For individual customers, remittances might seem like a personal matter. People move overseas in the hopes of a better future, and to find gainful employment. They share the rewards of their hard work with friends and families back home.
But taken together, these individual remittances combine into an incredibly powerful force that drastically improves the quality of people’s lives. Collectively, remittances boost entire economies, contribute to investment in education and health, and further the cause of income equality around the globe.
In fact, remittances are a far more effective force for good than official aid flows. The World Bank regularly estimates that remittances outweigh formal aid budgets by a factor of three to one.
So beneficial are remittances that the United Nations has made the development of low-cost money transfer corridors a key part of its Sustainable Development Goals.
And now, a new report from the International Fund for Agricultural Development (IFAD) has added further weight to arguments extolling the power of remittances in global uplift.
Let’s start with the immediate benefits to remittance-receiving families. Regular remittances to families in developing markets not only reduce the level of poverty, but also help them avoid falling back into the poverty trap. They provide a buffer to help deal with emergencies – such as someone falling sick.
What is incredibly heartening is that these families manage to save around 25% of received remittances on an average; a percentage that translates to just over USD 100 billion. This money is used towards longer-term goals, such as improving access to healthcare and quality education, and investing in assets.
And let’s not forget that remittances also form a strong base for future economic growth by kickstarting entrepreneurial activities. These small and micro businesses not only generate revenue for the family but also improve overall GDP and create employment opportunities for others.
When we look at the big picture, the macro-level impact of remittances on developing economies is equally beneficial. Over the years, developing economies have received an overwhelming volume of remittances, and this trend will continue. Between 2015 and 2030, middle-income countries will receive around USD 6.5 trillion in remittances.
It is estimated that remittances to developing countries have already grown by 51% between 2007 and 2016. During this period, growth in remittance flows to the Asia-Pacific region (87%), Africa (36%), Latin America and the Caribbean (18%), and the Near East and Caucasus (37%) have spurred long-term economic development.
There is also good news on the remittance cost front. The IFAD report highlights a drop in average remittance fees from 9.8% in 2008 to 7.32% (as of June 2017,). While still higher than the 3% that the UN is aiming for in its SDGs, the drop in the cost of sending money makes both senders and receivers better off, and improves economic efficiency across sending and receiving markets.
Despite these falling fees, Money Transfer Operators have continued investing in expanding their physical networks across new markets. More people have been brought into the fold of financial inclusivity through conveniently placed outlets. For instance, payout locations have increased over 400% in the top 23 recipient markets, rising to 1.5 million from an initial 350,000.
At Xpress Money, we believe that the remittance industry has a crucial role to play in creating financial inclusion and extending secure and legally licensed money transfer channels to global audiences. We are committed to delivering superior customer service to the widest possible global audience at competitive fees. For us, it is very heartening to see the impact that our industry is having on improving quality of life, and contributing towards poverty alleviation, across the world. And for the hardworking supporting families back home: the recent IFAD data is a validation of all your efforts. The money you send is making a difference not just to your loved ones but also to entire economies and countries.