Money sent home by migrant workers from abroad across the globe is projected to record a 4% growth this year, hitting the US$550bn mark compared with US$529bn recorded in 2018, according to the latest statistics from the International Fund for Agricultural Development (IFAD).
Kampala, Uganda | RONALD MUSOKE | Remittances take many forms but are usually associated with working migrants that send regular amounts to support their families and communities back home.
One in every nine people around the world is directly supported by remittances, according to IFAD, the UN agency that invests in rural people, empowers them to reduce poverty, increases food security, nutrition and strengthens resilience.
Speaking in Rome on June 14 ahead of celebrations to mark the International Day of Family Remittances on June 16, Gilbert Houngbo, the President of IFAD said money sent home by the world’s 200 million migrant workers is now three times more than that received in official development assistance.
“Behind the numbers are the individual remittances of US$200 or US$300 that migrants send home regularly so that their 800 million family members can meet immediate needs and build a better future back home,” he said.
With half of all flows going to rural areas in developing countries, governments, regulators and the private sector have an important role to play in leveraging the effects of these flows and, in so doing, helping nearly one billion people to reach their own sustainable development goals by 2030, said Houngbo.
In 2016, the United Nations designated June 16 as the “International Day of Family Remittances,” to raise awareness on the transformative impact that migrant remittances have across the Sustainable Development Goals—particularly poverty reduction and access to basic services at the household level.
This amount of cash which also surpasses foreign direct investment, Houngbo said, was an impressive figure given that it is just 15% of the total migrant workers’ earnings—the rest remains in the host countries’ economies.
Experts say if current trends continue, it is projected that US $8.5 trillion will be transferred to families in developing countries over the 15-year life of the UN’s 2030 Agenda for Sustainable Development. By then, it is estimated that over US $2 trillion (on average 25% of remittances received) will have been saved or invested.
The advantage of these payments is that they usually flow directly into the hands of households, which increases household income and reduces the likelihood of households falling into poverty.
This monetary support has positive effects on both education and health outcomes and it has been shown to support human capital development particularly in children.
Many governments including Uganda now recognise the crucial contribution of migrant workers. It is among the top five recipient African countries of money from people living abroad. An April 2018 World Bank report on migration and remittances noted that the country received up to US$ 1.4bn which was almost the same amount as that from the tourism sector.
In fact, the World Bank and Bank of Uganda reports say Ugandan citizens in the diaspora have been sending home over a billion dollars over the last three years. In 2017, Ugandans in the diaspora sent home US $1.4 billion though that figure fell slightly to US$ 1.312 billion in the subsequent year.
Catherine Wines, the co-founder of WorldRemit, a London-based digital money transfer told The Observer on the sidelines of a financial inclusion summit in Kampala last year that their platform had registered immense growth in money transfer to Uganda, recording a 150% growth in the last three years.
“Remittances have supported families for their basic needs like food, rent, school fees and hospital bills but, what we are seeing is that for extended families or people who have been away for longer, they help families set up small businesses,” said Wines.
In November, last year, WorldRemit registered 1.5 million transactions sent to Uganda since it launched its service in 2012. The company’s rapid growth in Uganda has been driven by transfers to mobile money accounts which have grown by over 150% in the last two years.
World Remit’s mobile-to-mobile model supports Uganda’s efforts, to promote financial inclusion as 90% of the recipients in rural areas receive their transfers directly onto their phones.
But linking the cash flows with financial services and, in the process, bringing millions of people into the financial sector, remains a challenge for many governments.
For the UN’s 2030 remittance targets to happen, Marina Manke, the head of the UN International Organization for Migration’s labour mobility and human development division, said there is continued need for cost reduction, increased transparency and ensuring that migrants’ equal access to financial education and empowerment including those offered by digitalization and other new forms of finance.
Paul Winters, IFAD’s Associate Vice-President told a forum at the UN headquarters in New York on June 16 that providing better access to remittances and better use to families through rural financial institutions has had a positive impact in rural areas by bringing many unbanked recipients into the formal financial sector.
“Thanks to this inclusive effect, families can now collaterize remittances and access financial products, such as savings, credit, and insurance,” he added, “In fact, it is fair to say that, in poor rural areas, remittances can help to make migration a choice rather than a necessity for so many young people and for future generations.”