Remittances
Encyclopedia
A remittance is a transfer of money
by a foreign worker
to his or her home country. Note that in 19th century usage a remittance man was someone (often a black sheep
) exiled overseas and sent an allowance on condition that he not return home.
Money sent home by migrants constitutes the second largest financial inflow to many developing countries
, exceeding international aid. Estimates of remittances to developing countries vary from International Fund for Agricultural Development
's US$301 billion (including informal flows) to the World Bank
's US$250 billion for 2006 (excluding informal flows). Remittances contribute to economic growth and to the livelihoods of people worldwide. Moreover, remittance transfers can also promote access to financial services for the sender and recipient, thereby increasing financial and social inclusion. Remittances also foster, in the receiving countries, a further economic dependence on the global economy instead of building sustainable, local economies.
estimates, remittances totaled US$414 billion in 2009, of which US$316 billion went to developing countries that involved 192 million migrant worker
s. For some individual recipient countries, remittances can be as high as a third of their GDP. As remittance receivers often have a higher propensity to own a bank account, remittances promote access to financial services for the sender and recipient, an essential aspect of leveraging remittances to promote economic development. The top recipients in terms of the share of remittances in GDP included many smaller economies such as Tajikistan
(45%), Moldova
(38%), and Honduras
(25%).
The World Bank
and the Bank for International Settlements
have developed international standards for remittance services.
In 2004 the G8
met at the Sea Island Summit and decided to take action to lower the costs for migrant workers who send money back to their friends and families in their country of origin. In light of this, various G8 government developmental organizations, such as the UK government's Department for International Development
(DFID) and USAID began to look into ways in which the cost of remitting money could be lowered.
In September 2008, the World Bank established the first international database of remittance prices. The Remittance Prices Database provides data on sending and receiving remittances for 200 “country corridors” worldwide. The “corridors” examined include remittance flows from 28 major sending countries to 86 receiving countries, which account for more than 60% of total remittances to developing countries. The resulting publication of the Remittance Prices Database serves four major purposes: benchmarking improvements, allowing comparisons across countries, supporting consumers’ choices, and putting pressure on service providers to improve their services.
At a July 2009 summit in L’Aquila, Italy, G8 heads of government and states endorsed the objective of reducing the cost of remittance services by five percentage points in five years. To drive down costs, the World Bank has begun certifying regional and national databases that use a consistent methodology to compare the cost of sending remittances.
A remittance man, by simple dictionary definition, is an emigrant supported or assisted by payment of money from their paternal home.
As a general term remittance man or remittance woman could mean anyone living away from home supported mainly by their family in a different house, neighborhood, city, or country regardless of their reason for being there. Such a person may be seeking business fortune, education, extended vacation, a new place for the family to move, employment, or safety from personal, family, or legal troubles.
of the Biltmore Estate
. Other less famous persons who lived off family remittance payments came from middle class families who could afford to send them. These might move from their east coast family home to the west coast seeking fortune and starting new businesses as American commerce historically expanded west.
British culture, this often meant the black sheep
of an upper or middle class family who was sent away (from the UK to the Empire
), and paid to stay away. These men were generally of dissolute or drunken character, and may have been sent overseas after one or more disgraces at home. There were also "remittance men" in several towns in the American and Canadian West http://query.nytimes.com/gst/abstract.html?res=9904E2D81F3BE633A2575BC1A9679C946596D6CF. American writer Mark Twain
and Canadian poet Robert Service
make references to those specific "remittance men" in some of their literary works. The term was in casual use in Alaska until the late 20th century, usually with a derogatory intent.
In past commercial mass entertainment novels the dark side remittance man has been popularized. An example of this usage is in Robert Louis Stevenson
's book The Wrecker
where the character Tommy Hadden is cast as the 'remittance man'. In the book
, respectively, were the top two senders of remittance globally.
A majority of the remittances from the US have been directed to Asian countries like India
(approx. 26 billion USD), Philippines
(approx. 20 billion USD) and China
(approx. 23 billion USD). Most of the remittances happen by the conventional channel of agents, like Western Union
or MoneyGram
. However, with the increasing relevance and reach of the Internet, online and mobile phone money transfers from companies such as Remit2India
, Money2India, Xoom.com
have significantly grown.
The Estrada administration in 2000 declared it “The Year of Overseas Filipino Worker in the Recognition of the Determination and Supreme Self-Sacrifice of Overseas Filipino Workers.” This declaration connects monetary remittances of overseas workers as the top foreign-exchange earnings in the Philippines.
and the Caribbean
, remittances play an important role in the economy of the region, totaling over 66.5 billion USD in 2007, with about 75% originating in the United States. This total represents more than the sum of Foreign direct investment
and official development aid
combined. In seven Latin American and Caribbean countries, remittances even account for more than 10% of GDP
and exceed the dollar flows of the largest export product in almost every country in the region. Percentages ranged from 2% in Mexico
, to 18% in El Salvador
, 21% in Honduras
, and up to 30% in Haiti
. The Inter American Development Bank's Multilateral Investment Fund (IDB-MIF) has been the leading agency on regional remittance research.
Through the providers listed on Send Money Home migrant workers can now view a price comparison on remittances to Latin American and Caribbean countries.
This research has often been carried out in collaboration with Manuel Orozco of the Inter-American Dialogue, his remittance research can be found at the Dialogue and at the IDB. In this region, Mexico, one of the best documented examples of migration and remittances, received remittance inflows of almost 24 Billion US$ in 2007, 95% of which originated in the US.
A significant study conducted by the Inter-American Development Bank (IDB) in 2004 provides useful insight into remittance and related migration patterns between Latin America and the United States. The study reveals that over 60% of the 16.5 million Latin American-born adults who resided in the United States at the time of the survey regularly sent money home. The remittances sent by these 10 million immigrants were transmitted via more than 100 million individual transactions per year and amounted to an estimated $30 billion during 2004. Each transaction averaged about $150–$250, and, because these migrants tended to send smaller amounts more frequently than others, their remittances had a higher percentage of costs due to transfer fees.
Migrants sent approximately 10% of their household incomes; these remittances made up a corresponding 50-80% of the household incomes for the recipients. Significant amounts of remittances were sent from 37 U.S. states, but six states were identified as the "traditional sending" states: New York (which led the group with 81% of its immigrants making regular remittances), California, Texas, Florida, Illinois, and New Jersey. The high growth rate of remittances to Mexico (not the total amount) is unlikely to continue. In fact, according the Mexican central bank, remittances grew just 0.6 during the first six months of 2007, as compared to 23% during the same period in 2006. Experts attribute the slowdown to a contraction in the U.S. construction industry, tighter border controls, and a crackdown in the U.S. on illegal immigration.
As the foregoing statistics illustrate, increased migration from Latin America to the United States has resulted in a very significant amount of remittance activity. The numbers also help us understand the dependence between a developed country and developing countries: The United States needs Latin Americans to supply its labor markets—the migration improves business profitability and reduces the costs of production, while Latin American countries depend on the flows of remittances that result from the migration of labor. This dependence has also resulted in what experts call "micro-geographies," tightly-knit networks that integrate U.S. communities with communities throughout Latin America, such as migrants from Oaxaca, Mexico who have settled in Venice Beach, California. Oaxacans not only send money back to their communities, but they also travel back and forth extensively.
As of recently, remittances from the U.S. to Latin America
have been on the decline. While there were USD 69.2 billion worth of remittances sent in 2008, that figure has fallen to USD 58.9 billion for 2011. This trend is a result of many factors including the global recession
, more economic opportunity in Latin American countries, and rising fees charged by coyotes to smuggle immigrants across the border. The pattern of migration has changed from a circular flow, in which immigrants work in the U.S. for a few years before returning to their families in their home countries, to a one-way stream whereby migrants find themselves stuck in the United States. As a result, the new wave of migrants are both less likely to leave and more likely to stay in the U.S. for longer periods of time. Overall, this trend has contributed to falling levels of remittances sent to Latin American countries from the United States.
According to a World Bank study, Nigeria is by far the top remittance recipient in Africa, accounting for $10 billion in 2010, a slight increase over the previous year ($9.6 billion). Other top recipients include Sudan ($3.2 billion), Kenya ($1.8 billion), Senegal ($1.2 billion), South Africa ($1.0 billion), Uganda ($0.8 billion), Lesotho ($0.5 billion), Ethiopia ($387 million), Mali ($385 million), and Togo ($302 million). As a share of Gross Domestic Product, the top recipients in 2009 were: Lesotho (25 percent), Togo (10 per cent), Cape Verde (9 per cent), Guinea-Bissau (9 per cent), Senegal (9 per cent), Gambia (8 per cent), Liberia (6 per cent), Sudan (6 per cent), Nigeria (6 per cent), and Kenya (5 per cent).
, this is being increasingly recognized as important by aid actors who are considering better ways of supporting people in emergency responses.
has increased the cost of sending remittances directly increasing costs to the companies facilitating the sending and indirectly to the person remitting. As in some corridors a sizable amount of remittances is sent through informal channels (family connections, traveling friends, local money lenders, etc.). According to the World Bank, some countries do not report remittances data. Moreover, when data is available, the methodologies used by countries for remittance data compilation are not publicly available. A 2010 world survey of central banks found significant differences in the quality of remittance data collection across countries: some central banks only used remittances data reported from commercial banks, neglecting to account for remittance flows via money transfer operators and post offices.
Remittances can be difficult to track and potentially sensitive to money laundering (AML) and terror financing (CFT) concerns. Since 9/11 many governments and the Financial Action Task Force (FATF) have taken steps to address informal value transfer system
s. This is done through nations' Financial Intelligence Units (FIUs). The principle legislative initiatives in this area are the USA PATRIOT Act, Title III
in the United States and, in the EU, through a series of EU Money Laundering Directives. Though no serious terror risk should be associated with migrants sending money to their families, misuse of the financial system remains a serious government concern.
* World Bank estimated http://blogs.worldbank.org/peoplemove/remittances-expected-to-fall-by-5-to-8-percent-in-2009http://blogs.worldbank.org/files/peoplemove/file/RemittancesData_March09-Release.xls
Central Bank data for: Bangladesh, Mexico, Pakistan, Philippines
The stability of remittance flows despite financial crises and economic downturns make them a reliable financial resource for developing countries. As migrant remittances are sent cumulatively over the years and not only by new migrants, remittances are able to be persistent over time. At the state level, countries with diversified migration destinations are likely to have more sustainable remittance flows.
A 2011 study develops a long-run growth model for a labour exporting country that receives large inflows of external income - the sum of remittances, FDI and general government transfers - from major oil exporting economies. The long-run economic benefits of external income is then evaluated using data for Jordan.
Wire transfer
Wire transfer or credit transfer is a method of electronic funds transfer from one person or institution to another. A wire transfer can be made from one bank account to another bank account or through a transfer of cash at a cash office...
by a foreign worker
Migrant worker
The term migrant worker has different official meanings and connotations in different parts of the world. The United Nations' definition is broad, including any people working outside of their home country...
to his or her home country. Note that in 19th century usage a remittance man was someone (often a black sheep
Black sheep
In the English language, black sheep is an idiom used to describe an odd or disreputable member of a group, especially within a family. The term has typically been given negative implications, implying waywardness...
) exiled overseas and sent an allowance on condition that he not return home.
Money sent home by migrants constitutes the second largest financial inflow to many developing countries
Developing country
A developing country, also known as a less-developed country, is a nation with a low level of material well-being. Since no single definition of the term developing country is recognized internationally, the levels of development may vary widely within so-called developing countries...
, exceeding international aid. Estimates of remittances to developing countries vary from International Fund for Agricultural Development
International Fund for Agricultural Development
The International Fund for Agricultural Development , a specialized agency of the United Nations, was established as an international financial institution in 1977 as one of the major outcomes of the 1974 World Food Conference. IFAD is dedicated to eradicating rural poverty in developing countries...
's US$301 billion (including informal flows) to the World Bank
World Bank
The World Bank is an international financial institution that provides loans to developing countries for capital programmes.The World Bank's official goal is the reduction of poverty...
's US$250 billion for 2006 (excluding informal flows). Remittances contribute to economic growth and to the livelihoods of people worldwide. Moreover, remittance transfers can also promote access to financial services for the sender and recipient, thereby increasing financial and social inclusion. Remittances also foster, in the receiving countries, a further economic dependence on the global economy instead of building sustainable, local economies.
Significance
Remittances are playing an increasingly large role in the economies of many countries, contributing to economic growth and to the livelihoods of less prosperous people (though generally not the poorest of the poor). According to World BankWorld Bank
The World Bank is an international financial institution that provides loans to developing countries for capital programmes.The World Bank's official goal is the reduction of poverty...
estimates, remittances totaled US$414 billion in 2009, of which US$316 billion went to developing countries that involved 192 million migrant worker
Migrant worker
The term migrant worker has different official meanings and connotations in different parts of the world. The United Nations' definition is broad, including any people working outside of their home country...
s. For some individual recipient countries, remittances can be as high as a third of their GDP. As remittance receivers often have a higher propensity to own a bank account, remittances promote access to financial services for the sender and recipient, an essential aspect of leveraging remittances to promote economic development. The top recipients in terms of the share of remittances in GDP included many smaller economies such as Tajikistan
Tajikistan
Tajikistan , officially the Republic of Tajikistan , is a mountainous landlocked country in Central Asia. Afghanistan borders it to the south, Uzbekistan to the west, Kyrgyzstan to the north, and China to the east....
(45%), Moldova
Moldova
Moldova , officially the Republic of Moldova is a landlocked state in Eastern Europe, located between Romania to the West and Ukraine to the North, East and South. It declared itself an independent state with the same boundaries as the preceding Moldavian Soviet Socialist Republic in 1991, as part...
(38%), and Honduras
Honduras
Honduras is a republic in Central America. It was previously known as Spanish Honduras to differentiate it from British Honduras, which became the modern-day state of Belize...
(25%).
The World Bank
World Bank
The World Bank is an international financial institution that provides loans to developing countries for capital programmes.The World Bank's official goal is the reduction of poverty...
and the Bank for International Settlements
Bank for International Settlements
The Bank for International Settlements is an intergovernmental organization of central banks which "fosters international monetary and financial cooperation and serves as a bank for central banks." It is not accountable to any national government...
have developed international standards for remittance services.
In 2004 the G8
G8
The Group of Eight is a forum, created by France in 1975, for the governments of seven major economies: Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States. In 1997, the group added Russia, thus becoming the G8...
met at the Sea Island Summit and decided to take action to lower the costs for migrant workers who send money back to their friends and families in their country of origin. In light of this, various G8 government developmental organizations, such as the UK government's Department for International Development
Department for International Development
The Department For International Development is a United Kingdom government department with a Cabinet Minister in charge. It was separated from the Foreign and Commonwealth Office in 1997. The goal of the department is "to promote sustainable development and eliminate world poverty". The current...
(DFID) and USAID began to look into ways in which the cost of remitting money could be lowered.
In September 2008, the World Bank established the first international database of remittance prices. The Remittance Prices Database provides data on sending and receiving remittances for 200 “country corridors” worldwide. The “corridors” examined include remittance flows from 28 major sending countries to 86 receiving countries, which account for more than 60% of total remittances to developing countries. The resulting publication of the Remittance Prices Database serves four major purposes: benchmarking improvements, allowing comparisons across countries, supporting consumers’ choices, and putting pressure on service providers to improve their services.
At a July 2009 summit in L’Aquila, Italy, G8 heads of government and states endorsed the objective of reducing the cost of remittance services by five percentage points in five years. To drive down costs, the World Bank has begun certifying regional and national databases that use a consistent methodology to compare the cost of sending remittances.
Overview
Remittances are not a new phenomenon in the world, being a normal concomitant to migration which has always been a part of human history. Several European countries, for example Spain, Italy and Ireland were heavily dependent on remittances received from their emigrants during the 19th and 20th centuries. In the case of Spain, remittances amounted to the 21% of all of its current account income in 1946. All of those countries created policies on remittances developed after significant research efforts in the field. For instance, Italy was the first country in the world to enact a law to protect remittances in 1901 while Spain was the first country to sign an international treaty (with Argentina in 1960) to lower the cost of the remittances received.Remittance man
Remittance man has a historical English meaning from the 19th century referring to money sent from Britain to a person living in a far away place such as a British colony – thus sending money in the opposite direction to today's usual usage of the term. The reader would be wise to look for the context within which the term is used when reading or hearing it since today's and old usages are opposites and the old meaning is still in wide use.A remittance man, by simple dictionary definition, is an emigrant supported or assisted by payment of money from their paternal home.
As a general term remittance man or remittance woman could mean anyone living away from home supported mainly by their family in a different house, neighborhood, city, or country regardless of their reason for being there. Such a person may be seeking business fortune, education, extended vacation, a new place for the family to move, employment, or safety from personal, family, or legal troubles.
Successful remittance men
A remittance man could be a younger son trying to escape the shadow of elder dominating sons to seek his own fortune and proof of worth, such as George VanderbiltGeorge Washington Vanderbilt II
George Washington Vanderbilt II was a member of the prominent United States Vanderbilt family, which had amassed a huge fortune through steamboats, railroads, and various business enterprises. He built and owned Biltmore, the largest home in the United States.-Biography:The eighth son and youngest...
of the Biltmore Estate
Biltmore Estate
Biltmore House is a Châteauesque-styled mansion near Asheville, North Carolina, built by George Washington Vanderbilt II between 1889 and 1895. It is the largest privately-owned home in the United States, at and featuring 250 rooms...
. Other less famous persons who lived off family remittance payments came from middle class families who could afford to send them. These might move from their east coast family home to the west coast seeking fortune and starting new businesses as American commerce historically expanded west.
Dark-side remittance men
Within VictorianVictorian era
The Victorian era of British history was the period of Queen Victoria's reign from 20 June 1837 until her death on 22 January 1901. It was a long period of peace, prosperity, refined sensibilities and national self-confidence...
British culture, this often meant the black sheep
Black sheep
In the English language, black sheep is an idiom used to describe an odd or disreputable member of a group, especially within a family. The term has typically been given negative implications, implying waywardness...
of an upper or middle class family who was sent away (from the UK to the Empire
British Empire
The British Empire comprised the dominions, colonies, protectorates, mandates and other territories ruled or administered by the United Kingdom. It originated with the overseas colonies and trading posts established by England in the late 16th and early 17th centuries. At its height, it was the...
), and paid to stay away. These men were generally of dissolute or drunken character, and may have been sent overseas after one or more disgraces at home. There were also "remittance men" in several towns in the American and Canadian West http://query.nytimes.com/gst/abstract.html?res=9904E2D81F3BE633A2575BC1A9679C946596D6CF. American writer Mark Twain
Mark Twain
Samuel Langhorne Clemens , better known by his pen name Mark Twain, was an American author and humorist...
and Canadian poet Robert Service
Robert W. Service
Robert William Service was a poet and writer who has often been called "the Bard of the Yukon".Service is best known for his poems "The Shooting of Dan McGrew" and "The Cremation of Sam McGee", from his first book, Songs of a Sourdough...
make references to those specific "remittance men" in some of their literary works. The term was in casual use in Alaska until the late 20th century, usually with a derogatory intent.
In past commercial mass entertainment novels the dark side remittance man has been popularized. An example of this usage is in Robert Louis Stevenson
Robert Louis Stevenson
Robert Louis Balfour Stevenson was a Scottish novelist, poet, essayist and travel writer. His best-known books include Treasure Island, Kidnapped, and Strange Case of Dr Jekyll and Mr Hyde....
's book The Wrecker
The Wrecker (novel)
The Wrecker is a novel written by Robert Louis Stevenson in collaboration with his stepson Lloyd Osbourne. The story is a 'sprawling, episodic adventure story, a comedy of brash manners and something of a detective mystery'. It revolves around the abandoned wreck of the Flying Scud at Midway Island...
where the character Tommy Hadden is cast as the 'remittance man'. In the book
By region
In 2010, US and Saudi ArabiaSaudi Arabia
The Kingdom of Saudi Arabia , commonly known in British English as Saudi Arabia and in Arabic as as-Sa‘ūdiyyah , is the largest state in Western Asia by land area, constituting the bulk of the Arabian Peninsula, and the second-largest in the Arab World...
, respectively, were the top two senders of remittance globally.
Asia
A majority of the remittances from the US have been directed to Asian countries like India
India
India , officially the Republic of India , is a country in South Asia. It is the seventh-largest country by geographical area, the second-most populous country with over 1.2 billion people, and the most populous democracy in the world...
(approx. 26 billion USD), Philippines
Philippines
The Philippines , officially known as the Republic of the Philippines , is a country in Southeast Asia in the western Pacific Ocean. To its north across the Luzon Strait lies Taiwan. West across the South China Sea sits Vietnam...
(approx. 20 billion USD) and China
China
Chinese civilization may refer to:* China for more general discussion of the country.* Chinese culture* Greater China, the transnational community of ethnic Chinese.* History of China* Sinosphere, the area historically affected by Chinese culture...
(approx. 23 billion USD). Most of the remittances happen by the conventional channel of agents, like Western Union
Western Union
The Western Union Company is a financial services and communications company based in the United States. Its North American headquarters is in Englewood, Colorado. Up until 2006, Western Union was the best-known U.S...
or MoneyGram
MoneyGram
MoneyGram International, Inc. is a US-based, Global Money transfer company, headquartered in Dallas, Texas. It has Global Operations Centers in Saint Louis Park, Minnesota and Brooklyn Center, Minnesota, Global Call Center Operations in Denver, Colorado and regional and local offices around the...
. However, with the increasing relevance and reach of the Internet, online and mobile phone money transfers from companies such as Remit2India
Remit2India
Remit2India launched on 14 February 2001 as a personalized online remittance service, which facilitates money transfers to India by Non Resident Indians spread across the world. The service provides global coverage, aggregates payments and delivery modes and claims to have the widest delivery...
, Money2India, Xoom.com
Xoom Corporation
Xoom Corporation is a San Francisco-based online money transfer company that provides consumer remittance services to the Philippines, India, Latin America, Europe, Australia, Canada, and South Africa...
have significantly grown.
Philippines
According to a World Bank Study, the Philippines is the second largest recipient for remittances in Asia. It was estimated in 1994 that migrants sent over US2.6 billion back to the Philippines through formal banking systems. With the addition of money sent through private finance companies and return migrants, the total is closer to US6 billion annually. Looking at current remittance flows, the total is estimated to have grown by 7.8 per cent to reach US21.3 billion in 2010. Remittances are a reliable source of revenue for the Philippines, accounting for 8.9 per cent of the country’s GDP.The Estrada administration in 2000 declared it “The Year of Overseas Filipino Worker in the Recognition of the Determination and Supreme Self-Sacrifice of Overseas Filipino Workers.” This declaration connects monetary remittances of overseas workers as the top foreign-exchange earnings in the Philippines.
Latin America and the Caribbean
In Latin AmericaLatin America
Latin America is a region of the Americas where Romance languages – particularly Spanish and Portuguese, and variably French – are primarily spoken. Latin America has an area of approximately 21,069,500 km² , almost 3.9% of the Earth's surface or 14.1% of its land surface area...
and the Caribbean
Caribbean
The Caribbean is a crescent-shaped group of islands more than 2,000 miles long separating the Gulf of Mexico and the Caribbean Sea, to the west and south, from the Atlantic Ocean, to the east and north...
, remittances play an important role in the economy of the region, totaling over 66.5 billion USD in 2007, with about 75% originating in the United States. This total represents more than the sum of Foreign direct investment
Foreign direct investment
Foreign direct investment or foreign investment refers to the net inflows of investment to acquire a lasting management interest in an enterprise operating in an economy other than that of the investor.. It is the sum of equity capital,other long-term capital, and short-term capital as shown in...
and official development aid
Development aid
Development aid or development cooperation is aid given by governments and other agencies to support the economic, environmental, social and political development of developing countries.It is distinguished...
combined. In seven Latin American and Caribbean countries, remittances even account for more than 10% of GDP
Gross domestic product
Gross domestic product refers to the market value of all final goods and services produced within a country in a given period. GDP per capita is often considered an indicator of a country's standard of living....
and exceed the dollar flows of the largest export product in almost every country in the region. Percentages ranged from 2% in Mexico
Mexico
The United Mexican States , commonly known as Mexico , is a federal constitutional republic in North America. It is bordered on the north by the United States; on the south and west by the Pacific Ocean; on the southeast by Guatemala, Belize, and the Caribbean Sea; and on the east by the Gulf of...
, to 18% in El Salvador
El Salvador
El Salvador or simply Salvador is the smallest and the most densely populated country in Central America. The country's capital city and largest city is San Salvador; Santa Ana and San Miguel are also important cultural and commercial centers in the country and in all of Central America...
, 21% in Honduras
Honduras
Honduras is a republic in Central America. It was previously known as Spanish Honduras to differentiate it from British Honduras, which became the modern-day state of Belize...
, and up to 30% in Haiti
Haiti
Haiti , officially the Republic of Haiti , is a Caribbean country. It occupies the western, smaller portion of the island of Hispaniola, in the Greater Antillean archipelago, which it shares with the Dominican Republic. Ayiti was the indigenous Taíno or Amerindian name for the island...
. The Inter American Development Bank's Multilateral Investment Fund (IDB-MIF) has been the leading agency on regional remittance research.
Through the providers listed on Send Money Home migrant workers can now view a price comparison on remittances to Latin American and Caribbean countries.
This research has often been carried out in collaboration with Manuel Orozco of the Inter-American Dialogue, his remittance research can be found at the Dialogue and at the IDB. In this region, Mexico, one of the best documented examples of migration and remittances, received remittance inflows of almost 24 Billion US$ in 2007, 95% of which originated in the US.
A significant study conducted by the Inter-American Development Bank (IDB) in 2004 provides useful insight into remittance and related migration patterns between Latin America and the United States. The study reveals that over 60% of the 16.5 million Latin American-born adults who resided in the United States at the time of the survey regularly sent money home. The remittances sent by these 10 million immigrants were transmitted via more than 100 million individual transactions per year and amounted to an estimated $30 billion during 2004. Each transaction averaged about $150–$250, and, because these migrants tended to send smaller amounts more frequently than others, their remittances had a higher percentage of costs due to transfer fees.
Migrants sent approximately 10% of their household incomes; these remittances made up a corresponding 50-80% of the household incomes for the recipients. Significant amounts of remittances were sent from 37 U.S. states, but six states were identified as the "traditional sending" states: New York (which led the group with 81% of its immigrants making regular remittances), California, Texas, Florida, Illinois, and New Jersey. The high growth rate of remittances to Mexico (not the total amount) is unlikely to continue. In fact, according the Mexican central bank, remittances grew just 0.6 during the first six months of 2007, as compared to 23% during the same period in 2006. Experts attribute the slowdown to a contraction in the U.S. construction industry, tighter border controls, and a crackdown in the U.S. on illegal immigration.
As the foregoing statistics illustrate, increased migration from Latin America to the United States has resulted in a very significant amount of remittance activity. The numbers also help us understand the dependence between a developed country and developing countries: The United States needs Latin Americans to supply its labor markets—the migration improves business profitability and reduces the costs of production, while Latin American countries depend on the flows of remittances that result from the migration of labor. This dependence has also resulted in what experts call "micro-geographies," tightly-knit networks that integrate U.S. communities with communities throughout Latin America, such as migrants from Oaxaca, Mexico who have settled in Venice Beach, California. Oaxacans not only send money back to their communities, but they also travel back and forth extensively.
As of recently, remittances from the U.S. to Latin America
Latin America
Latin America is a region of the Americas where Romance languages – particularly Spanish and Portuguese, and variably French – are primarily spoken. Latin America has an area of approximately 21,069,500 km² , almost 3.9% of the Earth's surface or 14.1% of its land surface area...
have been on the decline. While there were USD 69.2 billion worth of remittances sent in 2008, that figure has fallen to USD 58.9 billion for 2011. This trend is a result of many factors including the global recession
Global recession
A global recession is a period of global economic slowdown. The International Monetary Fund takes many factors into account when defining a global recession, but it states that global economic growth of 3 percent or less is "equivalent to a global recession".By this measure, four periods since...
, more economic opportunity in Latin American countries, and rising fees charged by coyotes to smuggle immigrants across the border. The pattern of migration has changed from a circular flow, in which immigrants work in the U.S. for a few years before returning to their families in their home countries, to a one-way stream whereby migrants find themselves stuck in the United States. As a result, the new wave of migrants are both less likely to leave and more likely to stay in the U.S. for longer periods of time. Overall, this trend has contributed to falling levels of remittances sent to Latin American countries from the United States.
Africa
Remittances to Africa play an important role to national economies, but little data exists as many rely on informal channels to send money home. Today’s African Diaspora consists of approximately 20 to 30 million adults, who send about USD 40 billion annually to their families and local communities back home. For the region as a whole, this represents 50 percent more than net official development assistance (ODA) from all sources, and, for most countries, the amount also exceeds foreign direct investment (FDI). In several fragile states, remittances are estimated to exceed 50 percent of GDP. Most African countries restrict the payment of remittances to banks, which in turn, typically enter into exclusive arrangements with large money transfer companies, like Western Union or Money Gram, to operate on their behalf. This results in limited competition and limited access for consumers.According to a World Bank study, Nigeria is by far the top remittance recipient in Africa, accounting for $10 billion in 2010, a slight increase over the previous year ($9.6 billion). Other top recipients include Sudan ($3.2 billion), Kenya ($1.8 billion), Senegal ($1.2 billion), South Africa ($1.0 billion), Uganda ($0.8 billion), Lesotho ($0.5 billion), Ethiopia ($387 million), Mali ($385 million), and Togo ($302 million). As a share of Gross Domestic Product, the top recipients in 2009 were: Lesotho (25 percent), Togo (10 per cent), Cape Verde (9 per cent), Guinea-Bissau (9 per cent), Senegal (9 per cent), Gambia (8 per cent), Liberia (6 per cent), Sudan (6 per cent), Nigeria (6 per cent), and Kenya (5 per cent).
Emergencies
During disasters or emergencies, remittances can be a vital source of income for people whose other forms of livelihood may have been destroyed by conflict or natural disaster. According to the Overseas Development InstituteOverseas Development Institute
The Overseas Development Institute is one of the leading independent think tanks on international development and humanitarian issues. Based in London, its mission is "to inspire and inform policy and practice which lead to the reduction of poverty, the alleviation of suffering and the achievement...
, this is being increasingly recognized as important by aid actors who are considering better ways of supporting people in emergency responses.
Potential security concerns
The recent internationally coordinated effort to stifle possible sources of money laundering and/or terrorist financingTerrorist Financing
Terrorist financing came into limelight after the events of terrorism on 9/11. The US passed the USA PATRIOT Act to, among other reasons, attempt thwarting the financing of terrorism and anti-money laundering making sure these were given some sort of adequate focus by US financial institutions...
has increased the cost of sending remittances directly increasing costs to the companies facilitating the sending and indirectly to the person remitting. As in some corridors a sizable amount of remittances is sent through informal channels (family connections, traveling friends, local money lenders, etc.). According to the World Bank, some countries do not report remittances data. Moreover, when data is available, the methodologies used by countries for remittance data compilation are not publicly available. A 2010 world survey of central banks found significant differences in the quality of remittance data collection across countries: some central banks only used remittances data reported from commercial banks, neglecting to account for remittance flows via money transfer operators and post offices.
Remittances can be difficult to track and potentially sensitive to money laundering (AML) and terror financing (CFT) concerns. Since 9/11 many governments and the Financial Action Task Force (FATF) have taken steps to address informal value transfer system
Informal value transfer system
An informal value transfer system refers to any system, mechanism, or network of people that receives money for the purpose of making the funds or an equivalent value payable to a third party in another geographic location, whether or not in the same form...
s. This is done through nations' Financial Intelligence Units (FIUs). The principle legislative initiatives in this area are the USA PATRIOT Act, Title III
USA PATRIOT Act, Title III
The USA PATRIOT Act was passed by the United States Congress in 2001 as a response to the September 11, 2001 attacks. It has ten titles, each containing numerous sections...
in the United States and, in the EU, through a series of EU Money Laundering Directives. Though no serious terror risk should be associated with migrants sending money to their families, misuse of the financial system remains a serious government concern.
Top recipient countries
| Country | Remittances 2006 | Remittances 2007 | Remittances | Remittances 2009 | Remittances |
|---|---|---|---|---|---|
| Israel Israel The State of Israel is a parliamentary republic located in the Middle East, along the eastern shore of the Mediterranean Sea... |
$ 13.5 billion | $ 14.4 billion | $ 16.6 billion | $ 20.2 billion | NA |
| India India India , officially the Republic of India , is a country in South Asia. It is the seventh-largest country by geographical area, the second-most populous country with over 1.2 billion people, and the most populous democracy in the world... |
$ 26.9 billion | $ 27 billion | $ 45 billion | $ 55.06 billion | $ 55 billion |
| China China Chinese civilization may refer to:* China for more general discussion of the country.* Chinese culture* Greater China, the transnational community of ethnic Chinese.* History of China* Sinosphere, the area historically affected by Chinese culture... |
$ 22.52 billion | $25.7 billion | $ 40.5 billion | NA | $ 51 billion |
| Philippines Philippines The Philippines , officially known as the Republic of the Philippines , is a country in Southeast Asia in the western Pacific Ocean. To its north across the Luzon Strait lies Taiwan. West across the South China Sea sits Vietnam... |
$ 12.7 billion | $ 14.4 billion | $ 16.4 billion | $ 17.3 billion | $ 21.3 billion |
| Mexico Mexico The United Mexican States , commonly known as Mexico , is a federal constitutional republic in North America. It is bordered on the north by the United States; on the south and west by the Pacific Ocean; on the southeast by Guatemala, Belize, and the Caribbean Sea; and on the east by the Gulf of... |
$ 25.6 billion | $ 26.1 billion | $ 25.1 billion | $ 21.2 billion | $ 22.6 billion |
| Poland Poland Poland , officially the Republic of Poland , is a country in Central Europe bordered by Germany to the west; the Czech Republic and Slovakia to the south; Ukraine, Belarus and Lithuania to the east; and the Baltic Sea and Kaliningrad Oblast, a Russian exclave, to the north... |
$ 8.5 billion | $ 12.5 billion | $ 13.75 billion | NA | $ 9.1 billion |
| Bangladesh Bangladesh Bangladesh , officially the People's Republic of Bangladesh is a sovereign state located in South Asia. It is bordered by India on all sides except for a small border with Burma to the far southeast and by the Bay of Bengal to the south... |
$ 5.5 billion | $ 6.6 billion | $ 9.0 billion | $ 10.7 billion | $ 11.7 billion |
| Nigeria Nigeria Nigeria , officially the Federal Republic of Nigeria, is a federal constitutional republic comprising 36 states and its Federal Capital Territory, Abuja. The country is located in West Africa and shares land borders with the Republic of Benin in the west, Chad and Cameroon in the east, and Niger in... |
NA | NA | NA | $ 9.6 billion | $ 10 billion |
| Pakistan Pakistan Pakistan , officially the Islamic Republic of Pakistan is a sovereign state in South Asia. It has a coastline along the Arabian Sea and the Gulf of Oman in the south and is bordered by Afghanistan and Iran in the west, India in the east and China in the far northeast. In the north, Tajikistan... |
$ 5.1 billion | $ 6.0 billion | $ 7.0 billion | $ 8.7 billion | $ 12.94 billion |
| Morocco Morocco Morocco , officially the Kingdom of Morocco , is a country located in North Africa. It has a population of more than 32 million and an area of 710,850 km², and also primarily administers the disputed region of the Western Sahara... |
$ 5.1 billion | $ 5.7 billion | $ 6.9 billion | $ 8.0 billion | $ 6.4 billion |
| Vietnam Vietnam Vietnam – sometimes spelled Viet Nam , officially the Socialist Republic of Vietnam – is the easternmost country on the Indochina Peninsula in Southeast Asia. It is bordered by China to the north, Laos to the northwest, Cambodia to the southwest, and the South China Sea –... |
NA | NA | $ 7.2 billion | $ 6.8 billion | $ 7.2 billion |
Central Bank data for: Bangladesh, Mexico, Pakistan, Philippines
Economic benefits
As remittance receivers often have a higher propensity to own a bank account, remittances promote access to financial services for the sender and recipient, an essential aspect of leveraging remittances to promote economic development.The stability of remittance flows despite financial crises and economic downturns make them a reliable financial resource for developing countries. As migrant remittances are sent cumulatively over the years and not only by new migrants, remittances are able to be persistent over time. At the state level, countries with diversified migration destinations are likely to have more sustainable remittance flows.
A 2011 study develops a long-run growth model for a labour exporting country that receives large inflows of external income - the sum of remittances, FDI and general government transfers - from major oil exporting economies. The long-run economic benefits of external income is then evaluated using data for Jordan.
External links
- Integration : Building Inclusive Societies (IBIS) UN Alliance of Civilizations online community on Good Practices of Integration of Migrants across the World
- Outlook for remittance flows to developing countries: Recovery after the global financial crisis but risks lie ahead
- Migration and Remittances