Remittances are a mainstay for millions of the world's poor – let's improve them

  • People in the Kenyan capital, Nairobi, transfer money using the M-Pesa banking service. Photograph: Bloomberg via Getty Images

This article was first published in the Guardian.

 

Remittances are a hidden force in international development. The World Bank estimates that $601bn (£424bn) was sent in remittances last year, $441bn of which was received in the developing world. This is three times the amount sent in international aid.

Today is the International Day of Family Remittances, started last year by the International Fund for Agricultural Development to celebrate the vital economic lifeline provided by the vast majority of the 250 million international migrants worldwide who send money to struggling families and communities back home.

These remittances improve standards of living in countless ways and help to make vulnerable communities more resilient to shocks, like economic downturns and natural and man-made disasters.

However, with financial institutions charging transaction fees ranging from 1% to 20%, many of these potential benefits are lost due to high transaction costs.

The sustainable development goals (SDGs), adopted last year to chart a path to greater equality and an end to poverty, commit to reducing the cost of remittances to 3%, and closing all remittances corridors with costs of more than 5%. Despite some significant progress, the cost of sending remittances remains unreasonably high for many nations, averaging 8% globally.

The amounts received by family members are also being limited by poor information services for migrants, who do not get accurate data on low-cost options, hidden costs and safety risks.

To address these issues effectively, collaboration is required. It has long been recognised that better results are achieved when different sectors work together, and many have a stake in remittances, from migration and development organisations to money transfer operators. All can help to improve the ways in which remittances are sent.

We need to work together to give migrants better, more transparent information about transfer channels and their costs. We also need to press for the development of regulatory frameworks, not only for financial organisations but also in areas that protect migrants’ interests and promote increased transfer options, for instance telecommunications.

Cross-sector approaches are not always easy: they require a concerted, collaborative effort between governments, regulatory bodies, the private sector and the international community. Government regulation of cross-border money transfers needs to ensure that transfer costs are more transparent, and do not exclude smaller transfer operators.

The International Organisation for Migration is working with specialist agencies such as the International Telecommunication Union and the Universal Postal Union. Through our partnership with the latter, for example, we hope to make existing post office networks competitive and widely accessible transfer agents. Other initiatives include TawiPay’s innovative remittances price comparison website, data drawn from which is used by their Global Remittances Observatory to inform the public about remittance prices and trends.

It is worth bearing in mind how remittances are typically earned. Migrant workers often endure poor working conditions and low wages, and the money they send home frequently represents a significant proportion of their earnings. That is why we should also be pressing for decent working conditions for migrants and less exploitation along the migration journey. Employers and governments can help to reduce these social costs, to ensure that remittances are earned under fairer conditions.

The global sands are shifting, with politics in flux in many nations, and more migrants on the move than ever before. Migrants themselves are contributing three times the amount donated by states, which shows traditional models are ceasing to operate.

However, we should not shift responsibility for basic services, such as education and healthcare, to migrants. Let us not forget that, under the SDGs, governments, the private sector and the international community have pledged not only to reduce remittance costs, but also to make better provision for access to universal healthcare and education.

Upholding these commitments will ensure a greater proportion of migrant workers’ remittances are spent on what matters most: providing a better standard of living for their families.

The International Day of Family Remittances is therefore an opportunity to celebrate the positive impact of remittances, while recognising that making them cheaper, transparent and more accessible will allow more of migrants’ hard-earned money to end up where it matters.

Dipti Pardeshi is chief of mission for the International Organisation for Migration, UK