Remittance, by no measure, is a new phenomenon. For decades now, people have migrated overseas in search of better career & monetary opportunities and have regularly sent money back home for the maintenance and upkeep of those they love. This person-to-person money transfer may look unassuming, when one considers it in isolation, but when seen from the macro view of global migration and international remittances, each of those individual transfers acquires significant proportions.
As per latest World Bank Data, the total number of international migrants is expected to cross 250 million, by the end of 2015. It estimates that in 2014, the total bulk of foreign remittance going into developing countries was $436 billion, a 4.4 percent increase over 2013. With most migrants sending money on a monthly basis, what does remittance mean to their economies back home?
For one, there are many economies in the world that are heavily dependent on remittances. Take Africa, for example, in countries such as Gambia, Lesotho, Liberia and Comoros, international remittances equal about 20 percent of GDP. Similar is the case with smaller islands in the Pacific Ocean, for Tonga and Samua Islands, remittances form 24% and 20% of the GDP respectively.
In these countries, remittance helps alleviate poverty, and provide a basic means of living to the people. In a lot of households, this remittance helps procure food, housing, education for children and health care. In some middle income families, it might even fuel entrepreneurial activities, or help achieve a life event such as a wedding. Over the years, it has been found that international money transfers remain stable even in times of conflict, economic downturn or even a calamity. The World Bank had estimated that in Haiti international remittances represented about 12 percent of GDP in 2011, while in some areas of Somalia, they accounted for more than 70 percent of GDP in 2006.
While one might argue, that the impact of remittances is higher in these smaller countries, the impact of remittances cannot be negated even in larger economies. In India, foreign remittances sum up to almost a quarter of the foreign reserves that the country receives. In middle income countries such as the Philippines, remittances contribute more than 8 % of the country’s GDP. Remittances also fund a substantial share of imports in some of the countries; for example, remittances financed one-third of imports in Nigeria in 2013.
To cut a long story short, each money transfer, however small, helps complete the larger picture of international migration and migrant remittances. As migration of labour continues to see a rise, remittances too will continue to be resilient in the future, helping not only families but even economies grow.