a constant cycle of repayment.
Now, what if families could receive a cash injection without needing to return it? When families receive more than necessary through remittances, they can use the extra income to buy land or start a business. The problem is, unlike health and education, micro-investments are not an urgent or vital need. This means families need to cover their basics before even thinking about investing.
But there is good news. Some data already suggests families will opt for investing if given the chance and proper education.
One study found remittances amount to more than 25% of all capital invested in small and micro-enterprises in Mexico. In regions with the highest rates of migration to the United States, remittances amount to 40% of investment.
Still, levels of financial literacy are low in rural areas, which hinders entrepreneurship. A study in Nepal found only 5% of respondents use their savings to start a business, while only 8% were planning to invest in the future.
Yet, while most adults live off of farming, families still focus on education spending. In the future, these children might showcase a bigger interest in starting a business.
Even though the effect of remittances on local investment depends on financial literacy, extra funds can only help the family. Lowering the cost of remittances can both help keep children in school and give families the financial freedom to invest.
5. How to bring down the cost of remittances at a global scale
Until recently, the remittances market was a monopoly. It was only around 35 years ago that different players began to surface, racking up their own percentages of the market share. However, many signed non-compete contracts, locking prices at the same rate.
By allowing the different players to bounce off of each other, the price of remittances can drop significantly, at least at an MTO level. The use of technology to facilitate transfers and agreements with banks and postal services can alleviate the costs across the board.
Regions like Sub-Saharan Africa, where sending fees are the highest, will need to be the main focus to help migrant workers remit money affordably. But all around the world, the pressure must come from governments to follow the international goal of bringing down the cost of remittances to 3% by 2030. As of 2020, no region has reached the proposed average sending cost.
There is a lot to be done to help migrant workers send money home and only less than 10 years to do it in. However, we are progressing at a commendable speed. With only 3.79% to go in bringing down remittance costs, it seems likely we will be able to emulate the 2009 to 2019 drop of 4% in the next decade.
At Ria, our remittance sending fees are close to reaching the 2030 goal globally, but we continue to foster competition in the hopes of offering an even better fee for our customers who live in the world’s most vulnerable regions.
6. COVID-19’s impact on remittances and how to bounce back
The first half of 2020 was marked by a coronavirus pandemic, the aftermath of which is still felt across the globe. This pandemic hasn’t only resulted in a sanitary crisis, but also a socioeconomic one. With major lockdowns paralyzing whole cities, many have found themselves out of a job.
Complications have arisen both in sending and receiving countries. For migrant workers and their families, this created a two-fold problem. On the one hand, weaker job security. On the other, the inability to pick up money transfers in cash, often the only choice for many recipients of remittances. Even now, as lockdowns soften and the economy begins to move again, the situation hasn’t improved much.
The World Bank projects a 20% decline in global remittances following the crisis. In short, remittances to low and middle-income countries (LMICs) could fall by 19.7% to US$445 billion.
To make matters worse, businesses and corporations have also suffered financially. Thus, foreign direct investment is also expected to drop by at least 35%. This could lead to families in LMICs relying almost entirely on remittances. In other words, it’s never been more important to help migrant workers overcome this financial hurdle.
Recently, the IAMTN (International Association of Money Transfer Networks) carried out a survey among money transfer companies to determine main challenges and next steps following the COVID-19 outbreak. The results were shared in a report titled “Impact of COVID-19 on Migrants and Remittances” published in May.
The three main issues encountered by money transfer customers were:
1. Limited access to remittance services. A direct result of partial or complete closures of physical stores following lockdowns.
2. Decrease in income. Dampened economic activity in host countries that led to job losses or salary cuts.
3. Limited adoption of digital channels. For one, many migrant workers aren’t eligible for bank accounts or debit cards, which are necessary to transact online. At the same time, receiving countries could lack the infrastructure to power digital remittances.
Parallel to this report, the World Bank shared a set of proposals to aid migrant workers. The key takeaway is urging local governments and policymakers to adopt measures that can ease remittance flows. Below are their main proposals.
1. Declare remittances an “essential service” to exempt money transfer operators from store closures.
2. Support the infrastructure for going digital by simplifying regulations and procedures. These could include increasing access to identification, bank accounts, and eKYC measures.
3. Incentivize money transfer companies to reduce transaction costs. This could be achieved through tax exemptions or other fiscal support agreements.
Although remittance volumes are currently in decline, an upsurge is estimated by 2021. In the past, remittances have continued to grow steadily, even during the 2008 financial crisis. Thus, the COVID-19 pandemic is projected to be a bump in the road, rather than a full stop.
Remittance volumes to LMICs could rise by US$5.6 million over 2019 numbers, totaling US$470 billion. But, how fast we get there will depend on collaborations with governments and money transfer providers.
These times may be challenging for empowering remittance senders and receivers. However, it has never been more crucial to stand by the millions of migrant workers and their families.
Economic crisis or not, migrants are often amongst the most vulnerable. They usually make up a big part of our front lines, supporting essential industries around the world. During this pandemic, migrant workers may have exposed themselves without the necessary access to healthcare.
But these are sacrifices migrant workers are willing to make. They’ll do whatever is necessary to break free of poverty, for themselves and for their families. So, it’s our responsibility, as an international community to look out for them.
They do the heavy lifting in opening ways for a better everyday life. And that applies not more than themselves and their communities back home.
Migrant workers also help host countries thrive through their invaluable contributions. By empowering migrant workers, we help lift economies, one family, and one community at a time. And, isn’t a global economic crisis the best time to get started? Let us know your thoughts in the comments below!
Did you know
indoor plumbing was invented in the Indus Valley?
along with many infrastructural changes first implemented in Indian
metropolises, allowed civilizations to flourish over millennia in the Indian
The result has
been nothing short of outstanding, with present-day India possessing the second-largest population in the world
despite ranking eight in extension.
Thanks to its
long and widespread history, India’s cultural heritage is impressively varied.
Currently, there 22 official languages,
with English being considered a subsidiary official language.
In honor of
India’s Republic Day being celebrated this Sunday, January 26, we bring you the
newest installment in our Brief Histories series. Continue reading to learn all
about migration and remittances in India below.
India has the highest volume of emigration in the
world, with 17.5 million natives living abroad. According to the Pew Research Center, one out of every twenty migrants worldwide was born in
India. The majority of Indian expats
live in the United Arab Emirates (3.4
million), the United States (2.7
million), and Saudi Arabia (2.4
million). However, the country doesn’t suffer from a dwindling population
as only immigrants comprise only 1% of
Based on stats from the Migration Data Portal, India’s international migrant stock equals 5.2 million,
0.4% of the population. Most immigrants come from Bangladesh (3.1 million), Pakistan
(1.1 million), and Nepal (533.6
thousand), all of which share a border with India. Thanks to the gender
parity found among immigrants, with 48.8%beingwomen, newcomers are likely arriving as part of a family unit.
impact of remittances in India
Last year, India received an estimated US$82.2 billion in remittances equating to 2.8% of the county’s GDP. If this number seems exorbitant, it’s
because it is. India is the top-remittance receiving country in the world, a
direct result of the high volume of emigration.
In correlation with current migration flocks, the
highest volume of remittances to India come from the United Arab Emirates (US$13.8 billion), United States (US$11.7 billion), and Saudi Arabia (US$11.2 billion).
Italy is a European country situated along the Mediterranean Sea. With a total population of around 60.4 million people and a central geographic location in Europe, Italy is home to a rich myriad of cultures.
Millions of people move to Italy every year in search of a better life. They make their journeys to earn money abroad and send back home to their loved ones.
Here, we explore Italy’s key migration trends and their relationship with remittance behaviors.
Immigration in Italy: newcomers to Italian soil
According to the United Nations Department of Economic and Social Affairs (UN DESA), around 6.3 million international migrants live in Italy. That’s approximately 10.4% of the country’s total population.
From 1990 to 2019, Italy’s immigration rate increased, with a significant spike occurring between 2000 and 2010. During this period, the immigration rate increased from 3.7% to 9.8%, which later stabilized to the current 10.4% recorded in 2019.
The three most significant immigrant groups reported to be living in Italy by 2019* were:
Romanians: 1.1 million
Albanians: 475.2 thousand
Moroccans: 450.6 thousand
A recent study from the IOM (International Organization for Migration) found Moroccans and Chinese to be two of Italy’s largest entrepreneurial immigrant communities. Other top countries of origin of migrant entrepreneurs recorded include Romania, Albania, Switzerland, and Bangladesh.
Good to know:
Lombardi hosts Italy’s largest share of immigrants and is the origin of the most remittance outflows, followed by Lazio.*
Around half of all companies in Italy set up by immigrants are registered in four main regions: Lombardi, Latium, Tuscany, and Emelia‡.
Lazio (Central Italy) and Campania (Southern Italy) are the most populated cities in Italy†.
Rome, Milan, and Naples are the largest cities in Italy†.
Source: *World Bank ‡IOM (International Organization for Migration) †UN DESA 2019
Emigration from Italy: Italian nationals moving abroad
Since the late 19th century, Argentina has been a top destination for the Italian diaspora. As recently as 2018, the MAECI (Italian Ministry of Foreign Affairs and International Cooperation) recorded that around 1 million Italians were living in the South American country. With an estimate of 5 million Italians live abroad, the number is equivalent to 1/5th of all Italians residing abroad.
More than half of the Italian diaspora (54%) has moved to a European country.
Half of Italy’s emigrant stock (50.1%) are from southern Italy, including Sicily.
Just over one-third of Italian emigrants (34.8%) are from northern Italy, including Lombardi and Piedmont.
Just 15.6% of Italian emigrants are from the central regions, including Latium and Rome.
Source: Register of Italians Residing Abroad (AIRE)
Balance of Italian emigrants and immigrants, 2017
Remittances to and from Italy
The World Bank highlights money transfers as a tool for Italy’s financial development, economic growth, and poverty alleviation. Remittances help the economy of the host country, as well as the receiving households. For the latter, it serves as a lifeline to cover basic needs such as food, housing, clothing, and warmth.
In 2019, Italy received an estimate of US$10.4 billion in remittances. Historically, around half of remitters in Italy (48%) originate mainly from Lombardy, Lazio, and Tuscany.
When it comes to remittance outflows, money transfer destinations correlate with the diaspora populations living in Italy. Below are the top 10 receiving countries of remittances from Italy as recorded by the Bank of Italy:
What have we learned?
Italy is home to a large number of migrants, mostly from neighboring countries in Europe. While immigration flows have increased steadily since 2007, Italian emigration flows remain as significant as the country’s immigration trend.
Both emigration and immigration in Italy are closely correlated with remittance volumes flowing in and out of the country, with Romania being the top remittance destination.
Money transfer companies like Ria operate in Italy to help migrant diasporas remit their money quickly, safely, and comfortably. To date, remittance service providers continue to support remitters across Italian borders both for the benefit of their loved ones in their home countries and for family and friends living within Italian borders.
Want to learn more about remittances and immigration? Check out our Brief Histories instalments here.
Poland has a population of around 38.3 million people, positioning it as the 8th most populated country in Europe. Its climate is largely temperate and seasonal, with relatively warm summers and cold winters. Although Poland is widely known as a net migration country, its favorable economic conditions are pulling in an increasing number of migrant workers.
As part of our Brief Histories series, here we delve into Poland’s migration flows and their impact on remittances to and from the country.
Poland’s migration flows
Since 2004, many Polish migrants have moved to other countries within the European Union, particularly to France, Germany, and the UK, according to the World Bank. These are among the sixteen EU countries that signed bilateral agreements with Poland on seasonal employment. An estimated 4.3 million Poles have been recorded as living abroad.
Poland is increasingly becoming the chosen destination for many immigrants in search of job opportunities.
Owing to strong emotional ties between Polish migrants and their families back home, a significant proportion of them choose not to settle in their host country permanently. Many prefer instead to emigrate for up to six months for seasonal work, returning back to Poland for the remainder of the year.
Although Poland is typically known in the west as a predominantly migrant country, the tide is turning. Poland is increasingly becoming the chosen destination for many immigrants in search of job opportunities.
In 2017, Poland issued more visas to foreign workers than any other country in Europe. During that year alone, more than 680,000 foreigners were granted legal residency in Poland, a significant proportion of them from Ukraine. An estimated one to two million Ukrainian citizens currently work in Poland, many of which live there temporarily to meet seasonal employment needs.
The geographical proximity between the two countries, coupled with low travel costs, give Ukrainians more freedom to emigrate for short term periods. From the Polish city of Lublin, for example, a bus service runs 17 departures per day to Ukraine’s capital city, Kiev, affording Ukrainians more flexibility to return home to their families for large portions of the year.
Poland also counts with a fair share of immigration from countries like Germany (81,779), Belarus (81,363), and Lithuania (54,057).
Polish immigration to other European countries has brought with it an increased volume of remittances. The highest volumes are sent from Germany (US$2.1 billion) and the United Kingdom (US$1.1 billion). In 2019, an estimated of US$6 billion were sent in remittances to Poland.
In correlation with the more recent migration flows to Poland, Ukraine is now the biggest recipient of remittances compared to all other European countries, according to figures from the World Bank. This is reflected in money transfers totalling around US$ 14.4 billionmade in 2018 from Ukrainians in Poland.
Poland is no longer associated solely with high migration flows. Rather, it has become a country of choice for many migrants looking to make a better life for themselves and their families. The lower travel costs and cultural proximity between Poland and its neighboring countries offers migrants greater ease to move back and forth for seasonal work. This trend has led to a growth in money transfers, providing a higher standard of living for recipient-families. Ultimately, the relationship between show positive economic benefits for both sending and receiving countries.
Do you live in Poland and need to send money home? Check out the myRia app! Pay with cash or card and send to over 160 countries worldwide.
The most important factor when it comes to furthering financial inclusion isn’t money. It’s proper identification. Without a valid ID, individuals will have a hard time opting for jobs, opening bank accounts, or receiving government aid.
This is the case for close to one billion people, around one-seventh of the world’s population, according to the World Bank. About 47% of that billion are children without birth certificates who, from the get-go, are already at a disadvantage to acquire any form of ID as adults.
World Bank data also suggests that 91% of the population without official documentation is found in lower-middle and low-income countries, with India (161 million), Nigeria (140 million), and Pakistan (77 million) leading the chart.
Large unregistered populations also pose a significant challenge in the age of digitization, where financial services are moving towards eKYC measures for customer identification. In turn, reducing access to these services will only slow down financial inclusion.
The Remittance Industry Observatory recently explored several barriers to accessing official documentation, ranging from lack of information to technological impediments.
Below, we offer a summary of key takeaways from the study, which shed some light on the reasoning behind these roadblocks and how we can go about removing them.
Current barriers to identification
Birth certificates: given it’s the minimum requirement, undocumented children cannot opt for official documentation anywhere in the world without proof of existence. Two common reasons for this issue include lack of education regarding civil registration among parents and non-hospital deliveries, according to the Carter Center.
Fees: for the many living in poverty, paying fees to process official documentation would mean going without food or medicine. Even in cases where documentation is processed for free, those living in rural areas will still need to pay for transportation to reach the nearest office.
Law and Society: in some countries, women need to provide more documents, such as a marriage certificate, to apply for an ID. Although within the specific society, laws are built in a way that its constituents can be accounted for, these documents don’t always travel well. Without a standard identification process, many will be landlocked. Refugees or internally displaced individuals may have fled their homes and left behind their documents. Without a system in place to replace these documents, how can these individuals be reinserted into the system?
Digitization: as we’ve discussed, innovation and change don’t happen at the same pace globally. Digitization is taking over in rich economies, but low-income countries will find it hard to fund what the World Bank and World Health Organization have estimated to be around $3.82 billion for a basic Civil Registration and Vital Statistics (CRVS) system. Thus, as money transfer operators, we can’t move on to a completely digital format, while so many countries won’t be able to implement the same identification measures in the near future.
Interoperability: even once digitization makes its way to low-income countries, many changes will need to be made to the existing infrastructure. Data from the civil registry, the social security databases, among others, will need to be cross-referenced in order to get accurate, representative data.
Without proper identification, the individuals who need it most will not be able to break out of poverty, and financial inclusion efforts will remain stagnant. However, protocols must be in place to safeguard funds and data, which means we cannot forgo identification requirements altogether.
So, the question for the remittance industry remains: how do we continue serving customers who, often by no fault of their own, lack the proper identification needed to access purely digital remittance channels?
As a money transfer operator, we follow local government regulations rigorously, establishing an open dialogue on how to make the process of receiving money easier for these unbanked customers living in poverty.
While we can’t control or unify regulations worldwide, our promise is to continue offering traditional money transfer services to those who still rely on cash and physical locations, a number that is far higher than one might think
Forget massive stocks of fresh produce, your MacBook and every other Hollywood film. Immigrants, comprising less than 4% of the world population, have made many, if not most, of our favorite things possible.
From Arianna Huffington to Sundar Pichai, the C-suites of many beloved companies are made up of foreigners, including ours.
Because we live it first-hand, we are firm believers that diversity and inclusion are the driving forces behind innovation. But you don’t need to take our word for it.
Let’s explore the many ways in which migrants make the world a better place and what our societies would look like if everyone closed up their borders.
As far as Canada is concerned, even counting with the inflow of immigrants (80% of the country’s population growth), the expected worker-to-retiree ratio for 2035 is of 2 to 1, a sharp decrease from the 1971 ratio of 7 to 1.
While the ratio continues to catch up, the immigrant community already in Canada have created 1,100 new Canadian companies, 60,000 new jobs and have filled 24,000 high-skilled vacancies.
In Europe, a study conducted by the French National Center for Investigation (CNRS), migrants have had a positive macroeconomic impact in 15 countries in western Europe between 1985 and 2015.
For aging countries where death rates outnumber birth rates, growing the economy and revitalizing industries are not the only reasons youth injections are needed.
Retirees tend to be passive citizens, relying on pensions and government aid. It is up to the current workforce to replenishing government funds through taxes. But, what happens when there are more retired individuals than working ones?
For Spain, where the native-born population is in a constant decline and pension funding still represents a major challenge, immigration meant the population was able to increase by 276,186 in 2018.
As impressive as the migrant economic output is within host countries, the most extraordinary phenomenon of all is the amount of money they are able to send home despite low salaries.
In 2018, migrant workers sent US$529 billion in remittances to low- and middle-income countries, a flow of funds that represented as much as 35% of a given country’s GDP.
This year, remittances are expected to surpass foreign direct investment after nearly a decade outperforming international aid by a threefold.
Depending on how remittances are used at the receiving end, they can help boost education, increase health coverage and promote investment.
A UNESCO (United Nations Educational, Scientific and Cultural Organization) study found that remittance-receiving households increased education spending by 35% in 18 countries in Sub-Saharan Africa and Asia and by an average of 53% in Latin America.
Another study conducted at the North South University in Bangladesh found that surveyed remittance-receiving families allocated more than 25% of remittances for education and health.
In Mexico, international remittances are behind 25% of all capital invested in small and micro-enterprises, with regions with higher levels of migration to the United States investing as much as 40%.
If you’re interested, you can explore this topic more in-depth by reading our A Case for Affordable Remittances white paper here.
What is safe to say is that immigrants contribute to societies all over the world, and without them, international organizations would have to come up with at least three times as much aid funding for developing nations while citizens of rich countries would be forced to expand population beyond their economic capacity of personal preference.
The world belongs to everyone for we each have a vital role to play in its development. Let’s stand together and continue growing in the direction of a better quality of life for all.
We don’t talk enough about Canadian immigration even though it is one of the largest melting pots by ratio. Last year alone, Canada admitted 321,065 immigrants. And, for the many migrant workers living in the Great White North, we also have big news!
We just launched Ria’s Canadian transactional website, a platform through which customers can send money to their loved ones from the comfort of their homes.
To celebrate, let’s take a look at immigration in Canada and how it impacts remittances worldwide.
Migrating to Canada
Out of all members of the G8 (now G7), a council made up of the world’s most industrialized nations, the Great White North has the highest proportion of immigrants. We’re talking about 7.5 million migrants, representing 20% of the overall population.
As of today, the largest expat communities in Canada are Indian (668,565 residents) and Chinese (649,260), with most immigrants coming from Asia (Middle East inclusive). Hence, it’s not surprising that Chinese languages, Tagalog, Spanish and Punjabi are the most widely spoken after the official languages, English and French.
Most immigrants in Canada live within the urban areas of Ontario, British Colombia, Quebec and Alberta, with the biggest concentrations found in Toronto, Montréal and Vancouver.
According to the last census, between British Columbia, Ontario and Nova Scotia, immigrants own 1,825,580 properties, which would account for around 23% of the migrant population. However, this number does include immigrants who own multiple houses.
That being said, is it possible for immigrants to purchase homes?
Well, their median income is of CA$55,700, while refugees who have been in the country for five years have a median income of CA$21,700. Although less than half, this number had seen a 29% increase by 2016.
Canada’s impact on remittances
According to the World Bank, the top destinations for remittances sent from Canada in 2018 were China (US$4.144 billion), India (US$2.877 billion), Philippines (US$2.37 billion), France (US$1.297 billion), Vietnam (US$953 million), and Lebanon (US$853 million).
However, a 2017 Canadian study focusing on residents born in Official Development Assistance-eligible countries (ODA), found that the Filipino community had made the most money transfers to friends and family that year.
In general ODA terms, the majority of remitters were born in Southeast Asia and Oceania (57%) followed by Eastern Asia (11%).
The study also found 59% o remitters sent money abroad to pay for living expenses like food and housing, while 43% sent money to pay for medical expenses. The most popular sending method among respondents was in-person at a money transfer store.
In essence, it’s no surprise that many people like moving to Canada. The Great White North might be cold, but it sure is welcoming.
Financial inclusion sounds like a great idea, but many of us are not aware of what exactly it entails. How do we truly bring this solution to communities in need, and how do these communities then thrive because of it?
Today, we’ll be answering the central questions surrounding financial inclusion, its adaptation, proliferation and eventual impact on marginalized societies worldwide.
Let’s take a look.
What is financial inclusion?
When we talk about fighting poverty, there are many approaches to be taken. It can mean ending world hunger by teaching communities to farm sustainably. It can also mean introducing universal health coverage to ensure medical treatment is available to every human on the planet.
But when we talk about financial inclusion, we are talking specifically about bringing those excluded from the financial system into it.
For the World Bank, financial inclusion is achieved when “individuals and businesses have access to useful and affordable financial products and services that meet their needs – transactions, payments, savings, credit and insurance – delivered in a responsible and sustainable way.”
And to measure its proliferation, the FII (Financial Inclusion Institute) analyzes it “as the percentage of adults (15+ years old) who report having at least one account in their name with an institution that offers a full suite of financial services, and comes under some form of government regulation.”
For us as an international community, achieving financial inclusion means actively reaching several Sustainable Development Goals such as eradicating poverty, ending hunger, ensuring health and well-being, promoting economic growth and jobs and reducing inequality.
How is it established?
According to the FII, unbanked adults need access to five basic financial services: savings, credit, money transfers, insurance and investment. These could be gained through banks, mobile money service provides or nonbank financial institutions.
However, individuals that possess accounts solely connected to microfinance institutions (MFIs) or that access financial services indirectly through a friend or a third-party account are not considered financially included. The same can be said for those who only use money guards, savings collectors or digital recharge cards.
Instead, financial inclusion is delivered and established through banks, credit unions and cooperatives, as well as businesses that offer innovative services, often tied to technology, that reach those living in rural areas with no access to traditional channels.
What is the impact?
Before truly grasping the impact of financial inclusion, we have to understand what it means to be financially excluded. When a person lacks a financial identity, it means they can’t receive government aid, apply for credit or take out loans. This encourages and sustains day-to-day living, what is known in the rich world as paycheck-to-paycheck, and chains these underserved adults to a cycle of poverty.
Through financial inclusion, the cycle can be broken. When unbanked individuals gain access to financial services, they can begin saving for unforeseen circumstances or investment, take out mortgages, launch small enterprises or plan ahead for recurring expenses such as school tuitions. Above all, it creates a safe and efficient channel through which to receive money, what we call remittances, from loved ones living abroad.
How do we ensure financial inclusion is achieved?
The World Bank Group launched the Universal Financial Access 2020 (UFA2020) initiative, which intends to enable one billion adults to access what they call “the basic building block to manage their financial lives,” a transaction account to store money. The project counts with over 30 partners who have pledged to further financial inclusion.
At the same time, money transfer operators, banks and post offices—the more well-known routes for sending funds to middle and low-income countries—are also working together to implement innovative solutions to extend their reach even further.
Hopefully, you now have a better grasp on financial inclusion and how it’s been put in place. If you have any other question, feel free to ask away in the comments below or start a conversation with us on Twitter!