Category: Remittances

A Brief History of Remittances and Immigration in Senegal

Senegal houses many wonders such as a village made of seashells, a pink lake called Retba, and jollof rice. So, it is no wonder the West African country is also home to over 260,000 immigrants.

Dakar, the country’s capital and socioeconomic focal point, is a popular hub for migrant workers. However, this trend has flipped in the past 30 years due to economic adversity, with Senegalese citizens now being the ones to migrate.

Yet, the Senegalese are resourceful people, currently fighting back deforestation with agroforestry and poverty with remittances.

Senegal’s relationship with immigration

With 60% of the population being younger than 25, a case could be made that Senegal counts with a solid incoming workforce. Yet, the dire economic circumstances and limited job opportunities have left the dependency ratio at 85%, meaning almost the entire population depends on somebody else financially.

This is one of the main reasons that motivate migration as Senegalese adults need better job opportunities. At the same time, deforestation has displaced many given than 70% of citizens live in rural areas and live off the land.

As to be expected, France is a popular destination for migrants of their former colony, with Marseille becoming a Senegalese hub thanks to the many who joined the French colonial army and later found work in the city.

Other popular choices for migrants are Italy and Spain, for their job opportunities in agriculture and hospitality, the United States, and neighboring countries in West Africa.

Even though 1.2% of the Senegalese population has left their home country in search of something more, immigrants from Guinea (39%), Mauritania (15%), and Guinea-Bissau (11%) still find opportunities around Dakar.

senegalese wood sculptor

The impact of remittances in Senegal

In 2018, Senegal received an estimated US$2.69 billion in remittances, representing 13% of the country’s GDP.

Remittance-receiving households in Senegal have an increased income of close to 60% compared to those who don’t receive funds from abroad.

These numbers are important given that, according to data compiled by the IOM Dakar Office, 50% of remittances are used for day to day expenses, 25% for savings and 20% for real estate investments. The other 5% goes to productive investment, but it could be argued that a higher volume of foreign income could garner bigger investment budgets.

Countries in Sub-Saharan Africa need better access to remittance services, and this can only be accomplished if competition is encouraged in the region. Exclusivity deals restrict the number of providers, increasing prices and hindering the reach of remittances.

Ria’s presence in Senegal

Malick Seck, Ria’s Managing Director for Africa, is a forerunner and advocate for sustainable remittance services in his native Senegal. Based in our Dakar hub, Seck travels the world spreading his passion for financial inclusion and development in Africa. His latest appearances have been at the Africa Remittances Confex in London and the Global Money Transfer Summitin Cape Town.

“Senegalese people, like their African brothers, are economic warriors. They are the ones pushing for change, boosting the country’s economy and bringing business back to Senegal,” Seck shared. “As managing director, I focus on the fight against exclusivity deals and looking for innovative ways to connect Africans with their loved ones, especially those who live in remote areas and have limited access to financial facilities.”

Orange Money is our newest service to Senegal, which allows our customers’ beneficiaries to receive money through Orange’s mobile wallet, granting access to remittances to those who live far from banks, post offices or Ria locations.

Remittance Channels: Formal vs. Informal

Before money transfer operators stepped into the scene, migrant workers relied on travelers to send money back to their loved ones.

Migrants would prepare small packets of cash and attach letters detailing for who and for what the money was for.

Then, they would find a traveler or remittance carrier. It could be a friend, a neighbor or an informal agent.

Now, thanks to money transfer operators, we live in an age where moving money is easier than ever, putting the informal remittance market into perspective.

For the global community, whatever happens with remittances is important. It is a sector that moved through formal channels over $500 billion last year according to the World Bank.

So, let’s look at the inner workings of formal and informal remittance channels.

The problem with informal remittance channels

Although it is still common practice to send remittances through informal channels, migrant workers should be aware of the many drawbacks.

It is true that these informal agents might be doing the job for free, especially if they simply happen be visiting their families and have easy access to your parents’ house.

However, there is a lot at stake. With informal channels, there is no guarantee that the funds will be delivered as money can be easily lost or the sender could even get robbed.

Or what about the countless scams that go unregistered and are untraceable?

And that’s saying nothing about when you need to send money urgently, when it just can’t wait until next month’s trip.

The importance of affordable and accessible formal money transfer services

In countries like Haiti and Nepal, over 20% of their GDP depends on remittances. When migrant workers help their families, they are also improving the economy of whole communities and nations.

This is why it’s imperative to offer them better options for sending money.

A good money transfer service is one in which senders can benefit from the speed and security they need for a low cost.

This means the sender is sure the money will reach its destination and that his or her beneficiaries can have the money within minutes.

Encouraging competition and opening up markets are ways in which governments and businesses can help money transfer operators offer an even better service and price.

Even if a migrant worker still decides to go with informal channels, the option should still be available to them.

Ria’s responsibility is to continue offering a reliable and convenient service, and we will not rest until we’ve connected people in each and every corner of the world.

Brief History of Remittances and Immigration in the Dominican Republic

As the original melting pot of the New World, the Dominican Republic has been housing and promoting immigration since 1492.

The very fabric of Dominican culture, from its food to its music, has been influenced by its Spanish, African and indigenous heritage, enhanced with the waves of European and Middle Eastern immigration starting in the 18th century.

Today, Dominicans joke that “everyone has an uncle in New York,” but there’s evidence to suggest this generalization might not be far from the truth given the tendency of Dominicans to move abroad to support their families.

Dominican Republic’s relationship with immigration

For the past decade, the Dominican Republic has ranked among the fastest-growing emigrant populations in the region with a registered 21% increase in number of expats, according to the Pew Research Center.

And what’s more, this ranking only takes into consideration countries that already had emigrant populations of at least 100,000 by 2010.

Around this time, the Organization for Economic Co-operation and Development (OECD) had estimated 13% of Dominicans were already living abroad, totaling some 716,586 migrants aged 15 or above.

With 67% of Latin American migrants winding up in the United States, it’s no surprise that 88% of Dominican expats have migrated stateside.

The impact of remittances in the Dominican Republic

In 2018, the Dominican Republic received USD$6.4 billion in remittances, most of which originated from the United States (77,4%) and Spain (10,6%).

Thanks to this inflow, the Dominican Republic ranks second top remittance receiving country in Central America and the Antilles, and the impact shows.

Remittances make up 8.14% of the country’s GDP, which has helped the nation’s economy grow, along with tourism and foreign investment, by an average of 5% in 2018.

The sturdy financial growth and flow of foreign currency also resulted in unforeseen exchange rate stability, with the Dominican Peso closing last year at RD$49.78 for a US dollar instead of the predicted RD$51.05.

Also, we discussed recently how children in the Dominican Republic aged 6 to 17 were more likely to attend school if they came from remittance-receiving households.

Anywhere you turn, the impact of remittances in the Dominican Republic is both positive and robust.

So, it is safe to say that Dominicans are making the most of having an uncle in New York.

Remittances Boost Education

A recent study conducted by the United Nations Educational, Scientific and Cultural Organization (UNESCO) proves that, albeit intricate, the relationship between remittances and education is a positive one overall.

The positive impact of remittances is indisputable, but the correlation between them and education is under constant debate.

Because of the complex nature of immigration, it’s difficult to predict the kind of impact it will have on families.

For instance, in the same way migrant workers can help pay for loans, medical bills and boost investment, their migration can also result in relocation expenses and disrupt existing family dynamics.

It can also dissuade older children from continuing their education, especially if they’re pursuing a degree that might not be transferable or valid abroad.

However, there is substantial evidence to show that most families in middle- and low-income countries who receive remittances do use the aid to keep their kids in school.

Remittances and education

According to the World Bank’s latest estimate, close to US$690 million were sent in remittances last year.

So, when we talk about remittances boosting education, we’re talking about a big impact worldwide.

In general terms, the number of children out of school has decreased dramatically since the 1970s, according to data collected by the UNESCO Institute for Statistics.

Chart via World Bank

Thanks to remittances, recipient households in India spend an extra 17% in education than households who aren’t.[1]

In the same way,  17% of the remittances received in Morocco went to rural and urban education spending.[2]

Remittance-receiving households in Lima and Guatemala tripled their education budget.[3]

At the same time, recipient families in the Philippines with relatives working in the Republic of Korea also tripled both their health and education spending.[4]

What’s more, remittances can help kids stay in school even if the funds are not being used expressively for educational investment.

For example, a 10% increase in remittances helped Filipinos reduce unpaid child labor by more than three hours a week, allowing for more children to return to school.

When families don’t have to worry about making ends meet, children are more likely to finish their education. For example, children aged 6 to 17 in the Dominican Republic were more likely to attend school if their families were being supported by remittances.[5]

Graph via UNESCO

Yet, based on the World Bank chart, there are still over 63 million children out of primary school.

The question is, how do we help raise education spending now that a pattern has been established?

The United Nation’s Sustainable Development Goals are very clear: reduce the global cost of remittances.

All sources are original citations of the UNESCO study.


[1] Parida et al., 2015

[2] Ibourk and Bensaïd, 2014

[3] Adams and Cuecuecha, 2010; Loveday and Molina, 2006

[4] Clemens and Tiongson, 2017

[5] Amuedo-Dorantes and Pozo, 2010

Online Money Remittance: Is It Safe?

The classic definition of remittance is ‘a sum of money sent as payment or gift,’ though it is more commonly known as the sum of money that foreign workers or expats send back to their home countries. Remittances comprise an industry worth $600 billion worldwide and that’s growing steadily.

Remittances fuel the national economies of many developing nations. Remittance services create employment avenues for thousands and have a deep impact on the quality of lives of millions across the planet.

This remarkable growth in the magnitude of worldwide remittances is largely due to the use of digital methods for sending money across borders, otherwise known as online remittances.

A short history

The earliest recorded examples of remittances date back to the nineteenth century when European emigrants depended on in-person transfers of physical currency. It was a crude, inefficient and risk-prone mode of sending money. With advancements in banking, it became possible to use banks to send international remittances. The earliest remittance treaties were signed between nations in the late twentieth century.

However, the cost of remittances remained high for decades. The transactions also took a long time to come through. It was common for international checks to be credited into a recipient’s bank account only after several weeks. The introduction of credit cards in the 1920s and wire transfers about half a century later progressively simplified remittances. The popularity of the internet and the adoption of online banking practices by big banks eventually revolutionized the domain.

The current state

Nowadays the use of checks and other conventional means for sending remittances is nearly extinct. Electronic transfers through banks, and increasingly through a large number of small and specialized International Money Transfer (IMT) service providers, are prime examples of fast and convenient online remittances today. Some IMT services have become so efficient that they can transfer remittances almost instantly.

Safety and reliability

Online remittances are one of the safest and most transparent modes of sending money from the perspective of both sender and recipient. The transaction can easily be tracked at every stage. In the rare case of a failure the amount is automatically refunded. Small IMT service providers eliminate most middlemen, which ensures that there are fewer points of possible failure.

The primary security issue with some forms of remittances is their potential to be used to sponsor illegal activities such as trafficking and terrorism. This is not a concern when remittances are sent through formal channels which governments can track. The potential for problems arises when remittances are sent through informal means such as friends, family, and other non-banking channels that handle physical cash. Similar issues also exist with cryptocurrencies. However, financial institutions are working to resolve these.

Costs

Online remittances are among the most cost-effective methods of sending money internationally. The average cost of sending international remittances was nearly seven percent in 2017.

Although this statistic is less than the previous decade, it remains a concern for the people who use remittances the most – residents of mid and low income countries. A 7% transaction cost remains an issue for someone who wants to send money to India, Nepal, The Philippines or another developing nation.

There are ongoing efforts by governments to reduce the costs associated with remittances because they have taken note of the fact that remittances have a significant impact on national economies, and that the high cost of remittances remains a limitation. The first organized attempt to reduce the worldwide cost of remittances was the establishment of a Remittance Prices Worldwide Database by the World Bank in 2008. Reducing remittance costs was also on the agendas of the 2008 G8 summit and the 2011 G20 summit.

Many financial institutions such as Ria Money Transfer and governments recognize that simplifying the use of digital currencies and mobile banking can make remittances cheaper, while also making them more accessible to a wider range of people living in remote areas. With the issue being systematically addressed on an international stage, online remittances are sure to become much more cost effective, which will allow then to expand at higher rates of growth.

Remittances: What Are They and Why Do People Send Them?

Remittances have remained a trending and powerful topic despite the twists and turns of technology and society.

This kind of money transfer, sent by a migrant worker to his or her home country, does more than connect families.

Remittances sustain fragile households and economies. As an imperative lifeline, we must ensure it’s always available to those who rely on it.

The impact of remittances

Currently, there are 232 million migrant workers in the world who send home more than US$600 billion a year, according to the World Bank.

For some 25 developing countries, remittances now constitute over 10% of their GDP. For countries like Haiti, Nepal and Tajikistan, more than 25% of their GDP comes from remittances.

Statistically, developing nations receive three times as much funding through remittances than through foreign aid.

At the same time, migrant workers remain active participants within their host economies, contributing as tax payers, filling in gaps in their industries and creating overall demand in the local job market.

“Immokalee, USA – May 19, 2010: Migrant worker from Guatemala arrives in Florida in time for the tomato harvest.”

Why people send remittances

Migrant workers send money home to support their family members, granting them a means to cover their basic needs.

At the same time, remittances have a direct impact on health, education and poverty levels, and even help develop infrastructure in communities.

According to the United Nations Development Program (UNDP), children in El Salvador and Sri Lanka coming from remittance-receiving families have a lower school drop-out ratio, even boosting investment in private tuition.

In Sri Lanka, these children are even born with a higher birth weight. Remittances are also used for local investments and to support small entrepreneurs. They help pay off loans and restore credit.

However, there’s one overarching benefit.

Remittances allow for families to regain their financial autonomy, making their future payments a matter of choice and not obligation.

Where Ria comes in

Ria aims to be the link between migrant workers and their loved ones. We work hard to ensure migrant workers can reach their family members anywhere within our networks, which includes over 145 countries and 361,000 locations. Our goal is to reach every corner of the world, no matter how remote, so we can be there for those who need it most. If you want to learn more about how women migrant workers closed the remittance gender gap, click here.

How Women Migrant Workers Closed the Remittance Gender Gap

In 1605, the first woman was granted a university degree. In 1881, the suffragists gained the right to vote in the Isle of Man. And in 2017? Women migrant workers closed the remittance gender gap.

According to the latest IFAD Sustainable Development Goals report, 100 million mothers and daughters now equal half the number of remittance senders.

Remittances—money transfers sent by migrants to a relative or individual in their home country—are a crucial source of income for millions of families in developing countries.

As stated by the IOM (International Organization for Migration), remittances “are recognized by governments and international organizations as important tools for reducing household poverty and enhancing local development, competing with international aid as one of the largest financial inflows to developing countries.”

The United Nations believes “empowering women to participate fully in economic life across all sectors is essential to build stronger economies, achieve internationally agreed goals for development and sustainability, and improve the quality of life for women, men, families and communities.”

More women are finding jobs abroad due to a growing demand for domestic and care work, which, aside from furthering the journey towards financial inclusion, represents a substantial win for both the remittance sector and the families that depend on it.

Women migrant workers and their relationship with remittances.

In 2016, even before the gap was closed, women were already contributing close to 50 percent of the estimated USD$601 billion sent in remittances that year.

While women earn less on average, another gap in need of closing, they tend to send back a higher percentage of their salary compared to men. Also, it’s worth noting that women have a habit of prioritizing health, education and community development.

For example, a study conducted in Nicaragua found women migrant workers sent back 73 percent of their income on average while men sent back 65.

Thanks to this upsurge in remittance senders, there was a reported 8.5 percent increase in remittances to middle and low-income countries, totaling $466 billion in money transfers worldwide.

This growth is significant given that, as stated in the IFAD report, remittances represent about 60% of receiving households’ incomes.

However, a lot of work still needs to be done.

Without proper financial education and better wages, women will have a difficult time breaking out of this cycle.

The informal nature of the job sectors they occupy can also keep them from opening bank accounts and prevents them from gaining access to social security.

As an international community, it is our responsibility to help remove these hurdles.

african school girl in class

How the United Nations uses remittances to push for gender equality

Inclusive economic growth is paramount to meet the needs of women and minorities.

That’s why the United Nations’ G20 Leaders communiqué talks about the importance of remittances every year.

Members are urged to make the most of their National Remittance Plans, ensuring a supportive environment that can maximize the positive impact of money transfers on local economic development.

Solutions are being progressively implemented, such as affordable money transfer services for migrants.

To continue bringing down the cost of remittances, governments must keep fostering competition in the sector and eliminating exclusivity deals.

Women should also have access to education, social support and plans for saving and investing, so they can have better control over their finances.

To this end, many organizations and international programs such as UN Women (United Nations) are significantly contributing to gender equality, putting together initiatives to encourage women and promote their inclusive economic growth and sustainable development.

A Brief History of Migration and Remittances in the Philippines

As an archipelago comprised of over 7,000 islands during high tide, the Philippines has always been poised for multiculturalism and traveling.

Over the years, the Philippines has become a key exporter of migrant workers, making the Filipino community an integral part of many cities around the globe.

As a result, the Philippines is the third top remittance receiving country in the world.

Remittances and the Philippines

Currently, more than 10 million Filipinos are living as expats—a sum equal to 10% of the country’s population.

Remittances in the Philippines are overseen by the Bangko Sentral ng Pilipinas (Philippines Central Bank, BSP). In 2017, they registered an inflow of USD$32,808 million, which translates to 10.5% of the Gross Domestic Product (GDP).

According to the BSP, overseas Filipino workers (OFWs)support their families mainly from the United States (9.4 million), the United Arab Emirates (2.54 million) and Saudi Arabia (2.5 million), a trend that’s been around since the dawn of modern migration.

The Migration History of the Philippines

Immigration started strong in the 20th century following the Spanish-American war, which resulted in the Philippines becoming a US territory.

Soon after, many Filipinos migrated to Pacific states like Hawaii to work at sugarcane and pineapple plantations.

It’s estimated that Hawaii received around 120,000 Filipino workers between 1906 and 1934.

Thanks to an overseas employment program launched by the government in the 1970s, the doors opened up for Filipinos to work in the Middle East, especially in member countries of the Gulf Cooperation Council (GCC).

Canada, Australia and New Zealand were also popular destinations at the time.

The Philippines Today

Today, guaranteeing the safety and well-being of OFWs is the main challenge, but migration hasn’t halted one bit.

In fact, the Philippines saw great economic stability during the 2000s despite the global crisis and political turmoil within the country. The gross domestic product (GDP) increased yearly by an average of 6% from 2011 to 2016.

However, the immigration flow remained unchanged, with 64% of migrant workers settling in the Middle East and another 25% finding jobs in Asia.

Since 1992, Filipino women have been taking center stage thanks to the demand for domestic workers. Today, only 38% of new hires go into the sector, signifying a broadening of job opportunities and a hopeful dawn for high-skilled job opportunities.

Ria and the Filipino Community

Since our arrival in the Philippines, we have made sure not only to speak the same language as our customers, but the right dialects as well.

Our core values resonate with the Filipino community who is thankful for our service, one which allows them to show their love for their families.

Just this month, our European team was honored by the Samahang Ilokano International Spain Chapter 04303 in Madrid, a Philippine association seeking to help fellow Filipino immigrants settle in their new countries.

The association presented us with a certificate of appreciation for our “continued support and leadership” at their 10-year anniversary celebration on November 18.

We used the opportunity to remind members and inform newcomers about the power of remittances and how we can help them be there for their loved ones.

Sending money home is a delicate and important business, making it imperative for senders and beneficiaries to feel they can trust the money transfer service provider.

At Ria, we believe the only way to foster that sense of security is through taking the time to connect with our customers, their families and their communities.

This post is part of our History of Remittances series. Previous posts include the remittance history of Malaysia and Morocco.

The Global Cost of Remittances

One in seven people has sent or received remittances, so it’s not surprising that around USD$600 billion will be transferred this year.

For those unfamiliar with the term, remittances are the monetary aid sent by migrant workers back to their families in their home countries.

In 2015, the United Nation’s General Assembly proposed a set of sustainable development goals to be reached by 2030. One of them was to bring down the global cost of remittances to 3%. At the time, the average sat at 8.73%. 

The figure has dropped to 6.94% since then, with a yearly average decrease of around 0.6%. At this pace, it will take another seven years to reach the Global Sustainable Development Goal.

The current market

To keep track of cost fluctuations and bring greater transparency to the business of money transfers, the World Bank publishes a “Remittance Prices Worldwide” report each quarter.

This is a detailed review of the cost of sending remittances through 365 country corridors, representative of the transfers between the 48 sending countries and 105 receiving countries.

At present, there are three major channels for international money transfers: banks, post offices and money transfer operators (MTOs).

For this quarter, banks remain well above the global average (10.51%), while MTOs represent the most affordable option (6.11%).

The cost of remittances also varies significantly depending on the receiving region, with South Asia being the cheapest (5.40%) and Sub-Sahara Africa being the most expensive (8.96%).

When it comes to the member countries of the United Nations’ G8 council, Japan, Germany, United Kingdom and Canada have the highest average costs, whereas France, Italy, the United States and Russia have the lowest.

Nevertheless, countries like Japan are making a great effort to close the gap, dropping from 10.8% to 9.58% in one quarter.

And the sense of urgency nations and institutions might feel to make remittances more affordable is well-founded. Reaching this sustainable development goal is imperative to attaining others like ending poverty and hunger.

The importance of bringing down the global cost of remittances

Remittances surpass foreign aid by more than 300%. For many receiving countries, remittances account for up to 25% of their GDP, as is the case for Haiti and Nepal.

However, the cost is often expensive compared to the incomes of migrant workers.

If the global cost of remittances was reduced by just 4%, the World Bank suggests that over $16 billion more could be sent to developing countries every year.

A reduction in money transfer costs would increase support to these regions and help raise the basic standard of living for thousands of families.

The Ria Promise

By fostering and encouraging competition, MTOs can continue to bring down the global cost of remittances.

At Ria, we contribute to poverty reduction by staying ahead of the curve with our competitive rates. It’s simple math.

For example, imagine a customer wants to send USD$300 to their family. If they’re charged the current global average in fees, the cost for the costumer will be of USD$21.

However, if the customer is charged the 3.0% average the United Nations suggests, the cost would be of USD$9 and represent a USD$12 saving that goes straight into the beneficiary’s pocket.

In essence, the more money our customers can save in fees, the more money their families can receive.

There are 2.5 billion underbanked people that depend on remittances to live. We need their global cost to reflect our dedication as an international community to do right by them.