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Migrant remittances lift millions from poverty
July 29, 2017, 4:49 pm
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A marked increase in the amount of money migrants from developing countries send home to their families is helping lift millions of people from poverty, says a new report from the United Nations International Fund for Agricultural Development (IFAD).

The first-ever study by IFAD on migrant remittances titled, ‘Sending Money Home: Contributing to the SDGs, One Family at a Time’, highlights the role these billions of dollars in migrant remittances play in helping development countries attain the UN Sustainable Development Goals (SDGs).

According to latest estimations, 250 million migrants sent around US$445 billion in remittances to developing countries in 2016. This money, of which 40 percent went to rural areas, helped support more than 800 million people globally. Remittance flows have grown over the past decade at a rate averaging 4.2 percent annually, from US$296 billion in 2007 to US$445 billion in 2016. This growth occurred despite economic dislocations, first caused by the 2008 financial crisis, and more recently by reduced revenues to oil-producing countries and currency market fluctuations.

The report projects that between 2015 and 2030, an estimated $6.5 trillion in remittances will be sent to low- and middle-income countries.  Most of these resources will be used by remittance-receiving families to reach their own individual goals: increased income, better health and nutrition, educational opportunities, improved housing and sanitation, entrepreneurship, and reduced inequality.

IFAD estimates that one in ten people originating from a developing country either sends or receives international or domestic remittances. This amount is equivalent to around three times official development assistance (ODA) and exceeds foreign direct investment (FDI) inflows in most developing countries.

"About 40 percent of remittances, nearly $200 billion, are sent to rural areas where the majority of poor people live," said Pedro de Vasconcelos, manager of IFAD's Financing Facility for Remittances and lead author of the report, which notes that over the past decade, remittances have risen by 51 percent — far greater than the 28 percent increase in migration from these countries.

"This money is spent on food, health care, better educational opportunities and improved housing and sanitation. Remittances are therefore critical to help developing countries achieve the Sustainable Development Goals," underscored Mr. de Vasconcelos.

The report, which covers a 10-year trend in migration and remittance flows from 2007-2016, shows that there have been increases in sending patterns across most regions of the world, with the sharpest rise over the past decade occurring in Asia, which witnessed an 87 percent increase in remittances.

Despite the decade-long trend, IFAD President Gilbert F. Houngbo noted the impact of remittances must first be viewed one family at a time. "It is not about the money being sent home, it is about the impact on people's lives. The small amounts of $200 or $300 that each migrant sends home make up about 60 percent of the family's household income, and this makes an enormous difference in their lives and the communities in which they live," said Mr. Houngbo.

Migration flows and remittances are having large-scale impacts on the global economy and political landscape. Total migrant earnings are estimated at $3 trillion annually, approximately 85 percent of which remains in the host countries. The money sent home averages less than one percent of their host country's GDP.

Transaction costs to send remittances currently exceed $30 billion annually, with fees particularly high to the poorest countries and remote rural areas. The report makes several recommendations for improving public policies and outlines proposals for partnerships with the private sector to reduce costs and create opportunities for migrants and their families to use their money more productively.

"As populations in developed countries continue to age, the demand for migrant labor is expected to keep growing in the coming years," pointed out Mr. de Vasconcelos. "However, remittances can help the families of migrants build a more secure future, making migration for young people more of a choice than a necessity," he added.

 

 

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