They play an important role in the lives of people all around the world. Someone that is close to you probably sends them regularly. You might know a friend or a family member who has to budget for them every month. What are they?
Remittances are moneys sent by a foreign worker to his or her home country. Millions of migrants around the world send billions of dollars in remittances each year to their families or communities of origin. Why exactly are remittances important? In many developing nations, remittances are a crucial source of family and national income and also are the largest source of external financing in some countries. Remittances are more impactful than foreign aid because they go directly into the hands of the poor. Recipients depend on remittances to cover day-to-day living expenses, keep a cushion against crises, or make minor investments in business and education.
Just how much money is being sent abroad? This October, the World Bank reported that developing countries are going to receive remittances worth $414 billion this year. India is the top receiving country with $71 billion, followed by China, the Philippines, Mexico and Nigeria. These numbers are only expected to grow even more throughout the coming years, especially in light of recent news. On November 15th, Western Mutual Malaysia introduced a new money transfer channel which allows people to send money straight to bank accounts in India. If similar services are put into place in other countries, remittances would become an even more important part of the global economy.
Some have argued that remittances may actually do more harm than good, but Gabriel Zinny explains in more detail why what’s good for the world is good for you and me. Do you agree? Tell us what you think in the comments below.