With the growing migration population, international remittances have also increased. One of the primary motives behind remittances is to provide financial security to the migrant’s family back in the home country. And for many developing countries, remittances are crucial as global remittance plays a vital role in shaping the countries’ economic landscape.
In this article, I have listed six facts highlighting the importance of the money sent back by the migrants.
According to a UN article, about one billion people experience the positive impact of remittance globally by sending or receiving funds. Also, one in nine people, or around 800 million, receive funds sent by their family members who migrated to another country for work.
How Much Money Are We Talking about Over Here?
According to data collected in 2019, migrants sent between $200 and $300 home every one or two months on average. But interestingly, this number represented only 15% of what migrants earned. The remaining 85% of the earning stays back in the country of employment. And in time, the remaining money is circulated back to the local economy or saved by the expatriate.
Global Remittance is Expensive.
International money remittance can tend to be expensive. Factoring in the exchange rates and the fees levied on a transfer; amounts to around 7% of the funds sent—this the global average of costs required to remit money. To ensure remittance is affordable to the masses and remitters can send back more money while spending less, many countries aim for Sustainable Development Growth (SDG) 10.C. Technological advancements, particularly mobile technology, continue to shape the industry. The most significant advantage of digitization is the faster transfer time and lower costs associated with the digital channels.
Helping people out of poverty
Although the funds sent back represent only 15% of the money earned by the migrant, it is still a significant part of a household’s total income. Experts estimated three-quarters of the remittance received spending happens on essentials like food, healthcare, school fees and housing expenses. Also, remitters send more money during crises to help their family during any emergencies. Remittance has been a lifeline for many families who use the funds received to better their living standards.
When migrants send money through remittances, they contribute to multiple goals set in the 2030 Sustainable Development Goals agenda. The goals that are contributed to by migrant’s remittances are
SDG 1: No Poverty.
SDG 2: Zero Hunger.
SDG 3: Good Health and Well-Being.
SDG 4: Quality Education.
SDG 6: Clean Water and Sanitation.
SDG 8: Decent Work and Economic Growth.
SDG 10: Reduced Inequality.
Empowering the Rural Areas
Almost half of the global remittance goes to the rural areas where three-quarters of the world’s poor and the food-insecure families live. Remittances that they receive have enabled them to lead a better life. It has given them better access to healthcare and better living standers. Also, with the money received, the families can afford higher education for the children. Estimates suggest that the accumulated flow of remittance to the rural areas will increase significantly in the next five years.
There is no doubt that remittances are a lifeline to many families. With the money received, many have risen above poverty. Remittances open up future opportunities for the children of the family with better access to higher education. But the high fees associated with global remittance remain a concern.
Thankfully with the digitization of the industry, service providers can provide a solution to the problem. Digital service providers charge low fees and offer better exchange rates than any other traditional remittance channel.
Digital channels are also faster in comparison letting customers send money instantly or on the same day. As technologies keep developing with time and more people start to use and trust digital channels, we can expect big things for the remittance industry down the line.
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