The challenge
For over a century, people have been moving from rural to urban areas, and across national borders in search of better opportunities. Of the 250 million international migrants, approximately 200 million leave home to work and send remittances home to their families.
Helping these families make the most of their own resources is vital to reach the Sustainable Development Goals (SDGs) by 2030. The international community may now recognize migrant workers and their families as agents of change and key partners in this effort.
The potential is clear: between 2022 and 2030, an estimated US$5.4 trillion will be sent by migrant workers back to their communities of origin in developing countries. IFAD is advocating to leverage the impact of these flows towards rural transformation and sustainable development.
The solution
In 2021, US$605 billion were sent to low- and middle-income countries. That’s a growth of more than 8 per cent compared to 2020. It is estimated that 75 per cent of remittance flows go towards immediate needs, but the other 25 per cent – over US$100 billion per year – is available for other purposes.
The amount that matters most is measured in the individual US$200 or US$300 sent home regularly. This amount represents 60 per cent of total household income and, if leveraged, it can most effectively improve the living standards of migrants and their communities back home.
With these apparently small funds, most remittance families commit to reaching ''their own SDGs'' – reduced poverty, better health and nutrition, education, improved housing and sanitation, entrepreneurship, financial inclusion and reduced inequality, and the ability to deal with the uncertainty in their lives by increasing their savings and building assets to ensure a more stable future.
The SDGs provide a unique opportunity to create a convergence between the goals of remittance families, government development objectives, private sector strategies to tap underserved markets, and the traditional role of civil society to promote positive change. In particular:
- Financial inclusion and literacy for remittance recipient families can increase opportunities for formal savings and investment. In turn, these mechanisms can build the human capital of remittance families and improve their living standards through better education, health and housing.
- Migrant investments beyond remittances can change the development landscape of local communities, if given appropriate options.
- Remittance markets improved through an adapted legal and regulatory framework, greater transparency and competition can lower cost and provide more resources to remittance families.
Since 2006, IFAD, through its US$43 million, multi-donor Financing Facility for Remittances (FFR), has worked to increase the impact of remittances for development by enhancing competition, reaching rural areas, empowering migrants and their families through financial education and inclusion, and encouraging migrants’ investment and entrepreneurship.
