A remittance is a transfer of money by a foreign worker to an
individual in his or her home country. Money sent home by migrants
competes with international aid as one of the largest financial
inflows to developing countries. Workers' remittances are a
significant part of international capital flows, especially with
regard to labour-exporting countries. In 2014, $436 billion went to
developing countries, setting a new record. Overall global remittances
totaled $582 billion in 2015. Some countries, such as
China, receive tens of billions of US dollars in remittances each year
from their expatriates and diaspora. In 2014,
India received an
estimated $70 billion and
China an estimated $64 billion.
1 Global extent
1.1 Top recipient countries
2 By region
Latin America and the Caribbean
2.3 North America
2.3.1 United States
4.2 Potential security concerns
4.3 Economic benefits for developing countries
5 See also
7 External links
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 estimates,
remittances will total US$585.1 billion in 2016, of which US$442
billion went to developing countries that involved 250 million
migrant workers. For some individual recipient countries,
remittances can be as high as a third of their GDP.
Top recipient countries
Top recipient countries of remittances (in billions of US Dollar)
Note: These are the largest 15 recipient countries of remittances only
for the year 2013.
World Bank data is used for all countries and
As a share of GDP, the top recipients of remittances in 2013 were
Kyrgyzstan (31.5%), Nepal
Samoa (23.8%), Haiti
The Gambia (19.8%),
Liberia (18.5%), Lebanon
El Salvador (16.4%),
Jamaica (15.0%) and
Bosnia and Herzegovina
Bosnia and Herzegovina (13.4%, which is about
1.817 billion $ on 31 December 2014).
The US has been the leading source of remittances globally in every
year since 1983. Russia, Saudi Arabia, and
Switzerland have been the
next largest senders of remittances since 2007.
A majority of the remittances have been directed to Asian countries
India (approx. 62.7 billion USD in 2016),
China (approx. 61.0
billion USD in 2016), the
Philippines (approx. 29.9 billion USD in
Pakistan (19.8 billion USD in 2016) and more.
Most of the remittances happen by the conventional channel of agents,
like Western Union, Ria Money Transfer, MoneyGram, UAE Exchange, and
similar. However, with the increasing relevance and reach of the
Internet, online and mobile phone money transfers have grown
significantly. Several companies such as Everex are exploring
blockchain (the technology underlying cryptocurrencies such as BitCoin
and Ethereum) to create descentralized microfinance and remittance
services, cutting transaction fees and offering extremely competitive
rates, while at the same time including underbanked individuals
(people without a bank account) to the world economy.
Remittances to India
The flow of remittances to Jordan experienced rapid growth during the
1970s and 1980s when Jordan started exporting skilled labour to the
Persian Gulf. These remittances represent an important source of
funding for many developing countries, including Jordan. According
World Bank data on remittances, with about 3 billion USD 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
A common shop for remittance in Angeles City, 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 US$2.6 billion back to the
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 per cent 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
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
Latin America 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
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.
Mexico received remittance inflows of almost US$24 billion in 2007,
95% of which originated in the US.
Remittances from the 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
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, 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
have been on the decline. While there were USD 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 to smuggle immigrants across the
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 are 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 play an important role to 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 $40 billion USD 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.
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
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),
Togo ($302 million). As a share of Gross Domestic Product, the top
recipients in 2009 were:
Cape Verde (9%),
Liberia (6%), Sudan
Nigeria (6%), and
A major source of foreign-exchange earnings for
remittances sent home by Nigerians living abroad. In 2014, 17.5
million Nigerians lived in foreign countries, with the UK and the USA
having more than 2 million Nigerians each.
According to the International Organization for Migration, Nigeria
witnessed a dramatic increase in remittances sent home from overseas
Nigerians, going from USD 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
MoneyGram and Rio. Under pressure, however, the
Central Bank reversed the decision and granted new licenses to a
number of competing MTOs.
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
United States Congress
United States Congress passed the Money Remittances
Improvement Act of 2014.
In April 2015, the Federal
Cabinet of Somalia
Cabinet of Somalia also officially launched
Special Task Force on
Remittances (STFR). The multi-agency
initiative is mandated with facilitating the Federal Government of
Somalia'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
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,
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
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
China alone sent more than $130 billion to their home
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
Department for International Development
Department for International Development (DFID) and USAID
began to look into ways in which the cost of remitting money could be
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
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, 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,
World Bank has begun certifying regional and national databases
that use a consistent methodology to compare the cost of sending
G20 2011 Summit in Cannes,
Bill Gates 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 such
as Azimo have emerged with the objective of lowering the cost of money
transfers to developing and emerging economies.
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, 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 financing 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 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 contested.
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. 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
World Bank and the
Bank for International Settlements
Bank for International Settlements have
developed international standards for remittance services.
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Comprehensive list of re