The financial crisis has made it increasingly difficult for migrant workers living abroad to send money home. With some notable exceptions, especially in Asia, it is clear that families dependent on remittances from the United States, Europe and Russia are receiving significantly less than in previous years. In Ecuador, which has seen an almost 30% decline in remittances this year, the impact of the financial crisis is greatest in rural areas.
Ecuador receives the majority of its remittances from its immigrant communities in the United States and Spain. In July, unemployment for Hispanics in the US rose to 12.3%, while in Spain unemployment has reached 18.1%, the highest in the EU. With jobs more difficult to come by and incomes similarly declining, migrant workers are doing their best to meet their family obligations. It is now clear, however, that there are limits to their ability to cope.
As the graph bellow illustrates, Ecuadorian families in provinces with a higher percentage of rural population are more likely to be negatively impacted by the decline in remittances. Families use 80-90% of remittances to buy essential food, clothing and shelter, supporting basic needs of households while also stimulating local economies. The remaining 10-20% is invested or saved, which is key to achieving long-term financial independence. When families receive less, the amount of money they can set aside for these longer-term investments decreases as they focus on their most immediate needs.
It is precisely these constituents; remittances receiving families in rural areas that IFAD's Financing Facility for Remittances (FFR) is designed to empower. With remittances expected to decline 12.4% to the region as a whole this year, that goal could not be more relevant.