XM -Blog

Expats, The Heart Of The Remittance Industry

October 5th, 2016

Expats, The Heart Of The Remittance Industry

For developing countries, there aren’t many shortcuts to socio-economic success. But I believe that these countries can gain immediate boosts by involving their emigrants and giving them a more immediate stake in national development.

Think about it. There are roughly 250 million people – or 3.4% of the world’s entire population1– that live and work away from their country of origin. What if they were committed to their nation’s prosperity? Many of them already are, and send home remittances that make a huge impact.

Remittances are the greatest force for income equality the world knows. There are roughly 600 billion US dollars moving from expats abroad to their home countries every year2, across the world. In size, remittance flows3 far outrank aid flows. And more importantly, they are a stable source of uplift. Unlike foreign direct investment (FDIs), remittances don’t escape to more attractive markets the minute there is an economic setback.

The numbers make a very compelling case. For 25 countries, remittances sent home by expatriates contribute over 10% of GDP. To give you an example, remittances make up 29.4% of Nepal’s GDP4. That’s a huge proportion. They constitute 9.4% of Sri Lanka’s annual GDP and 6.9% of Pakistan’s.

But numbers don’t tell the whole story. They don’t show that when these remittances wind up in the hands of family members back home, they are used to purchase essential goods and services –thus driving up demand and giving businesses like the local grocery store a boost in business. They pay for education – driving up investment in schools. They lift families, and in fact entire communities, out of poverty. And they spur development – because families with disposable income then purchase things that are taxed, filling government coffers. Remittances enable homes to be built. They turn shanty towns into permanent dwellings. The benefits go on and on.

There is also another dimension to remittances – one that hard data never encapsulates. We tend to think of remittances as financial flows. But there is a social element to them as well.

Social remittances are when new skills, ideas, influences and knowledge is sent from destination to destination. Expatriates aren’t only earning money in their countries of residence. They’re also becoming global citizens that are absorbing new influences, being exposed to new ideas and picking up new skillsets. These influences then make their way back to their country of origin through osmosis – when they visit home, chat with friends and family on the phone, send emails, or return home permanently post retirement.

For developing countries, social remittances are as important as financial ones 5. They introduce innovation into economies. They bring new ideas into play and translate them into new business activities. For example, families of expats back home start cottage businesses with the remittances, thus productively deploying the money that is being received while boosting other sectors as well.

Returning expatriates are also very entrepreneurial and use their new skills to set up their own ventures. In the more immediate term, social remittances lead to better hygiene practices, a focus on health, and a demand for better infrastructure – all of which creates a better quality of life for the entire community.

Emigrants are already one of the most powerful forces for countries’ economic development. It’s now time to laud their accomplishments and appreciate their commitment to their friends, families and communities back home. The next step is to look at ways in which governments and civil society can work towards integrating these hard-working expatriates with causes back home that they would want to support.

There is no shortcut to national prosperity. But as the numbers show, harnessing the power of remittances can be a very powerful lever for economic growth and development.




1. World Bank Group Migration and Remittances Factbook 2016, 3rd edition.

2. https://letstalkpayments.com/international-migrants-sent-home-600-billion-in-2015/

3. https://siteresources.worldbank.org/INTPROSPECTS/Resources/334934-1288990760745/MigrationandDevelopmentBrief24.pdf

4. https://pubdocs.worldbank.org/en/661301460400427908/MigrationandDevelopmentBrief26.pdf

5. https://www.migrationpolicy.org/article/its-not-just-about-economy-stupid-social-remittances-revisited


Written by Sudhesh Giriyan, COO, Xpress Money