Remittance refers to cash sent by migrant workers to other people back in their country of origin. Remittance is derived from the term ‘remit,’ which means “to send back.” Remittances can be business payment or personal money that migrants send to either family or friends back in their home countries.
A Little More on What is Remittance
As per the World Bank, the total remittance in 2018 growth was 10% of $689 billion, with $538 billion going to developing countries. India is one country with a high amount of remittance because it has the largest number of its population living abroad. For instance, in 2018 alone, remittance to India was $80 billion. Other countries with the largest recipient of remittance include China at $67 billion, the Philippines at $34 billion, Mexico at $26 billion, and Egypt at $26 billion.
International aid has the largest inflows to developing countries, and the money migrants send back to their home country competes with this. Remittances from those working abroad is an important part of international capital flows, especially for countries that export labor.
According to research, there is an increase in the remittances migrants send to their countries of origin. Two key factors are the driving force behind the increase, and they include the following:
Migration: There is a big number of people who now prefer to live and work abroad. So, the increase in remittance is from these people who often send money back home to their families.
Globally connected businesses: With the availability of the internet, it has become easier for businesses to collaborate and connect with clients, employees, and suppliers across the globe. Due to this, there has been a significant increase in remittances from abroad to pay business invoices.
How is Remittance Send?
There are a number of methods for sending remittance. We have methods such as:
- Wire transfer
- Cash points
- Payment via electronic
- Bank draft
- Mobile money
Note that the above methods of remitting money involve charges. However, the charges differ from one method to the other. For instance, banks charge a higher remittance fee, and their exchange rates are also a bit low compared to other methods. So, if you are sending your remittance through a bank, you will pay a high fee.
There are also offline companies such as MoneyGram and Western Union. These two offline companies were big players back then. However, with time, people shifted from these and instead opted for online providers who happen to offer fair exchange rates at a lower fee and without any hidden charges.
How Important is Remittance in the Economy?
Remittances are also considered a source of income, especially for those living in developing countries and those in emerging markets such as Mexico. For instance, in 2015, Mexicans living abroad were able to send back home more than $24 billion. The money happened to be more than what the country was able to generate from the oil it sells.
Another good example of a country that has economically benefited from remittances is Venezuela. A better part of Venezuela’s population has moved to live to seek refuge in other countries. For instance, there are so many immigrants and refugees from Venezuela who live and work abroad, resulting in high remittances. In 2017 alone, families in Venezuela received more than 1.5 billion in remittances.
So, remittances generally raise the people’s standard of living back home and also deal with poverty across the globe. They are significant when it comes to disaster relief, and in most cases, they have exceeded official development assistance.
Remittances Tracking and Transparency
Most countries rarely make public the amount people receive as remittances. Though a majority of the transactions take place through wire transfer or the web where they can account for the money, a good number of remittance transactions is not clear, making it difficult to track it.
For this reason, financial intelligence units have been more concerned about this because there is a likelihood that some individuals will use this as a way to do money laundering or sponsor terrorist activities.
References for “Remittance”