On International Day of Family Remittances we celebrate the incredible potential that remittances – money migrant workers send home to their families – have in providing crucial financial support for millions of people in developing countries.
16 June marks the second global observance of the International Day of Family Remittances – launched in 2015 by the International Fund for Agricultural Development (IFAD) to encourage the public and private sectors, as well as civil society, to do more to maximize the impact of remittances in the developing world.
Remittances, the money migrant workers send home to their families, provide crucial financial support for millions of people in developing countries.
For years, migrants worked in the shadows of globalization while their remittances went uncounted by governments and aid agencies. Over the past 15 years, however, the true size of their contribution has come to light, and most importantly the opportunities these funds present in helping families and communities escape poverty.
Here are four surprising facts you may not have known about remittances sent home from migrants.
Remittances are crucial for migrant's families, often representing more than 50 per cent of their income. These funds allow families to address their basics needs such as food, housing, health and education, but also help them to raise their living standards above subsistence levels. They can help rebuild the fabric of societies, spark economic development, and bring stability necessary for a hopeful future.
Fact: In 2015, almost 250 million economic migrants living outside their countries of origin sent about US$450 billion in remittances to their families back home.
In the Philippines, a financial education programme supported by IFAD is helping families of migrant workers turn remittances into successful businesses. They learn about budgeting and how to better invest the money they receive from abroad. For Lily Bruhl, whose husband is one of 10 million Filipinos currently working outside the country, this knowledge was life changing.
''The first thing I learned was that if you receive remittances from your husband, save first before you spend,” she said. “It also made me realize that I have to be ready for the reintegration of my husband because if I am not going to prepare, then who will prepare for us?''
With money saved from her husband's remittances, Lily soon decided to invest in a fish farm. Now she is running a successful business, and providing jobs to others in the community.
Fact: 30 to 40 per cent of remittances are sent to rural areasLike Lily, when given the opportunity, many rural families are willing to save (sometimes just small amounts) and invest in activities such as small businesses. This in turn contributes to job creation, better food security, and ultimately a better future for families and their communities.
"Today we honour migrant workers, their families and their stories of hope, separation and sacrifice," Kanayo F. Nwanze, President of IFAD, told those attending last year’s inaugural commemoration of the International Day of Family Remittances. "We also recognise their vital contribution to their families at home and to the development of their nations."
Nwanze added that remittances could play a critical role in transforming poor communities if both migrants and their families at home were given more options to invest their funds, creating opportunities for business development and employment.
The remittances from the Somali diaspora in Europe and the United States have resulted in targeted investments that have had a positive impact on Somalia's agriculture sector. Through the Somali AgriFood Fund, six business owners got financing for more than US$435,000 and are expected to generate close to 200 jobs and open new markets for about 15,000 small-scale producers in the agriculture and fisheries sectors. Somalia is estimated to receive over US$1,3 billion annually in remittances, exceeding official aid to the country.
The amount of remittances sent home is equivalent to around four times official development assistance and exceeds foreign direct investment inflows in most developing countries.
It is estimated that over the 15-year period the UN’s new Global Development Goals have set to end poverty, migrants abroad will have sent an accumulated US$7,5 trillion to their hometowns in developing countries. This is a testament to the transformative potential of remittances.
Fact: IFAD estimates that one out of seven people – more than one billion individuals - are directly impacted by remittances.
Remittances are crucial in fragile states or disaster-affected regions. They are often the only income families have, and can play a role in the reconstruction and stabilization of those states.
Fact: More than 90 per cent of the world’s poorest people do not have access to savings accounts, loans, insurance or any convenient way to transfer moneyThere is a direct correlation between financial exclusion and poverty.
For remittances to work for families and for development, it is crucial to improve access to basic financial services, such as savings and credit, but also to provide families with non-financial services adapted to their needs, such as technical assistance for business development or financial education programmes.
Lowering the cost of sending remittances can also have a tremendous impact, according Pedro De Vasconcelos, IFAD Senior Technical Specialist and Coordinator of the Financing Facility for Remittances. ''In the case of Europe, reducing the cost of sending remittances by one per cent would add up to a US$1 billion savings for those sending and receiving remittances.”