Global remittances now three times larger than aid
Remittances from people living in rich countries to family members in poor countries now accounts for $300 billion a year, far outstripping official aid payments as the largest source of financial flows to the countries of the South. Until now it has been poorly documented, partly because it is made up of hundreds of thousands of small individual payments, a few hundred dollars at a time. Now a UN agency has quantified the scale of remittances in a report. The New York Times has a story and – online – an interactive map.
The study by IFAD (the International Fund for Agricultural Development) found that 60 countries received $1 billion or more in remittances, while in 38 countries remittances accounted for 10% or more of GDP. (There’s a list of a ‘top ten’ at the end of the post). About a third of the flows originate in the United States, with large sums also originating in western Europe and the Middle East. Around 80% is spent immediately (on food, clothing, housing and so on) but around 20% is invested is saved or invested.
Until now the World Bank has been the main source of data on remittances, tracking flows through central banks and estimating the rest. IFAD’s study, so far a one-off), used additional sources, including survey data and figures from money transfer comanies. The two organisations agree on the overall $300 billion scale of the financial flows but differ quite widely on impact on specific countries. If the IFAD study is repeated the two may become more aligned.
IFAD’s interest is in raising awareness of the scale of the flows, and thereby enable them to foster economic and social development. A booklet with more detailed picture of each country’s remittance flows is published online by IFAD (opens in pdf). It is striking the extent to which the lack of ‘official sources’ has meant that the growth in remittances has tended to be under-estimated or overlooked.
The NYT also has a profile of Western Union, the private sector company with the largest share of the remittance market. It has emerged from bankruptcy in 1992 (when the telegrams business finally went bust) and a damaging lawsuit to emerge as an unlikely champion of migrants, even wading into political disputes about migration – an unusual profile in the corporate world, even if one which has complete commercial logic.
Remittances as share of GDP
- Guinea-Bissau 48%
- Eritrea 38%
- Tajikistan 37%
- Laos 35%
- Moldova 31%
- Palestine territories 30%
- Kyrgyzstan 28%
- Liberia 26%
- Lebanon 25%
- Honduras 25%