13 reasons why remittances are important
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13 reasons why remittances are importantEstimated reading time: 3 minutes
Every year on 16 June, the global community observes the International Day of Family Remittances (IDFR) to raise awareness of the hard work and sacrifice of the millions of migrants who support their family members and communities of origin through the money they send back home.
Remittances continue to matter more than ever. Here are 13 reasons why.
- A staggering one billion people worldwide – about one in eight – depend on remittances. Every year, 200 million migrant workers send money home, and 800 million people benefit from them.
- Even through a pandemic and political instability, remittance flows continued to grow. According to the latest World Bank data, remittances to low- and middle-income countries reached US$647 billion in 2022. That’s a growth of 8 per cent compared to 2021 – higher than the World Bank expectations six months ago.
- Migrant workers send on average US$200 to US$300 home every one to two months. This represents only 15 per cent of what they earn – the rest stays in their host countries. But what they do send can make up as much as 60 per cent of a household’s total income – representing a lifeline for millions of families.
- Over the last 20 years, remittance flows have grown in value five-fold, despite the myriad of adverse events that took place all over the world.
- The amount of money sent via mobile transfer increased 65 per cent during 2020 to US$12.7 billion and grew again to US$16 billion in 2021.
- Over 50 per cent of remittances are sent to rural areas, where 75 per cent of the world's poor and food-insecure live. Globally, the accumulated flows to rural areas is expected to reach approximately US$3 trillion over the next five years.
- About 75 per cent of remittances are used to put food on the table and cover medical expenses, school fees or housing expenses. In times of crisis, migrant workers are likely to send more money home to cover crop losses or family emergencies. The remaining 25 per cent of remittances, representing over US$150 billion per year, can either be saved or invested in asset-building or activities that generate income and jobs.
- More than 70 countries rely on remittances for at least 4 per cent of their GDP. As these countries demonstrate, remittances are an engine of socio-economic growth and transformation – particularly for rural areas.
- Remittances can be costly to send – and technical innovations like blockchain and mobile money might be the solution to keeping costs down. Right now, currency conversions and fees take up about 6 per cent of the total amount sent – that’s double the 3 per cent target set by the Sustainable Development Goals (SDG). In this regard, there’s enormous potential for innovative digital financial services.
- Between 2022 and 2030 –the SDG target year– an estimated US$5.4 trillion will be sent by migrant workers back to their communities of origin. Of that amount, around US$1.5 trillion will be either saved or invested.
- Migrant workers make an invaluable contribution to SDGs through remittances and investments. In particular, they contribute to ending poverty and hunger; promoting good health, quality education, clean water and sanitation, decent work and economic growth; and reducing inequalities.
- Strategic partnerships and progress on remittances go hand in hand. Partnerships among public and private sector stakeholders have paved the way for lowering the cost of remittance transfers and provided financial services for migrants and their families.
- Digital remittances have the power to help transform rural economies while also reducing costs for remitters and enabling beneficiaries in rural areas to track and access funds quickly without having to travel long distances.
Get involved with the IDFR’s campaign to build resilience.
Learn more about IFAD’s support for migrant workers and their families.Publication date: 16 June 2023