Remittances, usually understood as the money or goods that migrants send back to families and friends in origin countries, are often the most direct and well-known link between migration and development.
Remittances exceed official development aid but are private funds.
Global estimates of financial transfers by migrants include transactions beyond what are commonly assumed to be remittances, as the statistical definition used for the collection of data on remittances is broader (see IMF, 2009).
Also, such estimates do not cover informal transfers. Remittances can also be of a social nature, such as the ideas, behaviour, identities, social capital and knowledge that migrants acquire during their residence in another part of the country or abroad, that can be transferred to communities of origin (Levitt, 1998: 927).
The global diaspora makes a significant contribution to their families back home. The funds they send strengthen communities and can even rebuild countries that are emerging from war.
While the majority of remittances are used to help families with their day-to-day needs, they directly and indirectly create jobs and enhance food security, provide lifelines for survival, education, and health through these remittances.
In 2013, international migrants sent $413 billion home to families and friends — three times more than the total of global foreign aid (about $135 billion).
These remittances make a significant difference in the lives of those receiving it and plays a major role in the economies of many countries.
Not only through channelling financial resources, the diaspora are also providing different forum for the exchange of skills, knowledge and technology, and playing a role in peace-building and democratisation.
Most often than not the diaspora also opens up opportunities to tap the creativity, innovation, knowledge, experience and links of its members.
The World Bank estimates that international remittances to low- and middle-income countries have increased by 8.5 per cent in 2017, reaching USD 466 billion (Ratha et al., 2018).
This sum is estimated to grow by 4.1 per cent to reach USD 485 billion in 2018. These funds largely outnumber Official Development Assistance (ODA).
Overall, monetary transfers from migrant workers and others to all countries worldwide, including high-income countries, grew by 7 per cent from USD 573 billion in 2016 to USD 613 billion in 2017 (ibid.).
The top three countries receiving remittances in 2017 in absolute figures are located in Asia: India (USD 69 billion), China (USD 64 billion) and the Philippines (USD 33 billion).
The highest inflows in remittances were also reached in Mexico (USD 31 billion), Nigeria (USD 22 billion) and Egypt (USD 20 billion) (Ratha et al., 2018) .
In relative terms, the top 5 countries receiving remittances as a share of gross domestic product (GDP) for 2017 are the Kyrgyz Republic (35%), Tonga (33%), Tajikistan (31%), Haiti (29% which may be due to the large UN presence, Nepal (29%) and Liberia (27%) (ibid.).
The costs of sending USD 200 in the first quarter of 2018 amounted to about 7.1 per cent of the amount sent (Ratha et al., 2018). This is well above the target of 3 per cent of the
Sustainable Development Goal 10.c.1.. Costs are particularly high, meaning above 10 per cent, in many migration corridors in Africa and the Pacific due to high informal flows, lack of competition, and the use of mobile and other new technologies lagging behind. The costs of remittances in South Asia was the lowest, at 5.2 per cent (ibid.).
The new 2030 Agenda for Sustainable Development of the United Nations highlights the positive contribution of migrants and diaspora for achieving sustainable development. It emphasizes the need to study how migration and remittances can be leveraged for improved development financing through reducing remittance costs and mobilizing diaspora savings and collective remittances.
During the summit in July 2015, The Addis Ababa Action Agenda on financing new sustainable development goals that was defined includes a target of reducing the transaction cost of remittances to 3% by 2030.
African Union leaders have outlined the need to diversify and improve development financing from domestic as well as private sources, pointing out that novel mechanisms are needed for harnessing and investing remittances for national development, as well as making remittance transfers more cost-effective and enhancing their role in financial inclusion (African Union 2014).
In UpsideAfrica, one of the things we do is to raise money to fund SMEs (especially owned by women) across different countries in Africa. We also provide support, and network and training. As we understand the power in our little remittances, it is important for us to continue.
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