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Remittance families and development

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Remittance families and development

For more than a century, people have been moving from rural to urban areas, and across national borders in search of better opportunities. Approximately 200 million migrant workers have left home in order to send remittances, with the aim of giving 800 million family members the chance to remain home and address the root causes of their own migration. Every year, they send home over half a trillion dollars to pay bills, put food on the table, pay for health expenses, but also to save money and invest in a better future.

Helping remittance families leverage the development impact of their own resources is vital to reach the Sustainable Development Goals (SDGs) of the UN 2030 Agenda for Sustainable Development. The international community now recognizes migrant workers and their families as agents of change and key partners in this effort. The potential for synergy in connecting the scale of remittances to reach the SDGs is clear: one billion senders and receivers and a projected US$8.5 trillion in international remittances will be sent to developing countries between 2015 and 2030

Over the last decade, attention has focused primarily on the “sending side” of remittances, particularly the aggregate volumes and transaction costs of sending family remittances, essentially from developed to developing countries. The global dimension of this phenomenon is impressive: US$529 billion were sent to developing countries in 2018 – more than three times official development assistance and more than foreign direct investment. It is estimated that 75 per cent of remittance flows go towards immediate needs, but the other 25 per cent – over US$100 billion per year– is available for other purposes. Despite the focus on the aggregate flows of remittances, the amount that matters the most is not measured in millions or billions, but in the individual US$200 or US$300 sent home regularly. This amount represents 60 per cent of total household income and, if leveraged, can most effectively improve the living standards of migrants and their communities back home.

With these apparently small funds, most remittance families commit to reaching “their own SDGs” – reduced poverty, better health and nutrition, education opportunities, improved housing and sanitation, entrepreneurship, financial inclusion and reduced inequality, and the ability to deal with the uncertainty in their lives by increasing their savings and building assets to ensure a more stable future. In this regard, the SDGs provide a unique opportunity to create a convergence between the goals of remittance families, government development objectives, private sector strategies to tap underserved markets, and the traditional role of civil society to promote positive change. In particular:

  • Financial inclusion and literacy for remittance recipient families can increase opportunities for formal savings and investment. In turn, these mechanisms can build the human capital of remittance families and improve their living standards through better education, health and housing.
  • Migrant investments beyond remittances can change the development landscape of local communities, if given appropriate options.
  • Remittance markets improved through an adapted legal and regulatory framework, greater transparency and competition can lower cost and provide more resources to remittance families. As private flows, migrant remittances do not in any way reduce or supplant the need for additional resources, both public and private. However, the potential development impact of migrant remittances and investments can only be fully realized in partnership with coherent and realistic public policies and priorities coupled with private-sector initiatives. The Global Compact for Safe, Orderly and Regular Migration, adopted in December 2018, and its Objective 20 in particular, represents an opportunity to build on the growing recognition that the remittances sent by migrants to their families back home are fundamental for governments, international organizations and other partners in realizing their sustainable development objectives.

Remittances help reach the SDGs: One family at a time

Remittances can contribute to reaching the SDGs in a variety of ways:

  1. At household level. By recognizing the positive socioeconomic impact of remittances on families’ wellbeing (SDGs 1-5);
  2. At community level. By supporting policies and specific actions to promote synergies between remittances and financial inclusion, encourage market competition and regulatory reform, and mitigate any negative impact resulting from climate change (SDGs 6, 7, 8, 10, 12 and 13); and
  3. At international level. By ensuring that the revitalized Global Partnership for Sustainable Development – as outlined in SDG 17 – and the Global Compact on Migration promote collaboration across all sectors involved in remittances.

Financial inclusion and diaspora investment

It is commonly assumed that remittances are used only for consumption on the receiving end. But in reality, about 75 per cent of family remittances are used for immediate needs such as food, shelter and bill payment. The other 25 per cent – over US$100 billion annually – is dedicated to building more secure and independent futures, through better education, improved health, savings and investing in assets and incomegenerating activities.

It is also believed that the majority of diasporas do not save or invest. However, there are millions of migrant workers who, despite their economic limitations, already save either formally or informally, invest and send home about 15 per cent of their income. While remittance-receiving families and migrant workers are generally excluded from the formal financial system, they consistently demonstrate a commitment to save and/or invest whenever given the opportunity, using channels they understand and trust. Providing them with value-added options will improve long-term asset-building opportunities for themselves and their communities.

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