More people are migrating now to different countries than ever before. Every migrant has their reasons and goals behind leaving their home, but they all bring their knowledge, culture, ambitions, and life experiences with them. As they settle in their new host countries, they acquire new skills and knowledge. And they contribute to their communities and families back home by sending money to their country of origin.
Remittances are a critical development vehicle associated with migration. We have seen the volume of remittance flows steadily increase from the 90s to the present day. In 2019, migrants sent an estimated $549 billion to families in developing countries. The money sent home by migrants is more stable than portfolio equity flows, private debt and several times larger than international development aid.
At the individual and national levels, remittance flows can be economic lifelines. To celebrate this contribution by migrants to their home countries, 16th June is celebrated as the International Day of Family Remittances. According to the International Agricultural Department (IFAD), millions of people worldwide are directly supported by remittances from loved ones and relatives abroad. Remittances improve health and nutrition conditions, create educational opportunities, promote entrepreneurship and lift families out of poverty.
However, apart from financial remittances, migrant communities contribute through ‘social remittances’ – the flow of knowledge, skills, values, and migrants transmit home. Social remittances impacted most in sectors like health, education and business. Additionally, there is a broader development effect, as the recipient’s social remittances extend beyond the immediate circle of relatives and friends to a broader community.
Lifelines for Many
Together, social and financial remittances have a crucial role in achieving individual, community and national development goals. Also, they contribute towards achieving SDGs set by the UN. However, to reap the actual development benefits of social and financial remittances, there is still work to be done.
First and foremost, the government needs to create an enabling environment to promote remittance flows to productive sectors of the economy. Diaspora communities have habitually been essential contributors to development in their home countries through financial flows like remittances, trade and investment. The government should create a stable environment to encourage social and economic engagement of diaspora members with their home countries. Providing incentives and implementing policies like tax breaks, access to entrepreneurship opportunities and simplified entry and residence schemes can greatly incentivise the diaspora population.
Transparency in the Market
With the rise in the numbers of remittance service providers worldwide, a shift from banks to less costly Money Transfer Operators (MTOs) can be observed. Technology-driven solutions like digital wallets, mobile money applications and online money transfer services have created greater transparency and competition within the remittance market.
However, restrictive migration regulations often challenge social remittances, which act as barriers to movement between migrant’s host country and their country of origin. Many governments have implemented regulations to ensure smooth travelling back and forth between countries, facilitating social remittance.
Additionally, raising awareness, financial literacy and access to affordable financial services are essential for migrants in their host countries and their families back home. This will help migrants make informed choices regarding the safest and the cheapest, and most secure means of sending money back home. Also, this will give migrants a better understanding of financial products in which their families can invest. In the long run, this will reinforce the financial systems in countries of origin and residence.
Undoubtedly migrants play a critical role in their country’s economy. Remittances help millions by lifting them out of poverty and opening up opportunities for higher education, investments and many more. But there is still a lot to be achieved. Governing bodies and lawmakers need to develop strategies to lift the obstacles that restrict the free movement of migrants between their home country and host country. Migrants contribute tremendously both in their social and financial remittances to economies. Governments need to continue working in partnerships to ensure migrant’s critical role as an enabler of all pillars of sustainable development, as recognised in the Agenda 2030.
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