Money flowing from richer nations to India and other nations is lifting many families out of poverty. In 2016 India was the top remittance-receiving country in the world. The money that Indians abroad sent home to their families amounted to 3.3% of India’s gross domestic product.
The power of sending money home
A report recently released by IFAD (International Fund for Agricultural Development) indicates that remittance inflows are changing the lives of poor families for the better, especially in India, which tops the remittance-receiving list.
Titled “Sending Money Home: Contributing to the SDGs, one family at a time”, the IFAD report analyses remittance data and migration trends for developing countries over the past decade. It also makes projections about the potential that remittances have of helping countries meet Sustainable Development Goals (SDGs) by 2030. The SDGs of the United Nations Developmental Program are a universal call to action to end poverty, protect the planet and ensure that all people enjoy peace and prosperity.
Migrant workers are resilient and resourceful
In the decade between 2007 and 2016, remittance to India increased by a massive 68.6% – more than 17% higher than the world average of 51%. These gains were achieved despite the economic downturn after the 2008 financial crisis, currency market fluctuations and the drop in the oil price, which negatively affected oil-producing countries more recently.
IFAD comments that migrant workers and their relatives have demonstrated “remarkable resilience and resourcefulness” in adapting to economic downturn. They have managed to maintain a relatively steady level of support for their families despite economic challenges. The population of migrant workers from developing countries increased by 28 per cent between 2007 and 2016, yet remittance flows increased by 51% globally.
Top remittance receivers and senders
According to the IFAD report the four top remittance receiving countries were India (US$63 billion), China (US$61 billion), the Philippines (US$30 billion) and Pakistan (US$20 billion). Asia, which now receives 55% of all flows, has seen the most dramatic growth in remittances over the past decade.
The top ten sending countries were the United States, Saudi Arabia, the Russian Federation, United Arab Emirates, Germany, Kuwait, France, Qatar, United Kingdom and Italy.
Potent development booster
The ageing populations in developed countries create a continued need for immigrant labor. The fruits of this labor are a much more potent development booster for low- and middle-income countries than official development assistance. Remittances are worth three times the combined official development assistance given to these countries and are worth more than the total foreign direct investment in almost every one of these countries. Migrant workers are gradually bridging the economic divide between have and have-not countries by working, saving and sending home about 15% of their earnings.
The report points out that negative perceptions about migrant workers draining economic resources from host countries are erroneous. “The remaining 85 per cent – about US$2.5 trillion annually – stays in host countries, and is mostly spent on housing, food, transportation, taxes and other necessities. Through their work and income, migrants are essential to the economic well-being of their host countries,” the report states.
The $200 to $300 that each migrant worker sends home can contribute up to 60% of household income. Three quarters of family remittances are used to keep hunger and cold at bay by providing the means to buy food, shelter and to pay recurring bills. The rest of the money is used to improve health, housing and sanitation, to expand educational opportunities and to set up new businesses. Entrepreneurs who leverage remittance money to create new businesses in remittance-receiving countries provide a further boost to economic growth in those countries.
IFAD projections indicate that between 2015 and 2030 an estimated US$6.5 trillion in remittances will be sent to low- and middle-income countries. 1 billion people – including senders and their families – will be involved with remittances.
Women are holding their own in the remittance economy. Half of remittance senders – some 100 million senders – are women. This trend boosts gender equality and empowers women who are steadily gaining financial independence by maximizing employment opportunities.
The cost of sending money
The increase in remittance flows has had another positive spin-off. Costs have come down by almost 25% over the past decade from 9.81% to 7.45% for sending US$200. The United Nations Sustainable Development Goals have set a 3% remittance cost target by 2030.