UN: Migrant Remittances Have a Transformative Effect on Poverty
Remittances enable families to pay for basic necessities and boost local economies.
“When I left the Philippines, I said, ‘OK, five years,’” Charito Basa told Global Citizen.
“It’s been 31 years.”
Basa is a Filipina migrant who traveled to Italy in 1986 to make money to help her seven siblings go to school and her extended family pay for health care and other expenses.
She was luckier than most of her peers, men and women who could only find low-wage, exploitative jobs in sometimes dangerous conditions that could end at any moment.
Basa found work as a researcher and advocate for migrants soon after arriving in Rome, but where her story overlaps with that of the majority of her peers is how long she ended up staying and the extent to which her extended family came to rely upon her income — a form of money exchange known as remittances.
“I am the mother, the elder sister, the aunt of so many Filipinos,” she said. “Money is sent not only to your nuclear family, but also to sisters and brothers and other relatives, and even neighbors and friends are expecting support from Filipino migrants.”
Many people who travel abroad like this end up staying far longer than originally intended. They also end up transforming the lives of their friends and family members — but at great personal cost.
For example, the New Yorker recently described the alarming scale of Nigerian women who travel to Italy for sex work because opportunities are too scarce in their home communities.
In the US, Filipinas often end up as live-in nannies outside of the legal economy, and their undocumented status prevents them from ever traveling home. In Qatar, more than a 1,000 migrant laborers die each year, because regulations are so lax and working conditions are so harsh.
“You hear their story and it’s impossible to hold your tears,” Pedro de Vasconcelos, an expert on remittances, told Global Citizen. “I know many migrants who told me ‘I came initially for two years, and 17 years later, I’m struggling to say when this will end. If I die tomorrow, how will I have spent my life?’”
Despite the glaring inequalities and injustices that this global process reveals, remittances are only increasing.
Remittances to developing countries grew by 51% between 2007 and 2016, from $296 billion a year to $445 billion, more than triple what is spent on foreign aid globally, according to a groundbreaking report on the subject from United Nations International Fund for Agricultural Development.
An estimated 1 billion people, or one in seven of the global population, are involved in the flow of remittances — 200 million sending, 800 million receiving.
For the average family involved in this arrangement, remittances account for 60% of household income.
This massive influx of money is having a transformative effect throughout the world.
Remittances enable families to pay for basic necessities, filling in where foreign aid and government budgets fail, boost local economies, and ultimately alleviate the conditions that lead to mass migration in the first place by allowing families to build up wealth.
“This money is spent on food, health care, better educational opportunities and improved housing and sanitation,” said de Vasconcelos, the lead author of the UN’s report on remittances.
In countries like Somalia that suffer security issues, remittances fund local entrepreneurs and business ventures. In the Kerala, India, residents are 50% wealthier than the national average because of remittances.
In countries like Nepal and Haiti where natural disasters wrecked infrastructure, remittances have significantly contributed to relief efforts. For nine countries, remittances account for 20% of GDP and anything that cuts off the flow would prove disastrous, according to the UN’s report.
“Unlike foreign investment, which often fades in times of trouble, remittance flows increase in times of political upheaval and when natural disaster occurs,” Ishbel Matheson, vice president of corporate communications at WorldRemit, an online money transfer service, told Global Citizen.
“During emergencies, such as the recent cyclone that hit Fiji, WorldRemit saw a spike in remittances being sent home by concerned relatives and friends living abroad,” she said. “This money goes directly to the intended beneficiaries, bypassing any middleman, and providing crucial financial relief.”
But the impact of this money is impeded by a handful of corporate and governmental policies — including steep taxes, lack of banking opportunities, lack of infrastructure, labor and immigration laws, the stigma of migration, and outright bans on the practice, according to the UN.
Removing these barriers and instead taking steps to maximize the impact of remittances can go a long way toward ending extreme poverty, according to the UN report.
“There are 1 billion individual stories here,” de Vasconcelos told Global Citizen. “Very particular stories of sacrifice and dedication.”
“From a development perspective, this is not the elephant in the room, this is the herd of elephants in the room,” he said. “It’s so obvious, maximizing this can really contribute to helping millions of people.”
Making Remittances Work for People
While remittances are collectively enormous in scale and scope, they’re ultimately a family matter, de Vasconcelos said.
Mothers, fathers, brothers, and sisters leave their families often for years at a time to make money in a country that has work opportunities. According to de Vasconcelos, these are people who would be entrepreneurs in their home countries if economic conditions were better. They are daring, ingenious, and strong-willed and they undergo enormous stress to build a better life for their families.
Making sure their efforts are not done in vain should be a goal of the international community, he said.
And there are easy policies that can be put into place to improve this global situation, according to the UN.
For one, remittances shouldn’t be taxed at higher levels or subjected to fines. Oftentimes, there are limited ways to send money internationally, especially to remote, rural areas, and migrants have to rely on services that impose large fees or go through black markets and hope that money is faithfully transferred.
Transaction costs currently exceed $30 billion each year.
“Consider the challenges in this process,” Matheson of WorldRemit said. “You have to take time off your day job, stand in line at an agent store, fill out paper forms and hand over your payment in cash. The risk for human error is high and it takes months before the paper trail is put together and potential fraud can be investigated.”
Mobile payment systems like M-Pesa are a way to fix this problem and make sure most of the money being sent home actually reaches family members.
Other forms of mobile payment systems like WorldRemit can be made available to remote regions and international banks, in particular, can build digital infrastructure to aid the flow of money.
Currently, only 6% of remittances are sent online.
“The rest is sent in cash, over the counter or at high street agents,” Matheson said. “Western Union and MoneyGram – two of the biggest names in the industry – account for less than 20% of the market. The rest of the market is highly fragmented, made up of small mom and pop style shops selling newspapers and soft drinks with money transfers offered on the side.”
WorldRemit projects that the online share of the market will grow six-fold in the next few years because of how much cheaper and effective it is to send online.
Further, banks can help remote communities with bank accounts, loans, and other forms of financial support so that their money is more secure. This isn’t a matter of charity — banks stand to benefit from gaining more customers.
“You can have strategies for the poor that are also profitable for the private sector,” de Vasconcelos said
Helping families become financially literate can greatly increase the impact of remittances, according to de Vasconcelos, because it would suddenly mean people can make smarter investments and save money more efficiently by avoiding currency fluctuations.
Countries that receive a lot of remittances could begin working with recipient communities to build public projects. Remittances already go towards water wells, electricity systems, schools, and health clinics, and there’s no reason why governments can’t chip in to make sure the final results benefit more people.
Better immigration laws throughout the world could also make it easier for people to obtain work visas and earn fair wages, which would put an end to exploitative practices, the UN argues.
It would also help to reduce the amount of time that people have to stay away from their families.
At first glance, remittances might seem like a drain on host countries, that the places where migrants travel to end up as net losers, but this couldn’t be further from the truth.
More than 85% of the money earned by migrants — $2.5 trillion — stays within host countries, supporting local and national economies. Migrants abroad pay taxes in their host countries. And, oftentimes, migrants fill a demand in workforces that lack young, skilled workers, according to de Vasconcelos.
In many ways, migrants help the world economy go round.
Basa, the Filipina advocate, funded all of her siblings’ educations. She’s also allowed them to buy land, invest in businesses, and cover the costs of health care.
Ultimately, migrants make it so that other people don’t have to travel far for work. They’re lifting communities out of poverty. And they’re providing essential labor to wealthy countries.
“If you maximize the impact of remittances back home, you can give a choice to future migrants,” de Vasconcelos said.
“There’s nothing wrong with migration, but its when people have no choice that it’s a problem."