Remittances

:"Remittance can also refer to the accounting concept of a monetary payment transferred by a customer to a business"

to their home countries.

Money sent home by migrants constitutes the second largest financial inflow to many developing countries, exceeding international aid. Latest estimates vary between IFAD estimates of US$401 billion and the World Bank information from central banks at a more conservative US$250 billion for 2006 and these figures are increasing by almost 30% year on year. Remittances contribute to economic growth and to the livelihoods of needy people worldwide. Moreover, remittance transfers can also promote access to financial services for the sender and recipient, thereby increasing financial and social inclusion. Note though that in 19th century English usage a "remittance man" was exiled overseas and sent a meagre living allowance from England.

ignificance

Remittances are playing an increasingly large role in the economies of many countries, contributing to economic growth and to the livelihoods of needy people (though generally not the poorest of the poor). As remittance receivers often have a higher propensity to own a bank account, remittances promote access to financial services for the sender and recipient, an essential aspect of leveraging remittances to promote economic development.

The World Bank and the Bank for International Settlements have developed international standards for remittance services. [World Bank, [http://www.worldbank.org/remittances Payments and Remittances] .]

In 2004 the G8 met at the Sea Island Summit and decided to take action to lower the costs for migrant workers who send money back to their friends and families in their country of origin. In light of this, various G8 government developmental organizations, such as the UK government's Department for International Development (DFID) and USAID began to look into ways in which the cost of remitting money could be lowered. One of DFID's responses was to develop a programme called 'Sending Money Home?. [ [http://www.sendmoneyhome.org SendMoneyHome - Independent money transfer advice ] ] the aim of which was to provide a free and simple advice and comparison service for those looking to send money overseas through leaflets and its website (http://www.sendmoneyhome.org) which now not only offers advice on sending money from the UK, USA, Canada, South Africa and several European countries to over 100 countries around the world, but promotes financial inclusion by offering advice to migrant workers about opening bank accounts and promoting specialist advice centres.

The success of Send Money Home quickly demonstrated the demand for an advice service amongst remitters and other governments were quick to try to emulate this service. As of December 2007 similar price comparison websites have been created in France (http://www.envoidargent.org), Germany (http://www.geldtransfair.de), the Netherlands (http://www.geldnaarhuis.nl), Norway (http://www.sendepenger.no), and MoneyMove (http://www.moneymove.org).

Recent studies by the Overseas Development Institute have shown that remittances not only play an important part in many people's daily lives but are particularly important for people during crises. [ [http://www.odi.org.uk/hpg/remittances.html Overseas Development Institute Humanitarian Policy Group work on remittances] ]

There is a global central repository of information and bibliography of reference materials on remittances called DRIL – the DFID Remittances Information Library. The bibliographic search site includes links to over 300 articles and has been sponsored by the UK Government’s Department for International Development (DFID). DRIL is hosted by Developing Markets Associates (DMA) and can be found at http://www.dmassocs.com/dril or http://www.moneymove.org.

History

Overview

Remittances are not a new phenomenon in the world, being a normal concomitant to migration which has ever been a part of human history. Several European countries, eg Spain, Italy and Ireland were heavily dependent on remittances received from their emigrants during the 19th and 20th centuries. In the case of Spain, remittances amounted to the 21% of all of its current account income in 1946.Fact|date=October 2008 All of those countries created polices on remittances developed after significant research efforts in the field. For instance, Italy was the first country in the world to enact a law to protect remittances in 1901 while Spain was the first country to sign an international treaty (with Argentina in 1960) to lower the cost of the remittances received. [ [http://www.remesas.org remesas.org ] ]

Remittance Man

In the 19th century, the English usage of the word usually referred to money sent from England - the opposite direction to today's usual usage of the term. A "remittance man" was an exile living on money sent from home. Within Victorian British culture, this often meant the black sheep of an upper or middle class family who was sent away (from the UK to the Empire), and paid to stay away. These men were generally of dissolute or drunken character, and may have been sent overseas after one or more disgraces at home.

An example of this usage is in Robert Louis Stevenson's book "The Wrecker" where the character Tommy Hadden is cast as the 'remittance man'. In the book ::cquote|"Tom Hadden (known to the bulk of Sydney folk as Tommy) was heir to a considerable property, which a prophetic father had placed in the hands of rigorous trustees. The income supported Mr. Hadden in splendour for about three months out of twelve; the rest of the year he passed in retreat among the islands."

By region

Asia

A majority of the remittances from the US have been directed to Asian countries like India (approx. 26 billion USD), Philippines (approx. 14 billion USD) and China (approx. 23 billion USD). Most of the remittances happen by the conventional channel of agents (Western Union, Moneygram). However, with the increasing relevance and reach of the Internet, online money transfer has gained momentum over the years.

Latin America and the Caribbean

In Latin America and the Caribbean, remittances play an important role in the economy of the region, totaling over 66.5 billion USD in 2007, with about 75% originating in the United States. This total represents more than the sum of Foreign direct investment and official development aid combined. In seven Latin American and Caribbean countries, remittances even account for more than 10% of GDP and exceed the dollar flows of the largest export product in almost every country in the region. The Inter American Development Bank's Multilateral Investment Fund (IDB-MIF) has been the leading agency on regional remittance research. [ [http://www.iadb.org/mif/remittances MIF - Inter-American Development Bank ] ]

This research has often been carried out in collaboration with Manuel Orozco of the Inter-American Dialogue, his remittance research can be found at the Dialogue [http://www.thedialogue.org/programs/policy/trade/remittances/default.asp] and at the IDB. In this region, Mexico, one of the best documented examples of migration and remittances, received remittance inflows of almost 24 Billion US$ in 2007, 95% of which originated in the US.

A significant study conducted by the Inter-American Development Bank (IDB) in 2004 provides useful insight into remittance and related migration patterns between Latin America and the United States. The study reveals that over 60% of the 16.5 million Latin American-born adults who resided in the United States at the time of the survey regularly sent money home. The remittances sent by these 10 million immigrants were transmitted via more than 100 million individual transactions per year and amounted to an estimated $30 billion during 2004. Each transaction averaged about $150-$250, and, because these migrants tended to send smaller amounts more frequently than others, their remittances had a higher percentage of costs due to transfer fees. [http://www.uiowa.edu/ifdebook/ebook2/contents/part4-II.shtml E. Carrasco & J. Ro (2007), "Remittances and Development" University of Iowa Center for International Finance and Development E-Book] ]

Migrants sent approximately 10% of their household incomes; these remittances made up a corresponding 50-80% of the household incomes for the recipients. Significant amounts of remittances were sent from 37 U.S. states, but six states were identified as the "traditional sending" states: New York (which led the group with 81% of its immigrants making regular remittances), California, Texas, Florida, Illinois, and New Jersey. The high growth rate of remittances to Mexico (not the total amount) is unlikely to continue. In fact, according the Mexican central bank, remittances grew just 0.6 during the first six months of 2007, as compared to 23% during the same period in 2006. Experts attribute the slowdown to a contraction in the U.S. construction industry, tighter border controls, and a crackdown in the U.S. on illegal immigration.

As the foregoing statistics illustrate, increased migration from Latin America to the United States has resulted in a very significant amount of remittance activity. The numbers also help us understand the dependence between a developed country and developing countries: The United States needs Latin Americans to supply its labor markets—the migration improves business profitability and reduces the costs of production, while Latin American countries depend on the flows of remittances that result from the migration of labor. This dependence has also resulted in what experts call "micro-geographies," tightly-knit networks that integrate U.S. communities with communities throughout Latin America, such as migrants from Oaxaca, Mexico who have settled in Venice Beach, California. Oaxacans not only send money back to their communities, but they also travel back and forth extensively.

Emergencies

During disasters or emergencies, remittances can be a vital source of income for people whose other forms of livelihood may have been destroyed by conflict or natural disaster. According to the Overseas Development Institute, this is being increasingly recognised as important by aid actors who are considering better ways of supporting people in emergency responses. [ [http://www.odi.org.uk/hpg/remittances.html Welcome to the Humanitarian Policy Group ] ]

Potential security concerns

The recent internationally coordinated effort to stifle possible sources of money laundering and/or terrorist financing has increased the cost of sending remittances directly increasing costs to the companies facilitating the sending and indirectly to person remitting. As in some corridors a sizable amount of remittances is sent through informal channels (family connections, traveling friends, local money lenders etc.) remittances can be difficult to track and potentially sensitive to money laundering (AML) and terror financing (CFT) concerns. Since 9/11 many governments and the Financial Action Task Force (FATF) have taken steps to address informal value transfer systems. This is done through nations' Financial Intelligence Units (FIUs). The principle legislative initiatives in this area are the USA PATRIOT Act, Title III in the United States and, in the EU, through a series of EU Money Laundering Directives. Though no serious terror risk should be associated with migrants sending money to their families, misuse of the financial system remains a serious government concern. The effects of enforcement action have sometimes had counterproductive effects as in the case of Al-Barakaat, a HawalaÏ network responsible for the largest remittance flows to Somalia.

Top recipient countries

References

* [http://archive.gulfnews.com/articles/07/10/08/10158825.html]
* [http://www.rediff.com/money/2005/dec/08remit.htm]

External links

* [http://remittanceprices.worldbank.org/ Remittance Prices Worldwide] World Bank database on the cost of sending and receiving small amounts of money from one country to another.
* [http://www.iadb.org/mif/remesas_map.cfm?language=English&parid=5 2007 Map of Remittances to Latin America] This interactive map gives a breakdown of remittances Latin America as well as country profiles.
* [http://www.uiowa.edu/ifdebook/briefings/docs/remittance.shtml Briefing Paper: Remittances] This brief explains what a remittance transfer is and assesses the impact that remittances may have on developing economies.
* [http://www.worldbank.org/amlcft Financial Market Integiry unit, the World Bank] Bilateral Remittance Corridor Analysis (BRCA)
* [http://www.sendmoneyhome.org Sending Money Home?] The UK Government's Department For International Development's website provides free, impartial, and transparent information on the services, costs etc of sending money to the developing world. It also has links to relevant sites and papers on the subject of migrant remittances.
* [http://www.odi.org.uk/hpg/remittances.html Remittances during crises: implication for humanitarian response] The Overseas Development Institute's work on the role remittances play in crises.
* [http://www12.georgetown.edu/sfs/isim/pages/RCRCC.html Research Consortium on Remittances in Conflict and Crises ] A consortium of various academic institutes researching remittances' role in crises.
* [http://www.ft.com/cms/s/0/9310bb5c-7ccb-11dc-aee2-0000779fd2ac.html Remittances to Middle East and North Africa reach $34 billion]
* [http://www.dollarsandsense.org/archives/2008/0508thuotte.html Remittances to the Rescue?] from Dollars & Sense