A remittance is a non-commercial
transfer of money by a
foreign worker, a member of a
diaspora
A diaspora ( ) is a population that is scattered across regions which are separate from its geographic place of origin. Historically, the word was used first in reference to the dispersion of Greeks in the Hellenic world, and later Jews afte ...
community, or a
citizen
Citizenship is a "relationship between an individual and a state to which the individual owes allegiance and in turn is entitled to its protection".
Each state determines the conditions under which it will recognize persons as its citizens, and ...
with familial ties abroad, for household income in their home country or
homeland
A homeland is a place where a cultural, national, or racial identity has formed. The definition can also mean simply one's country of birth. When used as a proper noun, the Homeland, as well as its equivalents in other languages, often has ethn ...
. Money sent home by migrants competes with
international aid as one of the largest financial inflows to
developing countries
A developing country is a sovereign state with a lesser developed Industrial sector, industrial base and a lower Human Development Index (HDI) relative to other countries. However, this definition is not universally agreed upon. There is al ...
. Workers' remittances are a significant part of international
capital flows, especially with regard to labor-exporting countries.
According to the
World Bank
The World Bank is an international financial institution that provides loans and grants to the governments of low- and middle-income countries for the purpose of pursuing capital projects. The World Bank is the collective name for the Inte ...
, in 2018 overall global remittance grew 10% to US$689 billion, including US$528 billion to developing countries.
[ Overall global remittance is expected to grow 3.7% to US$715 billion in 2019, including US$549 billion to developing nations.][India to retain top position in remittances with $80 billion: World Bank]
Economic Times, 9 Dec 2018.
Due to its large diaspora and overseas expats population, India consecutively remains the top receiver of remittance, e.g. with US$80 billion in 2018,[ US$65.3 billion (2.7% of India's GDP) in 2017,][ US$62.7 billion in 2016][ and US$70 billion in 2014.] Other top recipients in 2020 were US$67 billion to China, US$34 billion each to Philippines and Mexico and US$26 billion to Egypt.[
]
Global extent
Remittances are playing an increasingly large role in the economies of many countries. They contribute to economic growth and to the livelihoods of those countries. According to World Bank
The World Bank is an international financial institution that provides loans and grants to the governments of low- and middle-income countries for the purpose of pursuing capital projects. The World Bank is the collective name for the Inte ...
estimates, remittances will total US$573 billion in 2019, of which US$422 billion went to developing countries that involved 250 million migrant worker
A migrant worker is a person who migrates within a home country or outside it to pursue work. Migrant workers usually do not have the intention to stay permanently in the country or region in which they work.
Migrant workers who work outsi ...
s. For some individual recipient countries, remittances can be as high as a third of their GDP.
International remittances have a major impact on the developing economies of the world with the majority of remittances, $441 billion in 2015, going to developing nations. This amount is nearly triple the $131 billion of global Official Development Assistance
Official development assistance (ODA) is a category used by the Development Assistance Committee (DAC) of the Organisation for Economic Co-operation and Development (OECD) to measure foreign aid. The DAC first adopted the concept in 1969. It i ...
. For many developing nations, remittances received make up a significant portion of their economies, even receiving over 10% of their GDP in remittances each year.
Top recipient countries
Note: The countries mentioned below are the largest 15 recipient countries of remittances ''only'' for the year 2013. World Bank data is used for all countries and years.
As a share of GDP, the top recipients of remittances in 2013 were Tajikistan
Tajikistan (, ; tg, Тоҷикистон, Tojikiston; russian: Таджикистан, Tadzhikistan), officially the Republic of Tajikistan ( tg, Ҷумҳурии Тоҷикистон, Jumhurii Tojikiston), is a landlocked country in Centr ...
(42.1%), Kyrgyzstan
Kyrgyzstan,, pronounced or the Kyrgyz Republic, is a landlocked country in Central Asia. Kyrgyzstan is bordered by Kazakhstan to the north, Uzbekistan to the west, Tajikistan to the south, and the People's Republic of China to the ea ...
(31.5%), Nepal
Nepal (; ne, नेपाल ), formerly the Federal Democratic Republic of Nepal ( ne,
सङ्घीय लोकतान्त्रिक गणतन्त्र नेपाल ), is a landlocked country in South Asia. It is ma ...
(28.8%), Moldova
Moldova ( , ; ), officially the Republic of Moldova ( ro, Republica Moldova), is a landlocked country in Eastern Europe. It is bordered by Romania to the west and Ukraine to the north, east, and south. The unrecognised state of Transnist ...
(24.9%), Lesotho
Lesotho ( ), officially the Kingdom of Lesotho, is a country landlocked as an enclave in South Africa. It is situated in the Maloti Mountains and contains the highest mountains in Southern Africa. It has an area of over and has a populatio ...
(24.4%), Samoa
Samoa, officially the Independent State of Samoa; sm, Sāmoa, and until 1997 known as Western Samoa, is a Polynesian island country consisting of two main islands (Savai'i and Upolu); two smaller, inhabited islands (Manono Island, Manono an ...
(23.8%), Haiti
Haiti (; ht, Ayiti ; French: ), officially the Republic of Haiti (); ) and formerly known as Hayti, is a country located on the island of Hispaniola in the Greater Antilles archipelago of the Caribbean Sea, east of Cuba and Jamaica, and ...
(21.1%), Armenia
Armenia (), , group=pron officially the Republic of Armenia,, is a landlocked country in the Armenian Highlands of Western Asia.The UNbr>classification of world regions places Armenia in Western Asia; the CIA World Factbook , , and ...
(21.0%), The Gambia
The Gambia,, ff, Gammbi, ar, غامبيا officially the Republic of The Gambia, is a country in West Africa
West Africa or Western Africa is the westernmost region of Africa. The United Nations defines Western Africa as the 16 c ...
(19.8%), Liberia
Liberia (), officially the Republic of Liberia, is a country on the West African coast. It is bordered by Sierra Leone to its northwest, Guinea to its north, Ivory Coast to its east, and the Atlantic Ocean to its south and southwest. It ...
(18.5%), Lebanon
Lebanon ( , ar, لُبْنَان, translit=lubnān, ), officially the Republic of Lebanon () or the Lebanese Republic, is a country in Western Asia. It is located between Syria to Lebanon–Syria border, the north and east and Israel to Blue ...
(17.0%), Honduras (16.9%), Timor-Leste
East Timor (), also known as Timor-Leste (), officially the Democratic Republic of Timor-Leste, is an island country in Southeast Asia. It comprises the eastern half of the island of Timor, the exclave of Oecusse on the island's north-wes ...
(16.6%), El Salvador
El Salvador (; , meaning " The Saviour"), officially the Republic of El Salvador ( es, República de El Salvador), is a country in Central America. It is bordered on the northeast by Honduras, on the northwest by Guatemala, and on the south by ...
(16.4%), Kosovo
Kosovo ( sq, Kosova or ; sr-Cyrl, Косово ), officially the Republic of Kosovo ( sq, Republika e Kosovës, links=no; sr, Република Косово, Republika Kosovo, links=no), is a partially recognised state in Southeast Eur ...
(16.1%), Jamaica
Jamaica (; ) is an island country situated in the Caribbean Sea. Spanning in area, it is the third-largest island of the Greater Antilles and the Caribbean (after Cuba and Hispaniola). Jamaica lies about south of Cuba, and west of Hispan ...
(15.0%) and Bosnia and Herzegovina
Bosnia and Herzegovina ( sh, / , ), abbreviated BiH () or B&H, sometimes called Bosnia–Herzegovina and often known informally as Bosnia, is a country at the crossroads of south and southeast Europe, located in the Balkans. Bosnia and ...
(8.82%, which is 1.540 billion $ for 2017 on 31 December 2017 conversion rate between € and US$).
Major operators
The remittance industry has mostly been dominated by companies headquartered in European financial centers and the American West
The Western United States (also called the American West, the Far West, and the West) is the region comprising the westernmost states of the United States. As American settlement in the U.S. expanded westward, the meaning of the term ''the Wes ...
, with Western Union
The Western Union Company is an American multinational financial services company, headquartered in Denver, Colorado.
Founded in 1851 as the New York and Mississippi Valley Printing Telegraph Company in Rochester, New York, the company ch ...
having the largest market share as of 2019. Other companies such as MoneyGram have also been a key player for decades. Most companies in the industry are pure play money transfer providers, although they may be owned by parent companies with more diverse interests.
Each of these companies focus on different consumer bases. Wise WISE may refer to:
Arts, entertainment, and media
* WISE (AM), a radio station licensed to Asheville, North Carolina
*WISE-FM, a radio station licensed to Wise, Virginia
* WISE-TV, a television station licensed to Fort Wayne, Indiana
Education
* ...
has been the fastest-growing money transfer startup in terms of total annual volume transferred, and focuses on transferring funds between bank accounts, often between developed countries. Ria Money Transfer has had an established presence among Spanish speakers in North America and Spain. WorldRemit has a higher share of African migrants located worldwide, while Azimo focuses specifically on the European market with an emphasis on migrant communities. Companies such as WorldRemit, Remitly, and Azimo have smaller average transfer amounts due to the higher share of working-class migrants using their services.
Although the remittance market share has diversified since the advent of money transfer " fintech" (financial technology startups) during the 2010s, Western Union
The Western Union Company is an American multinational financial services company, headquartered in Denver, Colorado.
Founded in 1851 as the New York and Mississippi Valley Printing Telegraph Company in Rochester, New York, the company ch ...
continues to dominate the majority of the remittance market share. Since the advent of fintech, many digital remittances have emerged on the scene, leading to the rise of comparison platforms or aggregators such as FXcompared and Monito in Europe and Send4x in Southeast Asia. Blockchain
A blockchain is a type of distributed ledger technology (DLT) that consists of growing lists of records, called ''blocks'', that are securely linked together using cryptography. Each block contains a cryptographic hash of the previous block, ...
-based remittances companies are also starting to be used and offer such advantages as fast transfer time and relatively low transaction costs.[How Blockchain-based technology is disrupting migrants' remittances: a preliminary assessment](_blank)
/ref>
There is also a relevant initiative, launched by the Bill and Melinda Gates Foundation
The Bill & Melinda Gates Foundation (BMGF), a merging of the William H. Gates Foundation and the Gates Learning Foundation, is an American private foundation founded by Bill Gates and Melinda French Gates. Based in Seattle, Washington, it was ...
in 2017, called Mojaloop. It is designed (in cooperation with Ripple, Dwolla, ModusBox, Crosslake Technologies and Software Group) to deliver financial support to people living in areas underserved by banks.
By region
The US has been the leading source of remittances globally every year since 1983. Russia
Russia (, , ), or the Russian Federation, is a transcontinental country spanning Eastern Europe and Northern Asia. It is the largest country in the world, with its internationally recognised territory covering , and encompassing one-eigh ...
, Saudi Arabia
Saudi Arabia, officially the Kingdom of Saudi Arabia (KSA), is a country in Western Asia. It covers the bulk of the Arabian Peninsula, and has a land area of about , making it the List of Asian countries by area, fifth-largest country in Asia ...
, and Switzerland have been the next largest senders of remittances since 2007. Between 9 million and 11 million workers send remittances from Russia each year.
Asia
A majority of the remittances have been directed to Asian countries like India
India, officially the Republic of India ( Hindi: ), is a country in South Asia. It is the seventh-largest country by area, the second-most populous country, and the most populous democracy in the world. Bounded by the Indian Ocean on the ...
(approx. US$87.0 billion in 2021), China (approx. US$ 60.0 billion in 2021), the Philippines
The Philippines (; fil, Pilipinas, links=no), officially the Republic of the Philippines ( fil, Republika ng Pilipinas, links=no),
* bik, Republika kan Filipinas
* ceb, Republika sa Pilipinas
* cbk, República de Filipinas
* hil, Republ ...
(approx. US$33.5 billion in 2020), Pakistan
Pakistan ( ur, ), officially the Islamic Republic of Pakistan ( ur, , label=none), is a country in South Asia. It is the world's List of countries and dependencies by population, fifth-most populous country, with a population of almost 24 ...
(US$26.0 billion in 2020), Bangladesh
Bangladesh (}, ), officially the People's Republic of Bangladesh, is a country in South Asia. It is the List of countries and dependencies by population, eighth-most populous country in the world, with a population exceeding 165 million pe ...
(US$21.5 billion in 2020) and more. Asian countries such as Tajikistan
Tajikistan (, ; tg, Тоҷикистон, Tojikiston; russian: Таджикистан, Tadzhikistan), officially the Republic of Tajikistan ( tg, Ҷумҳурии Тоҷикистон, Jumhurii Tojikiston), is a landlocked country in Centr ...
and Nepal
Nepal (; ne, नेपाल ), formerly the Federal Democratic Republic of Nepal ( ne,
सङ्घीय लोकतान्त्रिक गणतन्त्र नेपाल ), is a landlocked country in South Asia. It is ma ...
are among the countries that rely the most on remittances, accounting for 35% and 25% of their GDP respectively.
Most of the remittances happen by the conventional channel of agents, like Western Union
The Western Union Company is an American multinational financial services company, headquartered in Denver, Colorado.
Founded in 1851 as the New York and Mississippi Valley Printing Telegraph Company in Rochester, New York, the company ch ...
, Ria Money Transfer, Sigue Money Transfer
"Sigue" is a song by Colombian singer J Balvin and British singer-songwriter Ed Sheeran. It was released as a single through Universal Music Latin Entertainment on 25 March 2022, concurrently with their other collaboration, " Forever My Love" ...
, MoneyGram, UAE Exchange, and similar. However, with the increasing relevance and reach of the Internet, online and mobile phone money transfers have grown significantly.
Armenia
Remittances are a major component of the Armenian economy
The Armenian economy contracted sharply in 2020, by 5.7%, mainly due to the 2020 Armenia-Azerbaijan war. In contrast it grew by 7.6 per cent in 2019, the largest recorded growth since 2007, while between 2012 and 2018 GDP grew 40.7%, and key ba ...
. making up about 13% of Armenia’s GDP in 2011. In 2013 around 40% of families of Armenia have received remittances. As a result, Armenia falls in the top 20 countries worldwide for receiving remittances. Total remittances to Armenia have reached their peak in 2013 being equal to $2.192 billion but plummeted after the 2014 Russian ruble devaluation and reached $1.528 billion in 2019.
Armenia falls in the top 20 countries worldwide for receiving remittances. Armenia, being a country with one of the largest diasporas in the world, provides a case study of a developing economy that is dependent on remittances and the financial support they provide. Total remittances to Armenia reached $1.87 billion in 2013, a 10.8%
A study conducted in 2004
examined the impact of remittances from a micro perspective, and determined that households with average income were the most likely to have a family member abroad because poorer households lacked the financial ability to send family members out of the country and the most wealthy households did not have a reason to.
In 2017, the majority of remittance flows to Armenia originated from Russia, about 60.5% of overall remittances. The figure amounted to nearly $945 million due to more than 2 million Armenian population living in Russia. The next biggest inflows were recorded from the US, over $160 million, 10.25% of the overall figure (around 500,000-1,000,000 Armenian population). According to the IMF, starting from 2010 remittances in USD, AMD (Armenian dram), and Rubles, grew until they hit their peak in 2014 and started declining after that in a volatile fashion as a result of the Russian ruble devaluation. Remittances in AMD and USD declined to almost their 2010 levels.
Bangladesh
An estimated 10 million Bangladeshis, working abroad have sent $15 billion to home in 2018 and $18.32 billion in 2019. It is country's second-largest source of foreign earnings after its gigantic textile industry. Bangladesh is one of the top 10 countries in the world for migration and remittance according to World Bank. Most of the remittances come from gulf countries.
India
India is the world's top receiver of remittances, claiming more than 12% of the world's remittances in 2015. Indians living overseas are the world's largest diaspora. As per the Ministry of Overseas Indian Affairs (MOIA), remittance is received from the approximately 35 million members of the Indian diaspora
Overseas Indians ( IAST: ), officially Non-Resident Indians (NRIs) and Overseas Citizens of India (OCIs) are Indians who live outside of the Republic of India. According to the Government of India, ''Non-Resident Indians'' are citizens of Indi ...
. Remittances to India stood at billion in 2017 and remittances from India to other countries totalled billion, for a net inflow of billion in 2017.
Jordan
The flow of remittances to Jordan experienced rapid growth during the 1970s and 1980s when Jordan started exporting skilled labor to the Persian Gulf
The Persian Gulf ( fa, خلیج فارس, translit=xalij-e fârs, lit=Gulf of Fars, ), sometimes called the ( ar, اَلْخَلِيْجُ ٱلْعَرَبِيُّ, Al-Khalīj al-ˁArabī), is a mediterranean sea in Western Asia. The bo ...
. These remittances represent an important source of funding for many developing countries, including Jordan. According to the World Bank data on remittances, with about US$3 billion in 2010 Jordan ranked at 10th place among all developing countries. Jordan ranked among the top 20 recipients of remittances for the preceding decade. In addition, the Arab Monetary Fund (AMF) statistics in 2010 indicate that Jordan was the third biggest recipient of remittances among Arab countries after Egypt and Lebanon. The host countries that have absorbed most of the Jordanian expatriates are Saudi Arabia and the United Arab Emirates, where the available data indicate that about 90% of Jordanian migrants are working in the Persian Gulf.
Philippines
According to a World Bank
The World Bank is an international financial institution that provides loans and grants to the governments of low- and middle-income countries for the purpose of pursuing capital projects. The World Bank is the collective name for the Inte ...
Study, the Philippines is the second largest recipient for remittances in Asia. It was estimated in 1994 that migrants sent over US$2.6 billion back to the Philippines through formal banking systems. With the addition of money sent through private finance companies and return migrants, the 1994 total was closer to US$6 billion annually.
The total is estimated to have grown by 7.8 percent annually to reach US$21.3 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 America
Latin America or
* french: Amérique Latine, link=no
* ht, Amerik Latin, link=no
* pt, América Latina, link=no, name=a, sometimes referred to as LatAm is a large cultural region in the Americas where Romance languages — languages derived ...
and the Caribbean, remittances play an important role in the economy of the region, totaling over US$66.5 billion 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
Mexico ( Spanish: México), officially the United Mexican States, is a country in the southern portion of North America. It is bordered to the north by the United States; to the south and west by the Pacific Ocean; to the southeast by Guate ...
, to 18% in El Salvador
El Salvador (; , meaning " The Saviour"), officially the Republic of El Salvador ( es, República de El Salvador), is a country in Central America. It is bordered on the northeast by Honduras, on the northwest by Guatemala, and on the south by ...
, 21% in Honduras, and up to 30% in Haiti
Haiti (; ht, Ayiti ; French: ), officially the Republic of Haiti (); ) and formerly known as Hayti, is a country located on the island of Hispaniola in the Greater Antilles archipelago of the Caribbean Sea, east of Cuba and Jamaica, and ...
. The Inter American Development Bank's Multilateral Investment Fund (IDB-MIF) has been the leading agency on regional remittance research.
Mexico received remittance inflows of almost US$24 billion in 2007, 95% of which originated in the US.
North America
United States
A 2004 study found 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.[E. Carrasco & J. Ro (2007).]
Remittances and Development
(ebook). University of Iowa Center for International Finance and Development.
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 to 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.
Remittance culture in the United States has contributed to the formation of "micro-geographies", tightly knit networks that integrate U.S. communities with communities throughout Latin America, such as migrants from Oaxaca
)
, population_note =
, population_rank = 10th
, timezone1 = CST
, utc_offset1 = −6
, timezone1_DST = CDT
, utc_offset1_DST = −5
, postal_code_type = Postal ...
, 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 United States to Latin America
Latin America or
* french: Amérique Latine, link=no
* ht, Amerik Latin, link=no
* pt, América Latina, link=no, name=a, sometimes referred to as LatAm is a large cultural region in the Americas where Romance languages — languages derived ...
have been on the decline. While there were US$69.2 billion worth of remittances sent in 2008, that figure has fallen to $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
The coyote (''Canis latrans'') is a species of canine native to North America. It is smaller than its close relative, the wolf, and slightly smaller than the closely related eastern wolf and red wolf. It fills much of the same ecological nich ...
to smuggle immigrants across the border.
The pattern of migration has changed from a circular flow, in which immigrants work in the United States 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 is both less likely to leave and more likely to stay in the United States 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 in national economies. However, little data exists as many rely on informal channels to send money home. Immigrants from Africa today number approximately 20 to 30 million adults, who send around US$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, which allows these Money Transfer Operators (MTOs) to charge the highest fees for remittances in the world. However, there are a number of new players aiming to disrupt this established MTO model, such as Xoom and Willstream, which leverage increasing mobile phone penetration in the region and provide different rate structures to Diaspora customers. Additionally, global initiative like the United Nations Sustainable Development Goal 10
Sustainable Development Goal 10 (Goal 10 or SDG 10) is about reduced inequality and is one of the 17 Sustainable Development Goals established by the United Nations in 2015. The full title is: "Reduce inequality within and among countries".Unite ...
has a target of reducing the transaction costs of migrant remittances to less than 3 percent by 2030.
According to a World Bank study, Nigeria is by far the top remittance recipient in Africa
Africa is the world's second-largest and second-most populous continent, after Asia in both cases. At about 30.3 million km2 (11.7 million square miles) including adjacent islands, it covers 6% of Earth's total surface area ...
, 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
)
, national_anthem = " Ee Mungu Nguvu Yetu"()
, image_map =
, map_caption =
, image_map2 =
, capital = Nairobi
, coordinates =
, largest_city = Nairobi
, ...
($1.8 billion), Senegal
Senegal,; Wolof: ''Senegaal''; Pulaar: 𞤅𞤫𞤲𞤫𞤺𞤢𞥄𞤤𞤭 (Senegaali); Arabic: السنغال ''As-Sinighal'') officially the Republic of Senegal,; Wolof: ''Réewum Senegaal''; Pulaar : 𞤈𞤫𞤲𞤣𞤢𞥄𞤲𞤣 ...
($1.2 billion), South Africa
South Africa, officially the Republic of South Africa (RSA), is the southernmost country in Africa. It is bounded to the south by of coastline that stretch along the South Atlantic and Indian Oceans; to the north by the neighbouring count ...
($1.0 billion), Uganda
}), is a landlocked country in East Africa. The country is bordered to the east by Kenya, to the north by South Sudan, to the west by the Democratic Republic of the Congo, to the south-west by Rwanda, and to the south by Tanzania. The south ...
($0.8 billion), Lesotho
Lesotho ( ), officially the Kingdom of Lesotho, is a country landlocked as an enclave in South Africa. It is situated in the Maloti Mountains and contains the highest mountains in Southern Africa. It has an area of over and has a populatio ...
($0.5 billion), Ethiopia
Ethiopia, , om, Itiyoophiyaa, so, Itoobiya, ti, ኢትዮጵያ, Ítiyop'iya, aa, Itiyoppiya officially the Federal Democratic Republic of Ethiopia, is a landlocked country in the Horn of Africa. It shares borders with Eritrea to the Er ...
($387 million), Mali
Mali (; ), officially the Republic of Mali,, , ff, 𞤈𞤫𞤲𞥆𞤣𞤢𞥄𞤲𞤣𞤭 𞤃𞤢𞥄𞤤𞤭, Renndaandi Maali, italics=no, ar, جمهورية مالي, Jumhūriyyāt Mālī is a landlocked country in West Africa. Ma ...
($385 million), and Togo
Togo (), officially the Togolese Republic (french: République togolaise), is a country in West Africa. It is bordered by Ghana to the west, Benin to the east and Burkina Faso to the north. It extends south to the Gulf of Guinea, where its ...
($302 million). As a share of Gross Domestic Product
Gross domestic product (GDP) is a money, monetary Measurement in economics, measure of the market value of all the final goods and services produced and sold (not resold) in a specific time period by countries. Due to its complex and subjec ...
, the top recipients in 2009 were: Lesotho
Lesotho ( ), officially the Kingdom of Lesotho, is a country landlocked as an enclave in South Africa. It is situated in the Maloti Mountains and contains the highest mountains in Southern Africa. It has an area of over and has a populatio ...
(25%), Togo (10%), Cape Verde
, national_anthem = ()
, official_languages = Portuguese
, national_languages = Cape Verdean Creole
, capital = Praia
, coordinates =
, largest_city = capital
, demonym ...
(9%), Guinea-Bissau
Guinea-Bissau ( ; pt, Guiné-Bissau; ff, italic=no, 𞤘𞤭𞤲𞤫 𞤄𞤭𞤧𞤢𞥄𞤱𞤮, Gine-Bisaawo, script=Adlm; Mandinka: ''Gine-Bisawo''), officially the Republic of Guinea-Bissau ( pt, República da Guiné-Bissau, links=no ), ...
(9%), Senegal
Senegal,; Wolof: ''Senegaal''; Pulaar: 𞤅𞤫𞤲𞤫𞤺𞤢𞥄𞤤𞤭 (Senegaali); Arabic: السنغال ''As-Sinighal'') officially the Republic of Senegal,; Wolof: ''Réewum Senegaal''; Pulaar : 𞤈𞤫𞤲𞤣𞤢𞥄𞤲𞤣 ...
(9%), Gambia
The Gambia,, ff, Gammbi, ar, غامبيا officially the Republic of The Gambia, is a country in West Africa. It is the smallest country within mainland AfricaHoare, Ben. (2002) ''The Kingfisher A-Z Encyclopedia'', Kingfisher Publicatio ...
(8%), Liberia
Liberia (), officially the Republic of Liberia, is a country on the West African coast. It is bordered by Sierra Leone to its northwest, Guinea to its north, Ivory Coast to its east, and the Atlantic Ocean to its south and southwest. It ...
(6%), Sudan (6%), Nigeria
Nigeria ( ), , ig, Naìjíríyà, yo, Nàìjíríà, pcm, Naijá , ff, Naajeeriya, kcg, Naijeriya officially the Federal Republic of Nigeria, is a country in West Africa. It is situated between the Sahel to the north and the Gulf of G ...
(6%), and Kenya
)
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(5%).
Nigeria
A major source of foreign-exchange earnings for Nigeria are remittances sent home by Nigerians living abroad. In 2014, 17.5 million Nigerians lived in foreign countries, with the UK and the US having more than 2 million Nigerians each.
According to the International Organization for Migration
The International Organization for Migration (IOM) is a United Nations agency that provides services and advice concerning migration to governments and migrants, including internally displaced persons, refugees, and migrant workers.
The IOM w ...
, Nigeria witnessed a dramatic increase in remittances sent home from overseas Nigerians, going from US$2.3 billion in 2004 to 17.9 billion in 2007, representing 6.7% of GDP. In 2016, remittances reached a new record of $35 billion. The United States accounts for the largest portion of official remittances, followed by the United Kingdom, Italy, Canada, Spain and France. On the African continent, Egypt, Equatorial Guinea, Chad, Libya, and South Africa are important source countries of remittance flows to Nigeria, while China is the biggest remittance-sending country in Asia.
An August 2016 Nigerian Central Bank (NCB) decision to suspend the operations of all MTOs in the country, except those of Western Union, MoneyGram and Rio, was met with a strong backlash. It was argued that the decision was not appropriately justified, while also standing in contrast to the NCB's previous move to ban all exclusivity agreements with Western Union. The decision was considered to disproportionally strengthen the dominant position of Western Union, MoneyGram and Rio. Under pressure, however, the Central Bank reversed the decision and granted new licenses to a number of competing MTOs.
Somalia
Somali expatriates often send remittances to their relatives in Greater Somalia through Dahabshiil and other Somali-owned money transfer companies. In order to ensure that these funds go to their intended recipients rather than Al-Shabaab and other militant groups, the governments of the United States, Australia, and a number of other Western countries tightened their banking requirements or stopped processing altogether the remittances. To address the concerns, the United States Congress
The United States Congress is the legislature of the federal government of the United States. It is bicameral, composed of a lower body, the House of Representatives, and an upper body, the Senate. It meets in the U.S. Capitol in Washi ...
passed the Money Remittances Improvement Act of 2014
The Money Remittances Improvement Act of 2014 (; ) is a bill that passed in the United States House of Representatives during the 113th United States Congress. The bill would "allow the Treasury secretary to use state examinations for certain fina ...
.
In April 2015, the Federal Cabinet of Somalia also officially launched the Special Task Force on Remittances (STFR). The multi-agency initiative is mandated with facilitating the Federal Government of Somalia
The Government of Somalia (GS) ( so, Dowladda Soomaaliya, ar, حكومة الصومال الاتحادية) is the internationally recognised government of Somalia
Somalia, , Osmanya script: 𐒈𐒝𐒑𐒛𐒐𐒘𐒕𐒖; ar, ا ...
's new national policy pertaining to the money transfer industry. Its main priority is centered on establishing a comprehensive strategy and a consultative implementation plan for the formalization of the local financial sector. Additionally, the STFR is tasked with helping to foster a business environment and financial infrastructure conducive to growth. It is also empowered to coordinate and speed up the endorsement of financial governance instruments and transparency associated legislation, such as the laws on Anti-Money Laundering (AML) and Counter Financing of Terrorism (CFT). In accordance with the Financial Action Task Force (FATF)'s recommendations, the STFR is in turn slated to oversee the Somali federal government's campaign to ratify various international treaties. The Task Forces' membership is scheduled to be announced shortly, and will be drawn from government institutions, the remittance industry, banks, and other key private sector stakeholders.
History
Remittances are not a new phenomenon in the world, being a normal concomitant of migration which has always been a part of human history. Several European countries, for example Spain
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, national_motto = '' Plus ultra'' ( Latin)(English: "Further Beyond")
, national_anthem = (English: "Royal March")
, ...
, Italy
Italy ( it, Italia ), officially the Italian Republic, ) or the Republic of Italy, is a country in Southern Europe. It is located in the middle of the Mediterranean Sea, and its territory largely coincides with the homonymous geographical ...
and Ireland
Ireland ( ; ga, Éire ; Ulster Scots dialect, Ulster-Scots: ) is an island in the Atlantic Ocean, North Atlantic Ocean, in Northwestern Europe, north-western Europe. It is separated from Great Britain to its east by the North Channel (Grea ...
were heavily dependent on remittances received from their emigrants during the 19th and 20th centuries. In the case of Spain, remittances amounted to 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.
Since 2000, remittances have increased sharply worldwide, having almost tripled to $529 billion in 2012. In 2012, migrants from India and China alone sent more than $130 billion to their home countries.
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
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, date_est ...
's Department for International Development
The Department for International Development (DFID) was a department of HM Government responsible for administering foreign aid from 1997 to 2020. The goal of the department was "to promote sustainable development and eliminate world poverty". D ...
(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 Worldwide Database provides data on sending and receiving remittances for over 200 "country corridors" worldwide. The "corridors" examined include remittance flows from 32 major sending countries to 89 receiving countries, which account for more than 60% of total remittances to developing countries. The resulting publication of the Remittance Prices Worldwide 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 the July 2009 summit in L'Aquila
L'Aquila ( , ) is a city and ''comune'' in central Italy. It is the capital city of both the Abruzzo region and of the Province of L'Aquila. , it has a population of 70,967 inhabitants. Laid out within medieval walls on a hill in the wide vall ...
, Italy
Italy ( it, Italia ), officially the Italian Republic, ) or the Republic of Italy, is a country in Southern Europe. It is located in the middle of the Mediterranean Sea, and its territory largely coincides with the homonymous geographical ...
, 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.
At the G20 2011 Summit in Cannes
Cannes ( , , ; oc, Canas) is a city located on the French Riviera. It is a commune located in the Alpes-Maritimes department, and host city of the annual Cannes Film Festival, Midem, and Cannes Lions International Festival of Creativity. The ci ...
, Bill Gates
William Henry Gates III (born October 28, 1955) is an American business magnate and philanthropist. He is a co-founder of Microsoft, along with his late childhood friend Paul Allen. During his career at Microsoft, Gates held the positions ...
stated that, "If the transaction costs on remittances worldwide were cut from where they are today at around 10% to an average of 5%…it would unlock $15bn a year in poor countries." A number of low-cost online services have emerged with the objective of lowering the cost of money transfers to developing and emerging economies. There are also a number of comparison sites when it comes to remittance which breaks down the costs of sending money overseas. The World Bank stated that remittance to low- and middle-income countries reached $529 billion in 2018, which was a record high.
Dynamics
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 Institute
ODI (formerly the 'Overseas Development Institute') is a global affairs think tank, founded in 1960. Its mission is "to inspire people to act on injustice and inequality through collaborative research and ideas that matter for people and the ...
, this is being increasingly recognized as important by aid actors who are considering better ways of supporting people in emergency responses. An illustrative example can be Armenia, that had experienced a devastating earthquake in Spitak on December 7, 1988, when the Karabakh conflict had already started. About 45,000 people have died, while 500,000 became homeless. Armenia got help from different countries, for example, the U.S. government immediately sent $10 million, which helped to more or less recover the economy. Refugees and other displaced populations also often remit to family members left behind in conflict areas.
Potential security concerns
The recent internationally coordinated effort to stifle possible sources of money laundering and/or terrorist financing
Terrorism financing is the provision of funds or providing financial support to individual terrorists or non-state actors.
Most countries have implemented measures to counter terrorism financing (CTF) often as part of their money laundering la ...
has increased the cost of sending remittances, directly increasing costs to the companies facilitating the sending, and indirectly increasing the costs 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 (CTF) concerns. Since 9/11 many governments and the Financial Action Task Force (FATF) have taken steps to address informal value transfer systems. This is done through nations' Financial Intelligence Units (FIUs). The principle legislative initiatives in this area are the 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. Title III: International Money Laundering Abatement and Financial Anti-Terr ...
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.
Economic benefits for developing countries
The extent to which remittances produce benefits for developing countries is argued.
World Bank economists contend that remittance receivers' higher propensity to own a bank account means that remittances can promote access to financial services for the sender and recipient, claimed to be an essential aspect of leveraging remittances to promote economic development. For example, in Armenia, which has one of the highest remittance to GDP ratios, studies suggest that those households which receive remittances have a higher propensity to save, however, as opposed to some theoretic frameworks, these savings are not used to leverage borrowing more from the financial system as a way to grow their businesses. Other studies suggest that another channel through which remittances can foster economic growth is a household investment. For instance, the study conducted in South Caucasus reveals that in Armenia having a migrant household member is associated with a higher probability of establishing a family business by that household. Thus, the remittances sent by migrants can potentially encourage domestic investment, ensuring economic growth. However, new findings for Armenia suggest that remittances help potential migrants to ease the migration process, serving as a resource rather than as a contractual tool between migrants and non-migrants. It is concluded that remittances drastically shift emigration intentions upward. The need for remittances, and the ability and the strength of the migrant social capital
Social capital is "the networks of relationships among people who live and work in a particular society, enabling that society to function effectively". It involves the effective functioning of social groups through interpersonal relationship ...
(or the network) are factors which jointly determine emigration intentions. Meanwhile, critical migration scholars have expressed concern about the ability of remittances to address the structural causes of economic underdevelopment and see an increasing policy emphasis on finance as symptomatic of a paradigmatic shift towards a 'self-help development' that burdens the poor.
Remittances are generally thought to be counter-cyclical. The stability of remittance flows amidst financial crises and economic downturns make them a reliable source of foreign exchange earnings 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. This is particularly true of remittances sent by circular migrants, migrant workers who move back and forth between their home and host countries in a temporary and repetitive manner. At the state level, countries with diversified migration destinations are likely to have more sustainable remittance flows.
From a macroeconomic perspective, there is no conclusive relationship between remittances and GDP growth. While remittances can boost aggregate demand and thereby spur economic activity, other research indicates that remittances may also have adverse macroeconomic impacts by increasing income inequality and reducing labour supply among recipient countries.
The World Bank
The World Bank is an international financial institution that provides loans and grants to the governments of low- and middle-income countries for the purpose of pursuing capital projects. The World Bank is the collective name for the Inte ...
and the Bank for International Settlements
The Bank for International Settlements (BIS) is an international financial institution owned by central banks that "fosters international monetary and financial cooperation and serves as a bank for central banks".
The BIS carries out its work th ...
have developed international standards for remittance services.
See also
* Hawala
* Money services business
* Money transmitter
*Black tax
Black tax is a term that originated in South Africa for money that Black professionals provide to their family every month outside of their own living expenses, usually out of obligation. It is caused by continued economic imbalance that can be tra ...
References
{{Authority control
International factor movements