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New Thinking Surrounding Remittances and Development

Discussion paper by UNCTAD, 2011

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The present publication seeks to gather main experiences and proposals made by policy makers, delegates, experts, intergovernmental organisation and civil society representatives during the 2011 UNCTAD Single Year Expert meeting on “Maximizing the development impact of remittances”. It is also a tool for consolidating state of the art knowledge on remittances trends, providing new thinking on the role that remittances play on development, and enabling stakeholders in better designing comprehensive policy and institutional frameworks in the intersection between migration, remittances, financial services and labour mobility issues.


1) New ThiNkiNg surrouNdiNg remiTTaNces

aNd developmeNT

2) maximisiNg The developmeNT impacT of


Book oN remiTTaNces



1) New ThiNkiNg surrouNdiNg remiTTaNces aNd developmeNT

2) maximisiNg The developmeNT impacT of remiTTaNces


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Remittances flows are becoming an increasingly salient issue in the international debate on migration and
development. Remittances are perceived as one of the key benefits that migration bring to originating countries.
Remittances are private flows of resources mostly intended for direct consumption and household support. There
is solid evidence that remittances can and have assisted many developing countries and LDCs in maintaining BOP
stability, ensuring the availability of hard currency, improving countries’ credit worthiness for external borrowing
and increasing internal aggregated demand.

Remittance flows to developing countries are projected to reach $325 billion in 20101, growing 2 per cent if
compared to 2009 and arriving to the same amounts of pre economic crises levels of 2008. During this crisis,
remittances have proven to be more reliable and sustained flows than other sources of external financing such as
foreign direct investment, public debt or official development assistance. Nevertheless, remittances can not be
considered a substitute to these other sources of external finance due to their private nature and purposes.

The potential of remittances does not end there. Remittances are seen today under a totally different light as
they can become a solid resource base for leveraging human development, financial inclusion, and investment
in productive capacity. Realising the potential of remittances for development is not an easy task. Senders and
recipients, as owners of these resources, have their own priorities and usually dispose of only a small share of
these resources once basic needs have been addressed.

Evidence shows that a significant amount of remittance transfers to developing countries are spent on household
consumption. A share of these expenditures is directed toward the construction of homes, healthcare and
education, thereby generating local employment in these critical service sectors. Much of the remaining remittance
flows to developing countries are household savings, which can be invested in local infrastructure and productive
activities, often through the direct involvement of home country governments, local communities and diaspora
associations. These funds can be significantly leveraged for co-financing development.

Important challenges still exist in originating and destination countries in order to improve accessibility, affordability
and safety of remittances transfers. Also, an absence of products and services designed to specifically respond to
migrant needs, promote savings and incentivize entrepreneurial activities is hindering the potential that remittances
have for asset building and investment. Furthermore, an accumulation of new restrictions on temporary movement
of people and difficulties in protecting and enforcing migrant’s rights are becoming significant stumbling blocks
for remittances growth.

Given the increasing current importance of remittances as well as migration and labour mobility related issues have
for development, Member States have requested UNCTAD to consider “the potential benefits and opportunities
of trade, investment and development links between countries of origin of migrants and their communities
abroad”2 and “the potential of migrants’ remittances to contribute to development, maximize benefits derived
and minimize costs through policies such as expanding migrant’s access financial services”3.

In response to these requests, UNCTAD convened a Single Year Expert meting on “Maximizing the development
impact of remittances”, held in Geneva the 14-15 February 2011. Discussions by experts4 pointed out at the
value and relevance of different country experiences on the impact of remittances at the macroeconomic level
but also regional and household levels. Experts showed case the different measures being used by countries
for facilitating remittances flows, expanding financial inclusion, and levering transfers flows to enlarge savings
and promote human development. They also introduced key lessons on how specific incentives to promote
investment and productive capacity have been successful or not in practice.

In this regard, experts indicated that there is a need to further explore experiences in setting comprehensive
policy and institutional frameworks that encompass sound financial, labour and migration regulations, incentives
to formalise transfers and promote savings and investment, active public-private partnerships, as well as
mechanism to enhance diaspora and donor engagement. One critical, point raised by many experts is that when
designing or implementing such policy framework, a clear understanding about your migrants, their main needs,

1) New ThiNkiNg surrouNdiNg remiTTaNces aNd developmeNT

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interests and concerns, and how they interact through social networks was essential for success.

The present publication seeks to gather main experiences and proposals made by policy makers, delegates,
experts, intergovernmental organisation and civil society representatives during the 2011 UNCTAD Single
Year Expert meeting on “Maximizing the development impact of remittances”. It is also a tool for consolidating
state of the art knowledge on remittances trends, providing new thinking on the role that remittances play on
development, and enabling stakeholders in better designing comprehensive policy and institutional frameworks
in the intersection between migration, remittances, financial services and labour mobility issues.

As the focal point of the United Nations for the integrated treatment of trade and development and interrelated
issues, UNCTAD will use this knowledge and experiences to continue and deepen its work on key policy questions
regarding migration, remittances and development.

Supachai Panitchpakdi
Secretary-General of UNCTAD


Migration and remittances Factbook 2011. World Bank, 2011.1

See UNCTAD (2009). 2 Note for the Ad Hoc Expert Meeting on the Contribution of Migrants to Development:
Trade, Investment and Development Linkages.

UNCTAD (2008). 3 Report of the United Nations Conference on Trade and Development on its twelfth Session

See UNCTAD (2011). 4 Report of the Expert Meeting on Maximizing the Development Impact of Remittances,
document TD/B/C.I/EM.4/3.



The volume contains papers, presentations and submissions delivered at the UNCTAD Single Year Expert
Meeting on “Maximizing the development impact of remittances”, held in Geneva the 14-15 February 2011
at the Palais des Nations, Geneva, organized under the supervision of Mina Mashayekhi, Officer-in-Charge
of the Division on International Trade in Goods and Services, and Commodities. The volume also draws on
the ongoing substantive work of UNCTAD.

This volume was edited and prepared by Mina Mashayekhi with assistance from Liping Zhang and David
Vivas Eugui. Matthew Snyder assisted in the editorial review of certain pieces.

The major contributors are the authors of the individual papers. Substantive contributions of the participants
in the above forum were also significant, particularly those from Mr. William Lacy Swing, Director-General,
International Organization for Migration (IOM); Ms. Kyung-Wha Kang, Deputy High Commissioner, United
Nations High Commissioner for Human Rights (UNHCHR); Mr. Assane Diop, Executive Director for Social
Protection, International Labour Organization (ILO); Ms. Purnima Mane, Deputy Executive Director, United
Nations Population Fund (UNFPA); Ms. Kirsi madi, Deputy regional director for CEE/CIS United Nations
Children’s Fund (UNICEF); Mr. Ralf Chami, Director of Regional Studies Division, Middle East and Central
Asia Department, International Monetary Fund (IMF); Jean D’Cuhna, Global Migration Adviser, UNWOMEN;
Serguei NANBA, Coordinator Postal Financial Services, UPU; Nils Clotteau, UPU; Mr. Pedro De Vasconcelos,
Manager, Financing Facility for Remittances, International Fund for Agricultural Development (IFAD);
Susanne Melde Judith Schicklinski and Rudolf Anich, from the African, Caribbean and Pacific (ACP)
Observatory on Migration on Migration of the IOM; Robert Meins, Remittance Specialist, IFAD; Mr. Juan
Jose Garcia Vasquez, Vice Minister of Foreign Affairs in charge of Migration Issues, El Salvador; Ruth C.
Gonzaga Deputy Director, Balance of Payments Statistics Group Department of Economic Statistics Bangko
Sentral ng Pilipinas; Richard Ampomah–Asiedu, Research Department, Bank of Ghana; Mr. Khurshed Alam
Chowdhury, Director General, Bureau of Manpower Employment and Training, Ministry of Expatriate’s Welfare
& Overseas Employment, Bangladesh; Mr. Saul T. De Vries, Deputy Director, National Reintegration Center
for Overseas Filipino Workers, Department of Labour and Employment, the Philippines; Mr. Samba Yomb
Thiam, Technical Advisor to the Minister, Ministry of Senegalese Abroad, Senegal; Anas Alami-Hamedane,
Permanent Mission of the Kingdom of Morocco; Mr. Yu Zhu, Professor, Fujian Normal University and Chair
of Asia-Pacific Migration Research Network, China; Connel Fullenkamp, Department of Economics, Duke
University; Leon Isaacs, Managing Director, IAMTN; Manuel Orozco, Senior Associate, Inter American

A full list of participants is contained in annex I to this volume. We would like to thank all our experts who
took part and contributed to the meeting, and UNCTAD members and donors for their interest in and follow-
through on the meeting.

Paula Genoud-Villegas designed the cover page and other graphics and performed the text formatting for
this publication.

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Note ..................................................................................................................................................................ii
Foreword ......................................................................................................................................................... iii
Acknowledgements ......................................................................................................................................... v
Acknowledgements endnotes (1 to 4) ............................................................................................................iv
Acronyms ........................................................................................................................................................ix

PART I. LeveRAgIng RemITTAnces foR DeveLoPmenT .................................................................... 1

A. ......................................................................................................................................................................

B. .......................................................................................................................................................................


2. .......................................................................................................................................................................

3. .......................................................................................................................................................................

4. .......................................................................................................................................................................

5. .......................................................................................................................................................................

Endnotes () ....................................................................................................................................................

PART II. fAcILITATIng RemITTAnces fLows AnD enABLIng fInAncIAL IncLusIon ................... 41

A. ......................................................................................................................................................................

B. ......................................................................................................................................................................

c. ......................................................................................................................................................................

D. ......................................................................................................................................................................

e. ......................................................................................................................................................................

1. .......................................................................................................................................................................

2. .......................................................................................................................................................................

3. .......................................................................................................................................................................

Endnotes () ....................................................................................................................................................

PART III. ADDRessIng socIAL DeveLoPmenT ThoughT RemITTAnces ........................................ 83

A. ......................................................................................................................................................................

B. ......................................................................................................................................................................

Endnotes () ....................................................................................................................................................

PART Iv. RegIonAL AnD counTRy exPeRIences In
chAnneLLIng RemITTAnces foR humAn AnD economIc DeveLoPmenT ................... 97

Annexes ................................................................................................................................................... 175




Table 1. .............................................................................................................................................................

Table 2. .............................................................................................................................................................

Table 3. .............................................................................................................................................................

Table 4. .............................................................................................................................................................


Box 1. ...............................................................................................................................................................

Box 2. ...............................................................................................................................................................


Figure 1. ............................................................................................................................................................

Figure 2. ...........................................................................................................................................................

Figure 3. ...........................................................................................................................................................

1) New ThiNkiNg surrouNdiNg remiTTaNces aNd developmeNT

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African, Caribbean and Pacific Group of States

ADB Asian Development Bank

AFDB African Development Bank.

AML-CFT Anti-Money Laundering and Combating the Financing of Terrorism

ASEAN Association of Southeast Asian Nations

APEC Asia-Pacific Economic Cooperation

ARS Alternative Remittance Systems

ATM Automatic Teller Machine

BCB Banque Commerciale du Burkina Faso

BCEAO Central Bank of West African Economic and Monetary States

BIMT Bangladesh Institute of Marine Technology

BMET Bureau of Manpower Employment and Training

BOG Bank of Ghana

BOP Balance of Payments

BSP Bangko Sentral ng Pilipinas

CES Consumer Expectations Survey

CERMES Centre de Recherche Médecine, Sciences, Santé et Société

CIP Commercially Important Persons

CFA Franc

Franc of the West African Community

CFO Commission on Filipinos Overseas

CEMLA Centro de Estudios Monetarios Latinoamericanos

GATS General Agreement on Trade in Services

GFC Global Financial Crisis

DAIP Directorate for the support of Investment and Projects, Ministry for the Senegalese abroad

DMA Developing Markets Associates Limited

DDA Doha Development Agenda

DESA United Nations Department of Economic and Social Affairs

DPEE Directorate of Forecast and Economical Studies of the Senegalese Ministry of Economy and Finance

DPP Diaspora Partnership Programme

DOLE Department of Labor and Employment

DRC Republic of the Congo

EEA European Economic Area

EDI Electronic Data Exchange

EIB European Investment Bank

EFLP Economic and Financial Learning Program

EO Executive Order

EU European Union

FCD Foreign Currency Deposit

FCDU Foreign Currency Deposit Unit

FEDECASES Federation of Salvadorean Savings and Credit Cooperatives

FDI Foreign Direct Investment

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FIs Philippine financial institutions

FFR Financing Facility for Remittances

FLC Financial Learning Campaign

FSD Financial Sector Deepening

FX Foreign Exchange Rate

GCIM Global Commission on International Migration

GCC Gulf Cooperation Council

GDP Gross Domestic Product

GFMD Global Forum on Migration and Development

CGAP Consultative Group to Assist the Poor

GJP ILO’s Global Jobs Pact

GMG Global Migration Group

GNI Gross National Income

GPRS Ghana Poverty Reduction Strategy

GRWG Global Remittances Working Group

HTAs Hometown Associations

ICT Information and Communication Technologies

IAD Inter American Dialogue

IADB Inter American Development Bank

IAMTN International Association of Money Transfer Networks

ID Identification Cards

IFS International Financial System

IFAD International Fund for Agricultural Development

ILO International Labor Organization

IMF International Monetary Fund

IOM International Organization for Migration

ITCILO International Training Center of the ILO

ITRS International Transactions Reporting System

LDCs Least Developed Countries

LINKAPIL Link for Philippine Development

MDGs Millennium Development Goals

MEDA Euro-Mediterranean Partnership

MIDA IOM’s Migration for Development in Africa Programme

MFIs Microfinance Institutions

MIGRANT ILO’s International Migration Programme

MLA Moroccans Living Abroad

MoU Memorandum of Understanding

MPA Mobility Partnership Agreement

MPI Migration Policy Institute

MTO Money Transfer Operators

MSMEs Micro, Small and Medium Enterprises

NAP National Accounts of the Philippines

NBFIs Non-Bank Financial Institutions

NRB National Registration Bureau

NGOs Non Governmental Organizations


NPISH Non Profit Institutions Serving Households

NRCO National Reintegration Center for OFWs

NSAPR National Strategy for Accelerating of Poverty Reduction

ODA Official Development Assistance

OFs Overseas Filipinos

OFWs Overseas Filipino Workers

OECD Organization for Economic Co-operation and Development

OHCHR High Commissioner for Human Rights

OSAA Office of the Special Adviser on Africa of the United Nations

OWWA Overseas Workers Welfare Administration

PAISD Programme for Development and Solidarity Initiatives

PDOS Pre-Departure Orientation Seminar

PLASEPRI Partnership between Italy and Senegal for supporting the private sector and the revalorization of the
Senegalese Diaspora in Italy

PhilPASS BSP-Philippine Payments and Settlements System

PRI Pakistan Remittances Initiative

PSD Payments Services Directive

POLOs Philippine Overseas Labor Offices

QCS Quality Control System

REVA Return to Agriculture Project

RQAN Return of Qualified African Nationals Programme

RSPs Remittance Service Providers

SAR Special Administrative Region

SENAMI Secretaría Nacional del Migrante, Ecuador

SFP ILO’s Social Finance Program

SME Small and Medium Enterprises

SMS Short Messaging System

TFP Total Factor Productivity

TTCs Technical Training Centers

TVE Townships and villages enterprises

UKRTF UK Remittances Task Force

UNCTAD United Nations Conference on Trade and Sustainable Development

UNDP United Nations Development Programme

UNICEF United Nations Children's Fund

UNFPA United Nations Population Fund

UN-OHRLLS UN Office of the High Representative for the Least Developed Countries, Landlocked Developing
Countries and Small Island Developing States

UNWOMEN UN organization on Gender, Equality and Empowerment of Women

UPU Universal Postal Union

USD United States Dollar

WTO World Trade Organization

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(Transition Page to be created according to the cover)

parT oNe

leveragiNg remiTTaNces for


1) New ThiNkiNg surrouNdiNg remiTTaNces aNd developmeNT

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Migrants make important economic, developmental
and cultural contributions to sending and receiving
countries. Remittances from migrants have positive
impacts on poverty reduction and development
in originating countries, mostly developing ones,
substantially contributing to the achievement of the
Millennium Development Goals. These positive impacts
become greater when remittances can be saved and
invested in infrastructures and productive capacity.
Government policy measures could induce such
use. Significant barriers to migration and remittance
transfers need to be addressed in order to harness
opportunities for development and poverty reduction,
including through easing financial transfers, setting
appropriate incentives, improving policy coherence in
migration and remittances policies, and facilitating the
temporary movement of people.


Recent evidence points to a significant and growing
contribution of migration to economic and social
development throughout the world. Migrants form
part of a diverse but highly engaged workforce that
not only provides required labour inputs and brings
new developmental and cultural resources to receiving
countries, but also contributes to poverty reduction
and development finance, as well as domestic
demand, knowledge and skills transfer, and trade
and commercial networks in both sending and
receiving countries.

Remittances have attracted increasing interest at
the national and international level. Drawing linkages
between migration, remittances, trade, investment
and development is complex and multifaceted. For the
purposes of this note, a wide definition of “remittances”
is used, encompassing private monetary transfers that
a migrant makes to the country of origin, and including
investments made by migrants in their home countries,

as such funds significantly contribute to development
and poverty reduction. A stricter statistical definition
made by the International Monetary Fund (IMF)
includes workers’ remittances, compensation of
employees and migrant transfers.

The present note seeks to provide a contribution in
advancing paragraph 170 of the Accra Accord and
to the United Nations General Assembly resolution
passed in 2010 on international migration and
development2 and also to offer inputs to the informal
thematic debate in 2011 on international migration
and development in preparation for the second
United Nations high-level dialogue on migration and
development to be held in 2013. The note is based on
the content of the background note3 and the Chair’s
report of UNCTAD’s Single Year Expert meting on
“Maximizing the Development Impact of Remittances”
held in Geneva the 14-15 February 20114.

cuRReNt mIgRAtIoN tReNDs II.
AND globAl mIgRAtIoN

People have continuously moved, seeking
better economic opportunities, family reunion,
and humanitarian relief. Globalization, modern
communications and transportation have greatly
facilitated such movement. The United Nations
Department of Economic and Social Affairs (DESA)
estimates that the total migrant stock increased from
about 195 million to 215 million between 2005 and
2010 at 1.8 per cent annually on average, while the
share of migrants in the total population remained
stable in the same period (only moving from 3.0 to
3.1 per cent). Compared to the 2000–2005 period,
the growth in the number of migrants in developed
countries decelerated between 2005 and 2010.
Migrant workers, who are the main source of
remittances to their home countries, numbered about
86 million by 2009. The stock of international migrants
is expected to rise to 405 million by 2050.

1. mAXImIZINg tHe DeveloPmeNt ImPAct oF RemIttANces

By Mina Mashayekhi1

Officer in Charge
Division on International Trade in Goods and Services, and Commodities, UNCTAD


South–North migration through traditional corridors
remains important, accounting for 43 per cent of
migrant stock from the South, which suggests
that South–South migration has become larger.
The latter accounts for 73 per cent in sub-Saharan
Africa, reflecting that most migration occurs within
regions.5 The prosperity of certain countries attracts
large numbers of migrants, explaining why Saudi
Arabia, the United Arab Emirates and Singapore are
favoured destinations.

The number of migrants varies considerably across
regions (see fig. 1). Most migrants live in Europe, Asia
and North America, with growth rates in 2005–2010
in North America and Europe standing at about 10
and 8 per cent respectively. Growth is expected to
continue but at lower rate in those two regions. The
top migrant destinations in 2009 were the United
States, the Russian Federation, Germany, Saudi
Arabia and Canada. As a share of total population, the
top receiving countries were Qatar (87 per cent), the
United Arab Emirates (70 per cent) and Kuwait (69 per
cent), whose popularity as destinations has increased
owing to their more resilient labour markets as has
been revealed during the recent economic crisis.

Female migrants constitute a significant proportion
of international migrants, though their numbers have
remained relatively stable, going from 49.2 per cent
in 2005 to 49 per cent in 2010. Migrant women are
in many cases the only contributor to family finances.
Many fundamental aspects relating to them need to
be addressed, including rights-related issues and
equal labour opportunities.

In terms of sectoral distribution, migrants are
concentrated in key sectors such as construction,
tourism, manufacturing and agriculture, accounting for
29, 23, 17 and 16 per cent respectively (see fig. 2).

The crisis has severely impacted on sectors that
absorb large amounts of labour (e.g. construction,
tourism, and financial services). Demand for labour
has fallen substantially. The number of unemployed
people worldwide reached nearly 212 million in
2009, adding 19 million more jobless to the 2008
total.6 Disproportionately more jobs have been lost
among immigrant youth, in particular among men.
In 2009, the unemployment rate of the foreign born
between 15 and 24 years old reached 15 per cent
in the United States, 20 per cent in Canada and 24
per cent on average in the European Union (EU).

figure 1. Estimated number of migrants at mid year (2005-2010)

Source: DESA (2009).

Estimated number of migrants at mid year (2005-2010)





ia A
























t M






t M












2005 2010



f m




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Consequently, migration to OECD countries fell by
about 6 per cent in 2008 to about 4.4 million people,
reversing a continuously upward growth trend7
(see fig. 3). Unemployment is projected to continue to
rise, at 10 per cent on average in 2010. More than 57
million people will be unemployed compared with 37.2
million at the end of 2008, which makes OECD labour
markets less appealing for new migrants and difficult
for existing migrants. Globally, according to DESA, the
number of international migrants continues to increase
despite the crisis.

Some countries responded to the crisis by restricting
the inflow of migrant workers, often under public
pressure to keep jobs for nationals, with the attendant
effect on remittance flows. Such measures have
included lowering numerical limits (quotas and
caps); tightening labour market tests; inserting “hire
nationals” provisions in stimulus packages; limiting
the possibilities for migrants to change status and
renew permits; and promoting return migration. The
changes in visa regulations and/or restrictions on work
permits that have been introduced in some countries,
such as Canada, India, Japan, Malaysia, Thailand,

Singapore, the United Kingdom and the United States,
have impacted on migrants, including highly skilled

The number of migrants may increase as post-crisis
economic prospects improve. Some longer-term
trends have not yet been reversed, necessitating
future migration. Labour demand will continue to
exist in the Organization for Economic Cooperation
and Development (OECD) countries, due to ageing
population trends and continuous demand for certain
jobs in domestic, healthcare, and education services.
Emerging developing countries are expected to attract
higher migration flows as the amount of labour force
in developed countries is projected to remain stable
at about 600 million until 2050, whereas in emerging
developing countries it is expected to increase from
2.4 billion in 2005 to 3.6 billion in 2040.

Climate change and natural disasters are increasingly
relevant to migration flows. Environmental changes
such as rising sea levels, extreme weather events,
decreased or increased rainfall, and shifts in disease
patterns could trigger population displacement. At
least 20 million people were estimated to have been

figure 2. Share of migrant workers in total sector employment

Source: UNCTAD, based on data from the International Labour Organization (ILO) (2010).



displaced (in many cases temporarily) by climate-
related disasters in 2008, and about 200 million
people may be displaced by 20509. On the other
hand, measures to mitigate the impacts of climate
change and to promote environmental sustainability
are creating green jobs, for example solar/wind power
engineers and technicians and repair and maintenance
specialists. It is estimated that 2.1 million jobs will be
created in wind energy, 6.3 million in solar photovoltaic
energy, and 12 million in biofuels by 203010.

Many of the aspects surrounding migration,
remittances and development are politically sensitive
and emotionally charged in many countries. Due to
the importance and complexity of migration issues
and with the intention to continue multilateral dialogue
on international migration and development, which
had started with the United Nations High-level
Dialogue (2006), a Global Migration Group (GMG)
was created in 2006 at the initiative of the United
Nations Secretary General. Also the Global Forum on
Migration and Development (GFMD) was launched in
2006 to provide an opportunity to exchange views
and to depolarize perspectives, between origin and
destination countries.

The GMG is an inter-agency coordination body
seeking to promote a wider application of all relevant
international and regional instruments and norms
relating to migration and to encourage the adoption
of a more coherent, comprehensive and better
coordinated approaches to international migration.
It had undertaken joint work, including in relation to
mainstreaming migration into development, and had
made contributions to the GFMD sessions.

While, the agenda of the GFMD is quite comprehensive,
remittances have been one of the key issues subject to
dialogue in several gatherings since 2006 in Brussels
(2007), Athens (2009) and in Mexico (2010). The
GFMD was quite successful at the recent conference
held in Puerto Vallarta (Mexico) developing a common
framework for future discussion, including: (a) a focus
on human development, based on knowledge and
experiences; (b) a common understanding that there
were shared responsibilities (e.g. respecting human
rights and ensuring family protection) and shared
benefits (in the form of remittances, knowledge,
and labour inputs) between origin and destination
countries; and (c) using comprehensive partnerships
between government and civil society as solid
vehicles for advancing action on the ground. Many

Evolution of international migration flows from














Ireland Italy Republic of

OECD United

2003-2007 (average)


figure 3. Evolution of international migration flows from 2003-2008

Source: OECD (2010).


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observers consider that this framework could also be
a suitable platform for generating specific development

tReNDs IN RemIttANcesIII.

Data clearly indicate the increasing importance of
workers’ remittances to developing countries. Asia
is the biggest remittance-receiving region, followed
by Latin America and Africa (table 1). From 1990 to
2008, Asia experienced the fastest annual remittance
growth (17 per cent), followed by Latin America (14.3
per cent) and Africa (10.2 per cent). A rapid increase
in workers’ remittances to Asia is evident. In 1990,
workers’ remittances to Asia were roughly 20 per cent
less than to Africa and 47 per cent greater than to
Latin America. In 2008, they were roughly 2.3 and 2.4
times the size of inflows to Africa and Latin America

The level of remittances fell during the crises due to
decreased migration flows, in particular to OECD
countries, and due to the reduced income of migrants.
In 2009, remittances to developing countries reached
$316 billion, down 6 per cent from $336 billion in
2008. They are expected to increase by 6 per cent
in 2010, 6.2 per cent in 2011 and 8.1 per cent in
2012, to reach $374 billion by 201211. The crises have
generated different effects in key migration corridors.
Remittances to Latin America and the Caribbean,
Central Asia, and the Middle East and North Africa
fell more deeply than the world average, by 15 per
cent, 21 per cent and 8 per cent respectively, whereas
overall remittances to South Asia continued to grow
at 6 per cent, adding to the resilience of domestic
demand in this region.12 Flows to East Asia and the
Pacific region remained flat, while they fell by 3 per cent

in sub-Saharan Africa.13 The growth of remittances in
Asia and modest falls in sub-Saharan Africa can be
explained by higher diversity in destination countries
including other developing countries. For example,
India received 27 per cent of all its remittances from
Saudi Arabia, the United Arab Emirates and Qatar in

China, India, Mexico and the Philippines remained
the top recipients in 2009 (fig. 4). It is worth noting
that remittances are not only of value to developing
countries. In 2009, developed countries such as
France, Germany and Spain were among the top
recipients. Spain has been a major recipient since
the 1960s. The United States is the largest source
of remittances, with $46 billion in recorded outward
flows in 2008, followed by the Russian Federation,
Switzerland and Saudi Arabia.

In 2009, remittances accounted for 1.9 per cent of
the gross domestic product (GDP) of developing
countries and LDCs. In terms of share of GDP, smaller
countries such as Tajikistan, Tonga and the Republic
of Moldova, and a few LDCs including Lesotho and
Samoa, were the largest recipients in 2008 (see fig.
5), suggesting the greater role of remittances in these
countries’ economic and social development. The
impact of remittances on LDCs can be even higher.
Remittances account for more than 5 per cent of gross
national income (GNI) in almost a third of the LDCs.14
The share is more than 10 per cent in some LDCs such
as Cape Verde, Gambia, Haiti and Lesotho. For Cape
Verde, it ranged from 12 to 17 per cent during 2000
and 2006 (a relevant period for the LDC graduation
evaluation) and remittances were the second largest
source of foreign exchange.15 Remittance inflows
are considered to be one of the contributors to LDC
graduation, for example in the case of Cape Verde’s
graduation from LDC status in 2007.

Table 1. Top five receiving countries, by region (in billions of dollars, 1990–2008)1

Groupings 1990 2000 2008 average growth rate (1990-2008)

Asia2 5.5 21.5 93.2 17.0

Latin America3 3.8 12.2 41.4 14.3

Africa4 6.9 7.8 39.5 10.2

Source: UNCTAD (2010), based on IMF BOP statistics.

1 Credit of workers’ remittances.
2 Bangladesh, China, India, Pakistan and the Philippines.
3 Colombia, the Dominican Republic, El Salvador, Guatemala and Mexico.
4 Egypt, Morocco, Nigeria, Sudan and Tunisia.


figure 4. Top remittance-recipient countries (2009)

Source: UNCTAD, based on World Bank data (2008).

figure 5. Top ten countries in terms of remittances as a % of GDp (2008)

Source: UNCTAD based on data from World Bank (2008).

Top remittance-recipient countries (2009)































Top ten countries in terms of remittances as a % of GDP (2008)





























1) New ThiNkiNg surrouNdiNg remiTTaNces aNd developmeNT

2) maximisiNg The developmeNT impacT of remiTTaNces

Remittance inflows have proved to be resilient relative
to foreign direct investment (FDI) and are an important
component of financing for development. Figure 6
shows the evolution of FDI and ODA inflows versus
remittances in developing countries between 2005
and 2010. FDI tends to be higher in developing
countries’ balance of payments. However, the gap is
getting smaller as a consequence of the crises. FDI fell
by about 21 per cent from $593 billion in 2008 to $478
billion in 2009. In 2010, FDI arrived to $593 billion
and not expected to return to the pre-crisis level until
more solid economic recovery driven by output levels
and trade recovery gains momentum. Remittances
became an even more important source of external
financing during the crisis and in the recovery phase.
The reasons for the resilience of remittance flows
include the human value driven nature of remittances,
some level of stability of many resident migrants in
host countries, and continued demand for many
of the services performed by migrants even during
the crisis because the services are not performed
by locals either due to demographic change or the
unwillingness of locals to do them. As economic
conditions improve in migrant receiving countries,
remittance flows to developing countries are projected

to increase by 6.2 per cent in 2010 and 7.1 per cent
in 2011, partly offsetting the weak recovery in other
financial flows to developing countries. Remittances
to developing countries have been growing faster than
official development assistance (ODA), representing
capital inflows that are about three times higher than

Remittances can generate important macro impacts
in recipient countries. These impacts can be felt in
terms of GDP, exchange rates and reserves, the
creditworthiness of a country, exports and imports,
and consumption. All these impacts need to be further
studied under a longer term perspective as remittances
can last at least one generation. As mentioned
above, remittances had been countercyclical.
Being compensatory in nature, remittances helped
recipient households to smoothen their consumption
of tradable and non-tradables, directly or indirectly
expanding the State’s tax base and increasing fiscal
space. Stable and crisis-resilient remittances could
improve government debt sustainability and reduce
sovereign risks. On the downside, remittances may
lead to real exchange rate appreciation and damage
the competitiveness of tradable sectors (i.e. the Dutch
disease effect). Such effects had been stronger for










figure 6. Inflows of fDI, Remittances and ODa (2005-2010)

Source: UNCTAD based on WIR, OECD and World Bank data (2010).


low-income and some middle-income countries,
and even stronger for those with less open trade
and capital flows. Excess capital inflows may lead to
monetary expansion and inflationary pressures, while
reducing the incentive of governments to maintain
fiscal discipline and to undertake necessary poverty-
alleviation and infrastructure investments. Some
developing economies may run the risk of becoming
highly dependent on remittances and discouraging
active labour participation in productive activities.
This may decrease the domestic labour supply and
accumulation of capital, and therefore also economic
growth in developing countries. On the other hand,
remittances could allow people to leave the labour
market to upgrade their education or go into business
as it will be seen in the next sections.

RemIttANces, DeveloPmeNt Iv.
AND PoveRtY ReDuctIoN

Remittances by nature are private money transfers,
often earned at a high personal cost and driven by
household-support motives. While remittances can
provide a significant contribution to poverty reduction
and local development in remittances recipient
countries and regions, they should not be considered
a substitute for effective national development and
poverty reduction strategies.

In principle, remittances are expected to reduce
poverty, as they are, in many cases, directly received
by the poor, augmenting their income and alleviating
their poverty. In some countries, remittances may
make up over 50 per cent of the recipient’s total
household income. They also represent a more stable
source of poverty reduction than other capital flows.
Flows can last for one generation or more, and usually
go to more or less the same family members.

While there are concerns about brain drain, remittance-
dependence, and the negative impact of remittances
on small countries’ export competitiveness due
to pressure on currency appreciation, in general,
remittances have contributed positively to
advancement of the Millennium Development Goals
(MDGs). In Nepal, for example, remittances, together
with urbanization and higher wages, have resulted
in a decline of the incidence of poverty of about one
percentage point annually since the mid-1990s (from
42 to 31 per cent).16 The Asian Development Bank
estimates that 4.3 million people in the Philippines

remain above the poverty threshold simply because of
remittances. Studies in El Salvador and Sri Lanka find
that children of remittance-receiving households have
a lower school dropout rate.17 Qualitative studies in
Ecuador, Mexico, the Philippines and Thailand18 have
demonstrated that migration also allows rural women
to gain autonomy by taking paid work in urban areas
or abroad. Finally, remittances contribute to improving
child and maternal health by allowing the purchase of
food and medicines. In Guatemala, Mexico, Nicaragua
and Sri Lanka, children in remittance-receiving
households have higher birth weights and better
health indicators than children in other households.19

Recent analysis demonstrates that an increase in
international migration is positively linked to a decline
in the number of people in poverty. Various studies
indicate that a 10 per cent increase in the share of
remittances in a country’s GDP leads to, on average,
a decline from 1.6 to 3.5 per cent in the proportion
of people in poverty. Despite heterogeneous effects
across countries, remittances have reduced the
incidence and depth of poverty at the household
level in sub-Saharan Africa, Latin America,20 Asia
and the South Pacific.21 Recent evidence indicates
that the effect on reducing the poverty gap could in
some cases be more important than the effect on the
poverty rate.22

A recent study by UNCTAD (see box 1) provides
additional evidence on the linkage between remittances
and poverty reduction in developing countries. For
larger countries such as India, the impact of remittances
is perceived as less notable, however remittances do
form an important part of the country’s economic and
financial variables.

Remittances are often considered to be a monetary
consequence of social and emotional relations and to
be based initially on altruism, which explains why they
tend to be spent mainly on household consumption
(e.g. at the rate of 86.4 per cent in Mexico), with only
a small share saved and invested. While there are
differences among countries on how remittances are
spent, evidence shows some similarities in the order of
priorities that recipient families and sending migrants
give to their use (fig. 7).

The way in which remittances are used can produce
wide multiplier effects in the economy and for
development. Such an effect can be felt in the
purchase of essential goods and services, home
appliances, and medical and education services.

1) New ThiNkiNg surrouNdiNg remiTTaNces aNd developmeNT

2) maximisiNg The developmeNT impacT of remiTTaNces

box 1. India: Remittances and poverty reduction

Using the panel data for 77 developing countries (1980–2008), the study finds that remittances significantly
reduce poverty in recipient countries, but that results are more reliable for countries where remittances make
up 5 per cent or more of GDP. In these countries, on average, for the given level of GDP, a 10 per cent rise in
remittances leads to a reduction of 3.9 per cent in the poverty headcount ratio and to approximately a 3–3.5
per cent reduction in the poverty gap.

With respect to India, empirical estimates show that a 10 per cent rise in remittances as a share of GDP leads to
a 1.7 per cent reduction in the poverty ratio. At the regional level, the province of Kerala, which receives about
20 per cent of total remittances in India, has experienced higher levels of average per capita consumption
than the rest of India. Between 1988 and 2008, it witnessed an increase in annual average per capita net
state domestic product by 5.8 per cent, against a 14.7 per cent increase in per capita remittances.

Empirical causal tests undertaken in the Kerala region indicate that higher remittance levels have led to higher
per capita income and higher levels of investment, which are considered key variables affecting poverty

Source: UNCTAD (2010). Impact of Remittances on Poverty in Developing Countries.

Saving and
small investments

Long term household:
house building, loan payments, inputs

for family self sustained agriculture activities

Health and education:
medical services, studies, and insurance

Home comfort:
telephone services, home appliances, furniture, and transport

Direct household consumption:
food, medicines, rent, essential home services (water and electricity)

figure 7.



Most of the goods and services consumed (mostly
utilities and financial services) are produced locally,
except for home comfort goods with a high level of
imported component. Such consumption increases
the local demand, particularly in poor or rural areas,
thereby driving domestic production. To avoid
remittance-dependence, investment in education
becomes particularly relevant for long-term human
development, as professional prospects of the next
generation improve, generating less dependency on
remittances in the future.

When a share of remittances is used for small business
investments, the multiplier effect becomes larger and
more sustainable as they create income stream. On
average, around 10 per cent of remittances are found
to be saved and invested.23 Evidence shows that
remittances help to increase the level of small business
activities in the recipient developing countries. For
example, in Ghana and Guatemala, about one third
of remittances are used for starting small businesses
and house construction. Remittances are key sources
of finance for investment in farming, or for underwriting
risks in new agricultural ventures. Providing financial
counselling to remittance recipients helps to mobilize
their savings into the financial sector, which could then
be utilized for credit to enhance the country’s productive
base. It has been reported by DynaMicrofinance in
Senegal that 20 per cent of its remittance clients have
acquired a savings or loan product, in part due to its
efforts to systematically offer savings accounts and
other financial products to remittance recipients and
to explain how they work.24

Remittances can help local entrepreneurs bypass
inefficient or non-existent local credit markets,
especially in rural areas, and to start productive
activities. El Salvador25 implemented a pilot programme
(2008–2009), together with a non-profit organization

from the United States (TechnoServe), to help small-
scale entrepreneurs leverage remittances to access
credit and grow their businesses, including hotel and
restaurant services.

Several countries have been active in leveraging
remittances to alleviate poverty and create wider
social benefits. For example, Bangladesh and Ghana
have included remittances as a key source of income
in their National Poverty Reduction Plans and sought
to reduce transfer costs and enhance positive effects.
The Philippines has created special funds to encourage
enrolment by migrants in the national social security
system (e.g the Flexifund) and to encourage savings
for building homes (e.g. the Home Development
Mutual Fund).26

Remittances can also play an essential role in
responding to devastating natural disasters. A
recent study has found that remittances tend to rise
following crises and natural disasters (e.g. the floods
in Pakistan and Bangladesh) and conflicts (e.g.
Sierra Leone).27 Reconstruction can be supported by
international aid and assistance and also by private
philanthropic support during the initial phase, however
this aid can not be long-lasting. Remittances and
other supports from migrants abroad could play
a more effective role in the post-disaster recovery
and rehabilitation as shown in the case of Haiti
(see box 2).

leveRAgINg RemIttANces v.
IN DeveloPmeNt eFFoRts

Given the private nature of remittances and the fact
that their main use is for covering basic needs, it is
a key policy challenge for governments, development

box 2. Remittances and post-earthquake reconstruction in haiti

Officially recorded remittance flows to Haiti were $1.4 billion in 2008, but the true figure could be near $2
billion. Haitian diasporas have played a key role in the reconstruction and rehabilitation of Haiti. In 2009,
they sent $1.64 billion to Haiti, constituting 26 per cent of the country’s GDP. Some 300 Haitian hometown
associations in the United States and Canada also donated $10,000 each to their communities for social
projects. The temporary protected status granted by the United States after the earthquake for a period of 18
months to Haitians already in the United States enabled over 200,000 Haitians without proper documents to
work in the United States legally. This allowed more money to be sent through formal channels.

Source: Mobilize the Diaspora for the Reconstruction of Haiti by Ratha (2009).

1) New ThiNkiNg surrouNdiNg remiTTaNces aNd developmeNT

2) maximisiNg The developmeNT impacT of remiTTaNces

agencies and other stakeholders to find ways to
leverage their development impact and to mobilize
migrant action and capital to promote investment
and productive uses. Considerable efforts need to be
deployed to overcome migrants’ mistrust, over and
above the difficulties of identifying attractive investment
and business opportunities. Several countries have
been active in leveraging remittances in devising
mechanisms to promote investment, financial stability,
businesses start ups, and local infrastructure building.
Also efforts have been deployed by government and
development cooperation agencies to further engage
diaspora actions and channels their knowledge and
social contributions to local development efforts.

Remittances and other diaspora funds (including
investment) can be channelled as a source of
development finance by home countries to support
development and poverty reduction, including
the building of local infrastructure and productive
capacity. To create opportunities for development-
oriented investment from migrants, as stated in the
United Nations Doha Declaration on Financing for
Development, several tools have been utilized by
developing countries.

Diaspora bonds could be used as an innovative tool
to support macro economic stability and development
financing by tapping into the wealth of a diaspora
population and opening new marketing channels. They
tend to be considered a form of “patriotic” investment
more than private money transfer. However, diasporas
also pay attention to the potential return and risks of
these bonds. India was the first developing countries
to issue diaspora bonds during the economic crisis
in 1991, when it experienced a large trade and fiscal

deficit, high inflation and devaluation of the Indian rupee.
The Indian Development Bonds targeted at Indian
diasporas enabled India to raise $1.6 billion in a short
period of time, which was critical to India’s recovery
from the crisis. In 2000, the Indian Government sold
Resurgent India Bonds to non-resident Indians.28
Since then, it has been selling diaspora bonds to
support the budget and keep the Indian diaspora
engaged by using national values as a key component
of the marketing strategy. It is estimated to have raised
a total of $11 billion from diaspora bonds.29 Foreign
banks were allowed to sell the bonds, as they were
considered better located to serve the Indian diaspora.
Tax and credit incentives could make diaspora bonds
more attractive. The Philippines has also used this type
of bond to finance social housing projects. Greece is
also planning to issue diaspora bonds to alleviate the
country’s debt problem.

Steady flows of remittances and other funds from
migrants can have important stabilizing effects on the
balance of payments. Despite chronic trade deficits,
the current account balance of Bangladesh, Nepal
and the Philippines has turned positive with the rise
of remittances.30 Such funds also improve a country’s
creditworthiness for external borrowing (box 3).

Many migrants, in time, become important investors
by setting up businesses in home countries. Starting
from 1978, businessmen from Hong Kong SAR,
Macao SAR and Taiwan Province of China, as well
as members of the Chinese diaspora living in South-
East Asia, became the first investors to seize the
opportunity of China’s open-door policy combined
with various tax incentives. Most of them started their
businesses in China by investing in their regions of

box 3. Turkey: attracting expatriates’ funds to strengthen international reserves

Turkey has allowed its expatriates to open foreign currency deposit accounts at the Central Bank since 1976,
when it had difficulty in financing increasing current account deficits due to the oil crisis. Because the Turkish
lira was not convertible until 1989, these account enabled Turkish expatriates to hold their savings in foreign
currency with attractive returns. In order to facilitate the efficient transfer of savings, Turkey signed special
agreements with the European central banks, the German postal services, and financial institutions from
Europe and the United States, and from Turkey. During the financial crisis in 1994, which led to a sudden
capital outflow, the Turkish Government launched a new instrument (Super Foreign Exchange Accounts),
offering longer-term and higher interest rates to Turkish expatriates. The two special accounts now account
for roughly half of Turkey’s international reserves, which can be used as safeguard against swift capital
reversals and can help to reduce interest premiums on external borrowing.

Source: Atalay A. (2005). Almanya’daki İsçi Tasarruflarının Değerlendirilmesi: Kredi Mektuplu Döviz Tevdiat ve Süper Döviz
Hesapları Örneğinde Bir Makro Analiz.


origin. They made important contributions to China’s
trade and development, especially in the early years
of China’s economic take-off. As their investment is
concentrated in the manufacturing sector, they have
promoted China’s exports in manufactures through
their networks in foreign countries, and have introduced
new technology and management expertise, thus
helping this sector’s development. Their success
encouraged multinational companies to invest directly
in China a decade later. The Indian diaspora has played
a well-known key role in the growth of India’s ICT
outsourcing services through direct investment and
by facilitating commercial relations between United
States & European firms and Indian firms.

Government assistance, including credit provision
and incentives, can induce migrants and diasporas
to invest in home countries. Supported by the Inter-
American Development Bank, Brazil established a
Mutual Fund for Investment in Emerging Enterprises
(the “Dekassegui Fund”) in the early 2000s, aimed
at channelling a small portion of regularly transferred
remittances to more productive uses. The fund offers
support to Brazilians abroad (principally those in
Japan) hoping to open small businesses in Brazil. This
support includes selection and training of potential
entrepreneurs in Japan; integration and business
training in Brazil; and start-up and growth of new
businesses. The results seem to be encouraging,
with more than 11,000 entrepreneurs supported,
1,000 training activities, and 3,500 consultancies
undertaken to assist Brazilian returnees from Japan
between 2005 and 2008. The funds also provide
microcredits for start-up businesses, for example
in restaurants, food processing, and agribusiness.
In Morocco, the Groupe Banques Populaires is
a state-owned bank with branches in several
European countries. Receiving about 60 per cent of
all remittances to Morocco, it provides subsidized
credit for real estate and entrepreneurial investments
in Morocco. Bangladesh has announced the creation
of an expatriate welfare bank to provide collateral free
loans, in particular to returnees, as well as support for
investment in productive sectors of the economy. The
Philippines currently provides entrepreneur training
plus credit access to empower returnees and their
families for economic independence by the National
Registration Center for Overseas Filipino Workers.
Regardless of the approach taken when providing this
type of support, it is important respond to the specifics
of the country concerned rather than attempting to
use a “one size fits all” approach.

Diasporas can play an important role in supporting
the development of local infrastructure and public
services such as roads, hospitals and schools. The
Indian Government is presenting an ambitious $500
billion national infrastructure project to overseas
Indians in more than 50 countries.31 Indian diasporas
will participate through public–private partnerships that
will include knowledge and financial contributions from
them.32 If successful, this model could open a new
way to finance significant infrastructure projects by
diasporas interested in promoting development and
higher standards of living in their countries of origin. In
addition to family remittances, Somali diasporas have
built flexible social support networks to gather resources
to finance infrastructure, equip schools and hospitals,
pay health and educational service providers, and
train professionals in Somalia. Members of the Somali
diaspora in the Netherlands were assisted by the
Diaspora Partnership Programme (DPP) established
in 2008 by a non-governmental organization, CARE.
DPP strengthens diasporas’ capacities to deal with
a wide range of local partners to undertake joint
development projects. Mexico is also well known for
its active efforts in seeking diaspora contributions in
local development projects by providing matching
funds (the “3x1” citizens’ initiative). The programme’s
budget went from $5 million in 2002 to $42 million
by 2009, and more than 12,000 projects had been
implemented by 2010.33

Diaspora spending can attract trade in goods and
services (such as nostalgic goods and nostalgic
tourism) from countries of origin. Nostalgic goods
include traditional exports such as tortillas, tea and
curry, which tend to be labour-intensive and artisanal.
In this way, the export earnings are more likely to
benefit the local population. Nostalgic tourism usually
refers to the circular flow of tourists for holidays and
other personal purposes. ILO has estimated that a
significant percentage of migrants visit their home
countries as tourists. A study on Oaxaca in Mexico
shows a positive correlation between nostalgic tourism
and local development.34

The contribution of diaspora organizations can go
far beyond the economic and monetary dimension.
“Knowledge and social remittances” – i.e. migrants’
skills, knowledge and networks – are even more
valuable in promoting the development of the countries
and communities of origin. Social networks are by
their nature bidirectional, and allow the circulation of
resources, information, values and consumer behavior.

1) New ThiNkiNg surrouNdiNg remiTTaNces aNd developmeNT

2) maximisiNg The developmeNT impacT of remiTTaNces

Morocco has initiated the creation of a database of
certified diaspora associations to strengthen links
and to inform them of investment and development
initiatives in Morocco. In Indonesia, in-kind remittances
(i.e. goods sent by migrants to their families left
behind) have played an important role. Mobilization of
the diaspora for development have become one of the
most effective means of addressing concerns about
“brain drain”, by replacing it with “brain circulation”.
Various programmes – including the Migration for
Development in Africa programme operated by IOM –
have provided opportunities for diaspora involvement
in home countries and for sharing their expertise,
either through establishing exchange programmes in
public administration, or through university training in
home countries, or by facilitating the return of diaspora
doctors and other healthcare workers to Africa. One
innovative programme from ILO (the Green Jobs
initiative) linked remittances with green jobs in rural
areas, where remittances were used to reduce poverty
in a manner that was respectful of the environment.

HARNessINg oPPoRtuNItIes

Significant barriers exist in harnessing the positive
roles of remittances in development and poverty
reduction. There are barriers that increase the risk
or cost of sending home remittances, and barriers
that impede new flows of remittances. The former
can be found in both home and host countries; they
include lack of safe, reliable, affordable and accessible
transfer systems for remittances, taxation, information
asymmetries regarding the nature of the services,
prices and competition. The latter include migration
policies and trade-related barriers including market
access limitations related to the temporary movement
of natural persons. Remittance flows could benefit from
lower transaction costs and facilitated movement of
people. Strengthening the financial services sector will
be key in reducing cost and channelling remittances
into productive sectors.

Addressing cost-Related barriersA.

Several policy options can be indentified to ensure
safety and security in transactions, ensure affordability
and accessibility, promote competition in remittance-
related services, increase remittance flows via
tax exemptions, and improve transparency and

information flows.

Regarding safety and reliability, banks, money
transfer organizations (MTOs) and post offices offer
the highest levels of security and larger geographical
reach through their branch networks. It is generally
agreed that remittances transferred through formal
rather than informal systems are more likely to be
leveraged for development. Many migrants have felt
obliged to use informal channels as a consequence
of being undocumented. Consular ID cards, such as
those as issued by the Mexican Government, could
address their needs to access formal financial services.
Such cards have been accepted by mainstream
financial institutions in the United States. Formal
transfers can also reduce the risk that migrants and
recipients will be exploited by money-laundering
networks. To facilitate access to bank accounts
in EU countries, the European Investment Bank
and Mediterranean developing countries signed an
arrangement to allow migrants access to simplified
banking facilities upon presentation of identity or
consular registration cards.36

Affordability is one of the most important barriers to
remittance flows, as the transfer fee is a key cost
component of sending remittances. The lower the
transaction cost is, the greater the benefits and
opportunities are for receiving families and countries
to capture development gains and reduce poverty.
The volume of remittances from destination countries
and the average total cost are closely correlated. The
global average total cost fell to 8.7 per cent in 2010,
but it remains high.37 Generally, it is more expensive to
send money through commercial banks, with a global
average cost of 12.3 per cent in Q1 2010. Post Offices
and MTOs were the cheapest, at 6.7 and 7.1 per cent

Latin America and South Asia have recorded the
lowest regional average total cost for remittances.
While transfer cost in Latin America was 5 per cent
in 201038, South Asia has seen a consistent drop in
average total cost since 2008, from 7.8 per cent in
2008 to below 6 per cent in Q1 2010. Lower costs
are the consequence of high transfer volumes and
high levels of competition among service providers in
both host and home countries. Africa has the highest
average cost – between 10 and 14 per cent in the
2008–2010 period – mainly due to lower volume and
to lack of competition in the provision of financial
services in home countries, for example, owing to
exclusivity contracts between MTOs and their agents.


South–South transfers are expensive too, with an
average cost of 12.3 per cent in Q1 2010.

There are several available solutions to reduce the
cost of remittance transfers. Various practices to that
end have been adopted by stakeholders – including
by destination and recipient countries, post offices,
banks and credit unions. The European Union has
promoted partnership agreements, particularly with
Western African countries, at the continental, regional
and bilateral level. It has also taken steps to achieve
a gradual reduction in remittance costs (e.g. a recent
drop from more than 11 per cent to less than 9 per cent
in France), and to cooperate with African diasporas.
IFAD’s Financing Facility for Remittances group have
financed projects and policy advocacy plans that
promote competition at national and international
levels, offering alternative and better financial “options”
for migrants to use their hard-earned money.39

At the national level, Turkish banks, which receive half
of workers’ remittances transferred, have been using
a cost-effective “passing trade system” and collective
accounts. The easier and faster passing trade system
is similar to a post office transfer and does not need
either the sender or the recipient to open an account at
the bank concerned. The cash remittance takes place
simply on presentation of identity documents valid in
the country of residence for the sender and in Turkey
for the recipient. The money is transferred to Turkey
on the same day, at a lower cost than other financial
institutions.40 The “collective accounts” system has
been set up among banks to overcome the constraints
caused by the inadequate network of Turkish branches
abroad. The Turkish expatriate deposits the money to
be transferred at a Turkish bank abroad, which passes
the money to the collective account of the recipient’s
bank in Turkey. The transaction can take less than
four days; the only cost is the transferral fee between
different banks, as in the case of the passing trade

Costs involved in the migration cycle can impact on
the amount of remittances sent home. The upfront
costs tend to rise inversely against migrants’ skill
levels. Employers often cover these costs for more
skilled migrants, but lower-skilled migrants frequently
have to pay themselves, due to lack of information and
bargaining power vis-à-vis recruiters and employers.
For instance, Asian migrants moving to Qatar, Saudi
Arabia and the United Arab Emirates often pay 25–35
per cent of what they expect to earn over two to three
years as recruitment-related fees.41 Responsibility for

reducing the costs of migration lies with both origin
and destination countries. Some countries have
enacted relevant legislation. For example, Canada
and the United States require employers to cover
the recruitment and travel costs of migrant workers,
and the Philippines has set ceilings on what migrant
workers should pay to recruitment agents.42

Partnerships between non-governmental organizations
(NGOs) and banks could also be considered in
addressing this issue. In 2009, the Global Forum on
Migration and Development commissioned a study on
the feasibility of providing low-cost loans to Bangladeshi
migrants, who typically spend a third of their expected
earnings over three years on recruitment, travel, and
related fees. The study43 proposes that low-cost
loans be provided early in the recruitment process
via NGOs already operating microfinance schemes in
villages, in partnership with banks. The NGOs would
also check the validity and terms of the contracts. The
loans would be repaid via remittances sent through
the banks. Such partnerships could be launched
with donor funds, and should become self-financing
over time.

Widespread retail payment networks in home countries
have proved to be a relevant factor for ensuring
accessibility, particularly in rural or poor areas where
such networks do not exist or are not well developed.

Some countries have taken steps to expand networks
of remittance services. Mexico has invested significantly
in improving the retail payment infrastructure to
promote safe and efficient receipt of remittances.
It has more collection points than the African
continent.44 To increase the financial services available
in Mexico, particularly to low-income Mexicans,
the Banco de Servicios Financieros has created the
second-largest network in Mexico of popular banks,
microfinance institutions and credit unions to act as
remittance distributors. It received about $580 million
of remittances in 2008. In El Salvador, 40 per cent
of remittances go to rural areas where there are few
commercial banks. The Federation of Salvadorean
Savings and Credit Cooperatives (FEDECASES) and
other microfinance operators has played an important
role in expanding networks, by establishing branches
in low-income and rural areas. The success of
FEDECASES has attracted support from the IADB to
strengthen its financial and administrative capabilities
in providing such remittance services. Remittances
transferred by FEDECADES went from $1.2 million in
2001 to $88 million in 2004.45

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2) maximisiNg The developmeNT impacT of remiTTaNces

The postal system can also play a useful role in
improving remittance flows, on account of its very
wide physical network across the world and the trust
placed in it by customers owing to government support
and international regulation. Post offices are usually
cheaper than banks or money transfer organizations;
in sub-Saharan Africa, for example, they were 50 per
cent cheaper. Post offices have the potential to reach
underserved rural areas, particularly when assisted by
international support.

The importance of the postal network for transferring
remittances is linked to its three complementary
dimensions46 which are likely to become more
integrated in the near future. Firstly, the physical
dimension: with a total of 660,000 outlets, post offices
are the world’s largest physical network. There are
almost twice as many post offices and postal agencies
(500,000) as commercial bank branches (275,000)
in developing countries. Secondly, the electronic
dimension: post offices are connected by means of
an electronic data interchange network that enabled
them to provide electronic money order services and
to facilitate trade. (Airlines and customs agencies could
also connect to this network.) And thirdly, the financial
dimension: more than two thirds of post offices provide
some financial services (e.g. money orders, savings
accounts, bill payments, social benefits). For example,
the financial arm of Japan Post currently held almost
$1.9 trillion in savings, making it one of the biggest
financial institutions in the world.

With the implementation of the Universal Postal Union–
IFAD project in six West African countries, remittance
volumes increased by 104 per cent and transfer tariffs
were reduced by 30 to 50 per cent from 2009 to
2010. Proactive efforts by post offices could provide
creative solutions regarding remittance services. At
the regional level, under the ASEAN framework on
transport and communications cooperation, inter-
country remittance services were provided between
Brunei Darussalam, Malaysia and Singapore through
postal and money orders. In Brazil, the legal constraint
allowing only private banks to offer banking services
have been overcome by an agreement between the
post office and the private banks; this has allowed
the banks to provide remittance services at post
offices. This has facilitated remittances flows, lowered
transaction costs, and allowed banking services to
reach peripheral areas.

New smartphone-based products and services can
help increase both affordability and accessibility. In many

parts of Asia and Africa, mobile phone companies are
developing ways of transferring money to remote parts
of the country. Under the money transfer arrangement
between Vodafone Qatar and Philippines-based
Globe Telecom, 200,000 Filipinos working in Qatar will
be able to send money to the Philippines.47 Safaricom,
a United Kingdom telecom operator in Kenya, has
launched broad financial mobile services to facilitate
the transfer of workers’ remittances.48 It has more than
7 millions subscribers, generating more than $88.5
million worth of transactions daily. Efforts are also
being deployed by France and French-speaking Africa
in identifying regulatory challenges to allow remittance
transfers via the internet and mobile phones.49

In order to expand mobile money transfer services
in developing countries both regulatory flexibility
and surveillance are required. Designing appropriate
regulatory frameworks for the application of these
new technologies to money transfers and financial
transactions (e.g. mobile banking) poses a fresh
set of challenges for policymakers. In this regard,
there is a need to explore options to legalize related
operations, harmonize certain technical standards,
and take specific measures to address security
and consumer protection issues. Joint cooperative
mechanisms among central banks, associations of
financial institutions, and telecommunication providers
in home and host countries could help address some
of these challenges. Such cooperation could also
serve as a platform to respond to concerns regarding
intermediaries and unfair competition practices among
service providers. Current regulatory practices aiming
to address money laundering and the financing of
terrorism may also limit the spread of new technologies
for remittance purposes.

Allowing non-bank institutions such as microfinance
institutions to transfer remittances under proper
oversight could facilitate distribution and lower
transaction costs, in particular when anticompetitive
practices are prevalent. Abusive exclusivity
agreements between international MTOs and local
banks are reported to exist especially in Africa, where
60 per cent of funds are transferred by banks.50 Such
agreements and internal regulations authorizing only
banks to operate impede the ability of microfinance
institutions to engage in remittance payouts.
Development cooperation agencies, international and
regional institutions could support the enhancement
of regulatory and institutional capacity, especially in
Africa where the highest transfer costs are found.


Taxes on remittances could raise transaction costs,
incentivize informal transfers, and reduce resources
that in many cases go to the poor. Most developing
countries offer tax incentives to attract remittances,
but a few countries still worry about tax evasion.51 On
the destination countries’ side, recently in the United
States, the states of Oklahoma and Kansas have
imposed taxes on remittances. Oklahoma introduced a
$5 tax on each remittance transaction or wire transfer,
plus an added 1 per cent charge on amounts over
$500, generating concerns in Mexico. Both home and
host countries need to maintain due restraint on taxes
on remittances in order to maintain remittance flows
and ensure that they benefit those in need.

The elimination of exclusivity agreements and taxation
on remittances and the granting of incentives (e.g.
subsidies) can contribute to lowering transaction costs
and increasing the level of formal remittance flows.
In an effort to facilitate flows of remittances through
formal channels, the Pakistan Remittance Initiative
offered reimbursement to businesses (i.e. money
transfer organizations and banks) sending remittances
to Pakistan on the condition that they did not charge
customers any fees.52

Improving transparency and information flows
could help to address information asymmetries and
make senders aware of the best transfer options.
Centralized information centres and training services
in both home and host countries could be particularly
useful for low-skill workers. Information provided
could include safe and reliable suppliers of remittance
services, means of transfer, and fee comparisons. For
example, Mexico and the Philippines (in their overseas
workers resource centres) have sought to improve
transparency by maintaining a price database that
provides competitive price information to consumers.
Countries could establish a similar database by using
the World Bank’s World Remittances Prices Database,
which covers prices in the main migration corridors,
and country-to-country information. Development aid
could play a useful role in helping developing countries
to maintain information services, which require human
and financial resources.

Addressing barriers Impeding b.
Flows of Remittances

Migration-related measures found in both home and
host countries can deeply affect remittances flows.
In home countries, high recruitment fees, a lack of

training to empower migrants, and reintegration
issues need to be addressed. In host countries,
migrant quotas, economic needs tests, labour market
tests, management needs tests, burdensome visa
requirements and procedures, and an absence of (or
inadequate provision of) social protection and welfare
benefits for migrants, are commonplace.

An important factor affecting remittances flows is the
vulnerability of temporary migrants, which is the result
of their irregular status and their lack of knowledge
of the legal and economic context of the destination
country. For many home countries, irregular migrants
account for up to 50 per cent of their workforce
abroad. Such vulnerability can pose threats in terms of
the continuation, quantity and stability of remittances,
and in terms of migrants’ confidence in sending
remittances home. One option to address certain
aspects of the vulnerability of temporary migrants is
to promote the adoption, particularly in destination
countries, of the International Convention on the
Protection of the Rights of All Migrant Workers and
Members of Their Families under the ILO (1990).

Barriers to migration in general, and more specifically
to the temporary movement of natural persons
(mode 4), can impede temporary and circular migration
processes (temporary workers going back home and
returning to host countries upon new contracts) and
potential growth in remittance flows. The migration
policies of destination countries can have important
implications for remittance flows. There has been found
to be a correlation between the level of integration
of migrants and their preponderance to remit.
Legal status, for example, is an important variable
in determining the extent to which migrants make
contributions to their country of origin.53 Introducing
stricter requirements for visas and work permits without
providing facilitated options for temporary migration
in sectors where demand for foreign labour is high
is counterproductive. Experiences in Eastern Europe
have shown that strict migration policies exacerbate
human trafficking, pushing would-be immigrants into
irregularity and fostering irregular migration.54 One
compelling argument for migrants not leaving the host
countries is the prospect of being unable to return
due to increasingly strict and burdensome regulations
on migration. The more predictable, transparent and
open the regular channels are, the fewer incentives
there would be for irregular migration. Some migrant
workers’ programmes have understood this paradox.
For example, the return programmes of the Spanish

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Government for Ecuadorian workers provide cash
incentives plus priority consideration in applying
for new contracts for workers who have chosen to
return home.

By and large, temporary migration is facilitated in
highly skilled professions, whereas it is more restricted
for lower-skilled labour. Trade agreements can partially
address these barriers through the World Trade
Organization (WTO) services negotiations in the context
of Doha Development Agenda (DDA). Barriers to mode
4 found in key markets include quotas, economic
needs tests, burdensome visa procedures, and the
lack of mutual recognition of qualifications. Fewer
commitments have been made by WTO members in
mode 4 than in other modes of supply. Commitments
during the Uruguay Round have been low and limited
to the higher-skilled categories (managers, executives
and specialists), with approximately one half relating
explicitly to intra-corporate transferees. While mode
4 technically covers all skill levels, only about 17 per
cent of horizontal commitments cover low-skilled
personnel, and only 10 countries have allowed some
form of restricted entry to “other level” personnel.
Existing mode 4 commitments have not produced
the expected results for developing countries and
LDCs. This imbalance was supposed to be corrected
in the DDA, nevertheless offers in mode 4 remain
limited. Commercially meaningful commitments in
mode 4 could bring important development gains
for developing countries estimated at between
$150 billion, without including other benefits such
as development and poverty reduction impacts.
A great part of these benefits will take the form of
remittances. A coherent trade liberalization policy that
not only liberalizes movement of goods and capital
but also provides real market access in mode 4 will
contribute positively to economic integration, poverty
reduction, facilitating managed migration flows, and
increased remittances.

A special arrangement on mode 4, including market
access and regulatory issues, could be explored. It
could contain elements such as a stand-still clause on
restrictions; focused request and offer sessions with
special consideration for LDCs in the WTO Council for
Trade in Services (e.g. providing objective criteria for
economic needs/labour market tests or progressively
expanding quotas); and specific regulatory principles
applicable to mode 4 in the domestic regulation
negotiations (e.g. balancing requirements for
experience vs. academic qualifications, and non-

discrimination in relation to the origin of service
providers). An early harvest on the most-favoured-
nation waiver for LDCs enabling unilateral openings in
mode 4 could address some of the barriers in areas
of interest to both destination countries and LDCs.
Positive outcomes in these areas could become a deal-
maker in the General Agreement on Trade in Services
(GATS) and other negotiations under the DDA. It could
also facilitate continuous flows of remittances, and
incentivize circular migration.

Cooperation arrangements and memorandums of
understanding (MOUs) on temporary and circular
migration could accompany mode 4 commitments
and dissipate concerns about making binding
commitments in WTO. These agreements usually
are agreed between origin and destination countries
and are becoming increasingly popular. They tend to
cover a wide range of issues including migrant rights,
temporary labour flow management, labour and social
protection, and facilitation of remittance flows (e.g.
the agreement that had been concluded between
Ecuador and Spain). In many cases they could also
cover special labour arrangements such as short-
term employment, recognition of qualifications, and
technical and cultural exchanges. By ensuring that
migration takes place in accordance with agreed
principles and procedures, they can assist in guiding
the temporary migration process towards meeting
economic, social and development objectives.
Deeper engagement, implementation and monitoring
of partnerships under the GFMD could also assist in
optimizing mutual benefits.

For example, the agreement between Canada and
Mexico that was signed in 1974 establishing the
Seasonal Agricultural Worker Programme is considered
a useful reference point in the promotion of secure,
legal and orderly migratory movement between
countries. 208,670 Mexicans have participated in this
programme as at September 2010. Bangladesh is
party to seven such agreements/MOUs (mostly with
other developing countries) and another two are being
developed. The Philippines has signed several similar
agreements/MOUs covering the pre-departure, during
the period abroad, and upon return phases with several
countries in Asia and the Middle East. One example
in this regard is the 2009 agreement on temporary
contractual employment between the United Arab
Emirates, India and the Philippines, which provides for
a framework for worker selection, orientation, training,
contract validation, and return and reintegration. The


Government of Indonesia has signed MOUs with
the top 10 countries receiving Indonesian migrant
workers, in order to give them full protection and to
ensure their well-being, including by securing the flow
of their remittances. International organizations such
as IOM and the ILO are playing a supporting role in the
proper design and negotiation of these agreements.

Regional trade and cooperation agreements, such as
the Caribbean Community, the Andean Community,
and the Association of Southeast Asian Nations, can
be useful avenues for addressing barriers to the flow
of people, including mode 4, as they imply wider and
deeper political agreement and trade-offs between
Parties that could facilitate some openings in this
mode. North–South integration agreements could
also offer a facilitated framework; for example, the EU
economic partnership agreement negotiations with the
African, Caribbean and Pacific Group of States could
provide commercially meaningful access on mode 4.

Lack of access to social benefits such as pensions,
and their non-portability, affects migrants and reduces
their potential to contribute to development through
remittances. In the case of lack of access to the social
benefits system in destination countries, originating
countries could explore facilitating registration and
direct payments to the social security system by
migrants. Some countries, such as Mexico and
the Philippines, allow migrants to contribute to the
national pension and healthcare schemes regardless
of their access in destination countries.55 Many
migrants consider returning home after some time,
or at retirement age. Encouraging coverage and
payments to the social security system to workers
abroad could incentivize social investment in pension
and health insurance, with benefits upon retirement.
Non-portability of contributory pensions not only
discourages return and circular migration due to
the impossibility of accumulating benefits, but also
reduces the amount of remittance money that can be
sent home. Solutions to address the portability issue56

include unilaterally allowing full or partial portability,
and bilateral agreements seeking to avoid double
contribution of social benefits in both origin and
destination countries.

PRomotINg PolIcY vII.
coHeReNce IN mIgRAtIoN,
RemIttANces AND

The level of coherence and coordination of policies,
regulations and institutions relating to migration and
the use of remittances varies among countries. A
comprehensive approach that seeks to: (a) set clear
and aligned policy goals and priorities; (b) strengthen
regulatory and institutional capacity; (c) assess labour
market needs; (d) establish adequate mechanisms
to facilitate remittances flows and to channel them
into investment, savings, and productive capacity; (e)
provide for social minimum social security protection,
pre-departure and return reintegration training of
migrants, as well as multi-stakeholder consultations
processes, could facilitate remittance flows for
development and rights-based managed migration.
Cooperation and trade agreements at bilateral,
regional and international levels can also contribute
to ensuring benefits from migration and facilitated
remittance flows.

An institutional mechanism, as set up by Ecuador in
2007, could facilitate such coherence in countries of
origin. The Secretaría Nacional del Migrante (SENAMI)
is in charge of all policies related to migration and
remittances, with competence at the national and
international level. The SENAMI has implemented
this comprehensive set of policies through a series
of programmes – including offering migrants direct
legal assistance, creating links with migrants via the
“red de casas ecuatorianas” (offices financed by the
Government of Ecuador providing support services for
Ecuadorian migrants abroad), assisting in economic
and social reintegration, supporting diaspora
knowledge networks. It has also signed cooperation
agreements with local institutions, including tax
authorities, banks, the post office, the national civil
register, and universities, to provide tax incentives (e.g.
tariff exemptions for returning migrants’ housing and
working equipment). SENAMI has introduced facilitated
migrant return programmes that provide business
plan design, training, and seed capital provision. A
bank for migrants to provide low-cost transfers and
soft credits is also planned. SENAMI has also signed
agreements with public and private institutions abroad
to protect migrants’ rights, promote circular migration,
and facilitate transfers of remittances and mutual
recognition of social security.

Bangladesh established – in 2001 – the Ministry
of Welfare and Overseas Employment, which had
produced relevant regulations and initiatives including
a comprehensive overseas employment and migrant
protection policy, electronic registration of people

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2) maximisiNg The developmeNT impacT of remiTTaNces

interested in migrating, and a census of migrants. It
has also set up a policy-monitoring mechanism led by
a special task force. The main key policy focus has
been to “know your migrants”, i.e. to have a better
understanding of the number, composition, skill level
and motivations of migrants, and also of the main
corridors of migration, so as to design policy responses.
Sri Lanka has created a multi-stakeholder committee
to formulate and implement a comprehensive national
migration strategy to develop a vision for the role of
labour migration in the economy, improve protection
of migrants’ rights, and enhance benefits from
migration including remittances.57 This policy was
adopted by the cabinet of Sri Lanka in 2009. More
specifically on remittances, Albania has developed a
comprehensive action plan which includes expansion
of banking services, development of partnerships
between national banks in main destination countries,
and strengthening of microfinance institutions.

Philippines, since the early 1980s, the National
Reintegration Centre for Overseas Filipino Workers
(under the Department of Labour and Employment)
had been implementing the National Reintegration
Programme for Migrants together with the Overseas
Workers Welfare Administration and the Philippine
Overseas Labour Offices. Other institutional partners
working on this programme included the Central Bank
and the Department of Trade and Industry. Recognizing
that labour migration was not a “one-way street”, the
reintegration programme provided three phases of
assistance – pre-departure, during the period abroad,
and upon return. Indonesia had enacted its Law on
the Placement and Protection of Indonesian Migrant
Workers, which was aimed at protecting its migrant
workers abroad, including through special provisions
safeguarding their incomes and remittances.

In destination countries, the EU’s Global Approach
to Migration aims to create partnership agreements
with non-EU countries and to address all migration
and asylum issues.58 It guides several policy areas
including development, foreign affairs, employment
and social affairs. An example is the EU–Africa
Partnership on Migration, Mobility and Employment
(2007) which includes specific EU measures such as
encouraging the use of one services provider in the EU
for remittance transactions, and supporting diaspora
groups engaged in development-related activities and
country initiatives to safeguard skills for development.

coNclusIoNs AND PolIcY vIII.

Migration is a win-win pro-development opportunity
for origin and destination countries. Empirical evidence
indicates a positive correlation between remittances,
development, and poverty reduction. Remittances
have, if properly harnessed, multiplier effects on
economic and social development. Proactive
policy measures could induce the productive use
of remittances and capitalize on diaspora networks
for developmental purposes. There is a need for a
comprehensive and coherent policy – a regulatory
and institutional framework at the national level with
the involvement of all stakeholders.

Expanding networks to transfer and distribute
remittances, strengthening the capacity of the financial
services sector to channel remittances into productive
activities, using new technology, and improving
information flows can facilitate the efficient transfer
and use of remittances. To enable temporary and
circular migration and steady remittance flows, there is
a need to remove barriers to the movement of people,
including through GATS mode 4 commitments.
Managing migration and facilitating the flow of
remittances also requires increased efforts toward a
higher level of policy coherence and cooperation at
bilateral, regional and multilateral levels.

More specifically, a set of key policy recommendations
made by experts, government representatives, the
private sector, NGOs and other relevant stakeholders
were made at the UNCTAD Single Year Expert meting
on “Maximizing the development impact of remittances”
of 2011. These recommendations provide a road
map for immediate and meditate action not only in
the trade realm but also in multilateral migration and
development dialogue.

The most important conclusions recommendations
made were the following:

(a) Migration is a win–win pro-development opportunity
for all countries in the context of globalization.
It should be mainstreamed and integrated into
national development strategies.

(b) Managing migration issues is a shared responsibility
between the countries of origin, transit and
destination. Bilateral agreements on temporary
and circular migration can help maintain secure,
legal and orderly migratory movements between



(c) Remittances are intrinsically linked with migration,
and have become a particular driver of the economies
of many developing countries. Remittances
must be integrated into the overall migration
management policy and national development
strategy. The gender and youth dimension should
be integrated into the management of migration
and remittances.

(d) Remittances have made positive contributions to
poverty reduction, economic growth and social
development in recipient countries by answering
basic needs, enabling investment in housing,
health and education, and enabling transfers of
knowledge and skills from returned migrants and
diasporas. Nevertheless, it must be emphasized
that remittances cannot be a substitute for coherent
economic development strategies.

(e) Proactive and targeted policies and measures could
enhance the development impact of remittances.
These may include (i) financial education and financial
inclusion, both for migrants and for recipients of
remittances; (ii) the design and marketing of financial
products (e.g. savings and insurance products); (iii)
technical training in money transfer and financial
services; (iv) migrant entrepreneurship training; (v)
assistance to SMEs; and (vi) the securitization of
remittances (e.g. through diaspora bonds).

(f) While keeping in mind that remittances are private
flows, four steps in the process can be identified
as maximizing the development impacts of
remittances, namely: (i) formalizing remittance
flows; (ii) establishing an enabling and competitive
environment and conducive regulatory framework;
(iii) promoting access to financial services and
finance (i.e. linking remittances with other financial
products e.g. scaled savings products, credit,
insurance, and mortgages); and (iv) developing the
range of financial products, including for rural areas,
and promoting the use of new technologies.

(g) Remittance flows need to be improved further,
by: (i) reducing transaction costs; (ii) ensuring
safety and security; (iii) providing accessible
and affordable transfer channels; (iv) eliminating
tax on transactions; (v) improving transparency,
information and competition in the money transfer
markets; and (vi) offering innovative products. The
postal network could be an important modality in
rural areas, especially where other financial services

providers are absent.

(h) In order to increase remittance flows, measures
– especially those that may act as barriers on
temporary migration – should be dealt with at
national, bilateral, regional and multilateral levels,
including at the Doha Round services negotiations.
Facilitating temporary and circular migration –
including through bilateral agreements – provides a
useful solution, which requires cooperation among
the countries involved in migration.

(i) Policy coherence and integrated approaches
are particularly important. Despite the existing
policies, experiences and mechanisms available
to facilitate migration and remittances, there is
room for strengthening and improving cooperation
and coordination nationally and internationally –
including among origin, transit and destination
countries – and also for experience-sharing and for
providing an enabling environment for temporary
and circular migration.

(j) A comprehensive approach should seek, inter alia,
to: (i) set clear and aligned policy goals and priorities;
(ii) establish and strengthen coherent regulations
and institutions; (iii) assess labour market needs
in destination countries; (iv) provide migrants with
pre-departure and return reintegration training; and
(v) hold multi-stakeholder consultations to facilitate
flows of remittances for development, and rights-
based managed migration.

(k) The following are areas for future action:

(i) Consolidating current country-specific reviews
of financial regulations and payment systems
affecting remittance flows, in order to assess
what exists, what works, and what could be

(ii) Establishing an analytical framework and road
map to evaluate countries’ levels of financial
inclusion and financial literacy as a key
component of development strategies.

(iii) Producing a toolkit and database on pro-
development practices and policies that
facilitate remittance flows, in order to address
barriers and promote productive investments to
better harness remittances for development.

(iv) Continuing research and holding further
expert meetings on the linkages between
migration, remittances, trade, investment and

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2) maximisiNg The developmeNT impacT of remiTTaNces


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Sharma (2010). The Impact of Remittances on Economic Insecurity. Journal of Human Development and
Capabilities. Vol 11, No 4, November 2010.

Reyes, Mata, Gijón, Cruz and López (2009). Impacto del Turismo Nostálgico y las Remesas Familiares en el
Desarrollo de la Comunidad Rural Oaxaqueña.

World Bank (2007). Increasing the Macroeconomic Impact of Remittances on Development.

Vasconcelos and Meins (2011). Empowering the rural poor through remittances. IFAD.

Cellular News (2010). Vodafone enables mobile money transfers between Qatar and Philippines. 10 November

UNCTAD (2009). Report of the Ad Hoc Expert Meeting on Contribution of Migrants to Development: Trade,
Investment and Development Linkages.

UNCTAD (2009). Contribution of migrants to development: trade, investment and development linkages.

UNCTAD (2010). Maximising the development impact of remittances. TD/B/C.I/EM.4/2.

UNCTAD (2011). Report of the Expert Meeting on Maximizing Trade and Development Report.

UNCTAD (2008). Least Developed Countries Report 2008.

UNDP (2010). MDGs: Nepal.

UNEP, ILO, IOE, IUC (2008). Green Jobs: Towards Decent Work in a Sustainable, Low-Carbon World.

UNDP (2005). International Financial Flows and Worker Remittances: Best Practices.

UNDP (2009). Human Development Report.

WTO (2010). WT/TPR/OV/W/3.

World Bank (2010a). Migration and Remittances Factbook 2011.

World Bank (2010c). Migration and Development Briefs, 12.

World Bank (2007). Development finance via diaspora bonds: Track record and potential.

World Bank and IFC (2010). Remittance Prices Worldwide.

1) New ThiNkiNg surrouNdiNg remiTTaNces aNd developmeNT

2) maximisiNg The developmeNT impacT of remiTTaNces


Liping Zhang and David Vivas Eugui participated in the drafting of this note. Mesut Saygili and Deepali 1
Fernandes provided some inputs.


UNCTAD (2010). 3 Maximising the development impact of remittances. TD/B/C.I/EM.4/2.

UNCTAD (2011). 4 Report of the Expert Meeting on Maximizing the Development. Impact of Remittances,
document TD/B/C.I/EM.4/.

World Bank (2010a). 5 Migration and Remittances Factbook 2011.

ILO (2010). 6 Global Employment Trends.

OECD (2010a). 7 Economy: Migration key to long-term economic growth.

International Organization for Migration (2010a). 8 World Migration Report;
and WTO (2010). WT/TPR/OV/W/3.

International Organization for Migration (2008a). 9 Migration, Environment and Climate Change.

United Nations Environment Programme, International Labour Organization, International Organization of 10
Employers, and International Trade Union Confederation (2008). Green Jobs: Towards Decent Work in a
Sustainable, Low-Carbon World.

World Bank (2010a).11

UNCTAD (2010). 12 Trade and Development Report.

World Bank (2010c). 13 Migration and Development Briefs, 12.

UNCTAD (2008). 14 Least Developed Countries Report 2008.

African Development Bank (2009). 15 Republic of Cape Verde: Country Strategy Paper 2009–2012.

UNDP (2010). 16 MDGs: Nepal.

Migration Policy Institute (2007). 17 Leveraging Remittances for Development.

IOM (2010c). 18 Migration and the MDGs.

World Bank (2007). 19 Increasing the Macroeconomic Impact of Remittances on Development.

Fajnzylber and Lopez (2006). 20 Close to Home: The Development Impact of Remittances in Latin America.

Brown (2010). 21 Assessing the Impact of Remittances on Poverty using Household Survey Data.

ADB (2009). 22 Remittances in Asia: Implications for the Fight against Poverty and the Pursuit of Economic

UNDP (2005). 23 International Financial Flows and Worker Remittances: Best Practices.

ILO (2010). 24 Remittance Transfers in Senegal.

Hudson Institute (2010). 25 The Index of Global Philanthropy and Remittances.

De Vires (2011). 26 Mobilizing the use of remittances toward poverty reduction and Economic and Social
Development through government initiatives: The Philippines experience.

Sharma (2010). 27 The Impact of Remittances on Economic Insecurity. Journal of Human Development and
Capabilities. Vol 11, No 4, November 2010.

Inter-American Dialogue (2003). 28 Worker Remittances in an International Scope.


World Bank (2007). 29 Development finance via diaspora bonds: Track record and potential.

GFMD (2010). 30 Key Trends and Challenges on International Migration and Development in Asia and the

Ministry of Overseas Indian Affairs and Confederation of Indian Industry (2010). 31 Engaging the Global Indian.

One India. 32 Prez woos diaspora to invest in India. 11 January 2010.

Secretaría de Desarrollo Social (México) (2010).33

Reyes, Mata, Gijón, Cruz and López (2009). 34 Impacto del Turismo Nostálgico y las Remesas Familiares en el
Desarrollo de la Comunidad Rural Oaxaqueña.

MPI (2003). 35 Consular ID cards: Mexico and Beyond.

EIB (2006). 36 Study on improving the efficiency of workers’ remittances in Mediterranean countries.

World Bank and IFC (2010). 37 Remittance Prices Worldwide.

Orozco. (2010). 38 A scoreboard in the market of money transfers. Inter-American Dialogue.

Vasconcelos and Meins (2011). 39 Empowering the rural poor through remittances. IFAD.

OECD (2005). 40 Principal Channels and Costs of Remittances: The Case of Turkey.

UNDP (2009). 41 Human Development Report.

GFMD Mexico (2010).42

Philip Martin (2009). 43 Reducing the Cost Burden for Migrant Workers: A Market-based Approach.

World Bank and IFC (2010).44

Institute for Inter-American Integration (2006). 45 Leveraging efforts on remittances and financial

Nanba (2011). 46 Facilitating the Flow of remittances. UPU.

Vodafone enables mobile money transfers between Qatar and Philippines. 47 Cellular News. 10 November

Greenwood (2009). 48 Africa’s mobile banking revolution.

République Française, AFD, UBM, BAD, and CDBCA (2009). 49 Transfert de fonds des migrants au Mahgreb
et en Zone Franc.

IFAD (2009). 50 Sending money home to Africa.

MPI (2007).51

UNCTAD (2011). 52 Report of the Expert Meeting on Maximizing the Development. Impact of Remittances.
Document TD/B/C.I/EM.4/.

IOM (2010).53

Journal of Comparative Economics (2010). 54 The Economics of Human Trafficking and Labour Migration:
Micro-Evidence from Eastern Europe.

Holzmann (2010). 55 Portability of Pension, Health, and other Social Benefits: Facts, Concepts, Issues.


ILO (2008).57

EU Commission. COM(2008) 611.58

1) New ThiNkiNg surrouNdiNg remiTTaNces aNd developmeNT

2) maximisiNg The developmeNT impacT of remiTTaNces

Your Excellencies, Ladies and Gentlemen:

It is an honour to be here today and I am grateful to
Secretary-General Supachai for the kind invitation to
participate in this distinguished gathering. I should like
to make three points very briefly:

mIgRAtIoN As A DRIveR I.
oF tHe globAl ecoNomY:
settINg tHe sceNe

Today, we live in a world on the move. Numerically,
there are more people on the move than at any time
in recorded history: 214 million international migrants
and 740 million internal migrants. In other words, in a
world of seven billion inhabitants, one in every seven
of us is in some form of migratory status.

The information and communications revolutions
have fuelled these migratory movements. An intending
migrant knows at any one time what is going on in any
part of the world:

More than 247 billion emails are transmitted every •

Some 1.9 billion persons now have access to the •
internet (in contrast to only 390 million people in the
year 2000).

Facebook now has more than 500 million •
subscribers; and

Twitter has some 200 million users; and both are •

While these social media advances have accelerated
human movement, it is demographic and labor market
trends and widening North-South disparities that will
ensure that mass migration will continue well into this
Millennium. These realities will ensure that migrant
remittances continue to play an important role in the
global economy.

It is within this global context that the role of migrant
remittances in development is perhaps to be best
understood. Migrant remittances are, after all, one of
the largest cash flows and cash transfers in the world;
remittances are valued by the World Bank to have
exceeded US $440 billion in 2010 — making migrant
cash transfers home larger than the GDP of countries
such as Austria or Sweden. Developing countries
received the lion’s share of this at US $ 325 billion (This
figure represents money sent through official channels
only — an additional 50 percent could be added to
obtain a rough idea of the real figure, including informal

Remittances did not start with the modern era. They
are by no means a new phenomenon. Remittances
are linked intrinsically to migration — the world’s oldest
development strategy.” Migration is the most powerful
manifestation of an individual’s desire for development
— the right to leave one’s place of birth or abode in
search of new opportunities and a better life.

During the 19th and 20th centuries — years before
becoming migrant destinations — European countries
were heavily dependent upon remittances sent from
their emigrants in the so-call “New World.” In 1901,
e.g. Italy was the first European country to enact
legislation to protect remittances; and in 1960, Spain
was the first country to sign an international treaty (with
Argentina) to lower the cost of receiving remittance

What is perhaps new, is the acknowledgement, on
the part of governments, international organizations,
NGOs and academic researchers alike, that over the
past decade or so, migrant remittances are one of
the drivers of the global economy; particularly so in
relation to developing countries.

In today’s world, consider the following:

Remittances are typically two to three times •
larger than all bilateral and multilateral Overseas
Development Aid (ODA); about as much as all

2. RemIttANces As AN INtegRAl PARt oF mIgRAtIoN PolIcIes

Statement of William Lacy Swing
Director General, International Organization for Migration


global Foreign Direct Investment (FDI); and, in some
cases, remittances account for up to 30 percent of
annual GDP for a dozen or more countries.

Remittances are resilient to economic fluctuations •
– remittances, e.g., fell only 5.5 percent in 2009
in contrast to forecasts of a 9 percent decline,
and actually registered a quick recovery in 2010
(although this varied significantly from region to
region, with China and India’s gains somewhat
skewing the overall result).

Remittances contribute importantly to the economic •
health of developing countries. For example, in
Moldova, almost one third of all households receive
remittances; this represents approximately 60
percent of household income;

Remittances percolate quickly to the grassroots •
level – allowing households to purchase food,
healthcare, shelter and education – and thereby
cover the most basic of needs and provide livelihood

“beYoND RemIttANces,” oR II.
“RemIttANces Plus”

But remittances can – and do – do more, as you
the experts, know from your own experience. After all,
migrant remittances are private financial flows.

For this reason, IOM pioneered the idea of
“mainstreaming” or integrating migration and
remittances into develop planning. In this regard, IOM
with several of its UN partners in the Global Migration
Group (GMG), produced a Handbook, entitled
Mainstreaming Migration into Development Planning.
This GMG Handbook was launched last November
at the Global Forum on Migration and Development
(GFMD) in Mexico.

The handbook provides useful tools to incorporate
migration into development planning through the
formulation of strategic goals and priorities; the
identification of key partners and beneficiaries; and
the development of consultative mechanisms and
institutional structures.

You, the experts at this meeting, will no doubt review
many options for the management of remittances
and highlight those that you consider to be “best


Beyond the immediate impact of remittances
on migrant households in countries of origin, the
challenge is to influence positively the macro-economic

In this regard, one enduring question for policy
makers is that of creating incentives for migrants and
their families to invest “surplus money” that remains
after daily expenses to serve as a multiplier for

Innovative diaspora programmes can effectively
leverage the migrant’s contribution with public
resources. The Mexican “3 for 1” (“tres por uno”)
programme matches each dollar of remittance money
sent by a diaspora member through dedicated Mexican
Home Town Association abroad with a dollar each
from the municipal, state and federal governments in
Mexico. This arrangement empowers migrants and
promotes local community.

IOM has helped create organized remittance
transfer mechanisms that enabled migrants to secure
their transfers, reduce the transaction fees paid, and
pool their resources so as to maximize their impact.
In Tajikistan, e.g., such a scheme is being used to
develop sustainable livelihoods through micro-credit
schemes, infrastructure investment and education

But the contributions of migrants go far beyond
the economic of monetary dimension. There are also
what we refer to as “social remittances” – migrants’
skills, knowledge and networks – these are perhaps
even more valuable in promoting development of
their countries and communities or origin. Migrants
represent untapped economic and social capital.

For example, IOM’s Migration for Development
in Africa (MIDA) programme provides a rich array of
means for diaspora members to become involved
in home countries and share expertise – whether
(a) through establishing exchange programmes in
public administration; or (b) university training; or (c)
by facilitating the return of doctors and other health
care workers to Africa. Diaspora mobilization for
development also represents one of the most effective
means to address developing countries legitimate
concerns about “brain drain,” replacing it with “brain

1) New ThiNkiNg surrouNdiNg remiTTaNces aNd developmeNT

2) maximisiNg The developmeNT impacT of remiTTaNces

To support development with “social remittances,”
our goal should be that when migrants return home,
either permanently or temporarily, they do so either
with (a) new or improved skills; or (b) capital to invest.

RemIttANces As AN III.
INtegRAl elemeNt oF
mIgRAtIoN PolIcY

My first two points were (a) today’s unprecedented
movement of people is best understood in the context
of globalization (even though population movements
have been largely neglected in the globalization
debate); and (b) remittances go far beyond the simple
transfer of fund even those these constitute one of the
largest cash flows in today’s economy.

My third and final point logically follows these
two, namely that remittances, to make a maximum
contribution to development, need to be part of a
government’s overall migration policy. That is to
say, what is needed is a ‘whole of government” and
“whole of society” approach, one that uses all the

options available, including a liberal migration policy

and visa regime, societal integration, circular migration

schemes, and a recognition that temporary migration

alone is unlikely to satisfy labor market needs.

You as experts will want to consider whether it is

indeed through a temporary migration framework that

one must seek to remove barriers to improve flows

of remittances. It would be important to ensure that

permanent migration opportunities not be seen as

the preserve of highly-skilled workers with temporary

work contracts being set aside for the lower-skilled


There is, in any case, agreement that for remittances

to flow around the world, it must first of all be possible

for migrants at all skill levels to find and access work

opportunities abroad. Properly established and

managed, labor migration programmes would appear

to be an essential pre-condition.

Thank you.




Ladies and gentlemen,

It is my pleasure to address this expert meeting on
maximizing the development impact of remittances.

The issue of migration is one of increasing
importance and growing complexity. The Office
of the High Commissioner for Human Rights has
prioritized the issue of migration within its work, and
has consistently called for the protection of the human
rights of all migrants, regardless of their immigration or
other status. A recent statement of the Global Migration
Group, which was adopted under the chairpersonship
of the High Commissioner for Human Rights, stressed
that being in an irregular situation does not and should
not deprive migrants of their humanity or their human

In myriad ways, migrants contribute to the countries
in which they live and work and to the countries that
they leave behind. These benefits are economic as
well as social and cultural. Migrants can provide capital
and investment to countries of destination and origin;
they transfer knowledge, technology and new ideas;
and they increase cultural diversity. Human mobility
makes societies more dynamic and prosperous.

The United Nations Secretary General recently
recalled the fundamental role that migrants play in
strengthening the global economy by contributing
to economic growth and human development. The
transfer of remittances between countries of destination
and origin is an important means, through which
migrants can make this contribution to development.
Remittance flows are now estimated to be three times
larger than official development aid transfers.

According to the World Bank, remittance transfers
amounted to some USD $440 billion in 2010. These
remittances allow migrants and their families to

access health services, schools and private housing
contributing to the realization of their rights, such as
the right to health, the right to education or the right to
housing. Conversely, when remittance flows shrink or
cease, the human rights of migrants and their families
can be jeopardized as they are unable to access
essential goods and services.

In this context, our Office believes that human
rights are an indispensable aspect of the debate on
migration and development. Development cannot be
defined solely in economic terms. Development, in
a more fundamental sense, has to be understood in
terms of a process which expands the choices people
have in order to lead lives that they value, with the
human person as the central subject of development.

When we place human beings at the centre of
international migration considerations, it becomes clear
that development benefits cannot only be measured in
terms of contributions to economic growth. Without
equity, without social inclusion, economic growth
alone will not alleviate poverty in society and amongst
marginalised groups of migrants. The human rights-
based approach on marginalisation and vulnerability
directs priority attention to those who are suffering
discrimination and disadvantage and leads to policies
that aim explicitly at alleviating the situation of such
persons and groups.

Sadly, around the world today we are witnessing an
increase in xenophobia, anti-migrant sentiment and
discriminatory practices affecting the human rights
of migrants, with irregular migrants at particular risk.
This is especially pernicious when such sentiments
are reinforced by legislation, regulations and official
policies which criminalize and exclude migrants. The
High Commissioner has therefore called on all States
to respect the internationally guaranteed rights of all
migrants, to protect those rights against violations,
and to fulfill the rights necessary for migrants to enjoy
a life of dignity and security.

It is important to note that remittances are not a

3. HumAN ResouRces AND mobIlItY
uNDeR A HumAN RIgHts coNteXt

Statement by Ms. Kyung-wha Kang
Deputy High Commissioner for Human Rights

1) New ThiNkiNg surrouNdiNg remiTTaNces aNd developmeNT

2) maximisiNg The developmeNT impacT of remiTTaNces

substitute for effective national development strategies.
Migrants should not be pushed to migrate, especially
in the absence of labour and human rights protection,
just to generate remittance flows. Migrants are human
beings; they are not commodities or mere “agents
of development”. Remittances can also not replace
the obligations of States to fulfil the fundamental
human rights of their citizens by providing, without
discrimination, access to food, health, housing,
education, water and sanitation, and decent work.

Remittances are private money, often earned at a
high personal cost to the sending migrant. Migrants,
particularly those who are in an irregular situation are
frequently forced to work in the unregulated parallel
economy, where they can be subject to horrific abuse
and exploitation. Some migrants may have no choice
but to endure sub-standard working conditions
abroad in order to be able to send money to their
families and communities back home. There is some
evidence that during the recent global financial crisis,
many poor migrants have remained in their countries
of employment, making even greater sacrifices in
order to continue sending money home. High transfer
costs of remittances, which can result from a failure
to regulate transfer fees and modalities, further erode
migrants’ ability to provide for their families.

States need to carefully consider what laws and
policies are needed to adequately respond to the
human rights issues faced by migrants, to address
their vulnerability, and to ensure that their human
rights are not adversely impacted by measures
designed primarily to maximize the development
benefits of remittances and other migration policies.
The human rights impact of migration legislation and
administrative practice must be a central consideration
in the formulation and implementation of policy. It is
important to stress that States are legally bound to
protect the human rights of migrants, irrespective of
their net contribution to the economy.

Migrants whose rights are protected, who are
socially integrated, and who are given the opportunity
to participate in migration policy-making at local and
national levels, are more productive. They contribute
more to society, both economically and socially, than
those who are exploited, marginalised and excluded.
I urge you to pay careful attention to the human rights
implications in your discussion of remittances and
development over the next two days.

Thank you. I wish you a very successful and
productive meeting.



The sheer size of remittances inspires hope that
these nonmarket income transfers may somehow
be channeled into development finance. But such
an outcome cannot be presumed. This paper
discusses the many ways through which remittance
transfers affect aggregate economic activity, arguing
that remittances have both positive and negative
implications for economic development. In practice,
these effects appear to cancel each other out,
leaving little empirical evidence that remittances have
contributed to economic development. Despite
their disappointing record, remittances do have the
potential to facilitate development, provided that
social institutions can mitigate the negative effects of
remittances and enhance their benefits.

INtRoDuctIoN I.

Workers’ remittances—transfers from international
migrants to family members in their country of origin—
represent one of the largest sources of financial
flows to developing countries. In 2010, over $325
billion of workers’ remittances were expected to
be transferred worldwide through official channels,
and it is likely that billions more were transferred
through unofficial ones59. Although the sheer size of
remittances suggests that they should be economically
important to many countries, their magnitude
relative to income flows makes this conclusion seem
even more likely. For example, Chami et al. (2008)
reported that the average workers’ remittances-GDP
ratio for all developing countries over the period 1995-
2004 is 3.6%. On a country-by-country basis, workers’
remittances exceeded 1% of GDP (on average)
for over 60 countries during this period, and seven
of these countries had average workers’ remittances-

GDP ratios of 15% or higher.

For developing countries, remittances are also large
relative to other financial flows. During the most
recent 10-year period, remittance flows amounted
on average to about one third of export earnings,
more than twice private capital flows, almost 10 times
official capital flows, and more than 12 times official
transfers. Remittances have even recently become
as large as foreign direct investment (FDI) flows
to developing countries. Thus, although workers’
remittances have not been uniformly significant across
all emerging economies for a large group of countries
in which they are, they represent a resource inflow that
often exceeds a variety of other balance of payments
flows that have received much more attention from
economists as well as policymakers.

Certainly, remittances do not go unnoticed in most
of the countries that receive them. Typically, each
international migrant leaves several family members
behind, and supports them with a steady flow of
remittances. Therefore, a global stock of many millions
of migrants implies that many more millions of people
are directly affected by remittance flows. Because
remittances are generally spent on consumption
necessities—food, clothing, medicine, and shelter—
they help lift huge numbers of people out of poverty
by supporting a higher level of consumption than
would otherwise be possible. This effect is widely

Beyond the fact that remittances alleviate poverty,
however, their macroeconomic impacts are not well
understood. Given their effects on consumption,
effects on short-term output from fluctuations in
remittance flows are to be expected, and a few papers
have estimated remittances multipliers for economies
such as Pakistan and Mexico.60 But a more pressing
question is whether remittances have any long-term
effects on economic performance, and in particular,
whether remittances can hasten a country’s economic

4. WoRkeRs’ RemIttANces AND ecoNomIc DeveloPmeNt:
ReAlItIes AND PossIbIlItIes

Ralph Chami
Middle Eastern and Central Asia Department

International Monetary Fund

Connel Fullenkamp
Department of Economics

Duke University

1) New ThiNkiNg surrouNdiNg remiTTaNces aNd developmeNT

2) maximisiNg The developmeNT impacT of remiTTaNces

development. This possibility is suggested by the fact
that remittances are essentially unrestricted, private
financial flows that could finance investment as well
as consumption. In other words, certain aspects of
remittances appear, at least on the surface, to be
similar to FDI and other private international capital
flows, and they may therefore have similar effects on
economic growth.

Such thinking seems to be popular among
policymakers, who increasingly associate remittances
with other private capital flows. The discussion
of remittances in the UN’s Monterrey Consensus
document (United Nations, 2003), which has formed
the basis of international development finance policy
since 2002, is a case in point. Remittances are
mentioned only once, in Paragraph 18, and then
only in the context of urging countries to reduce the
costs of sending remittances internationally. But the
very same sentence also goes on to urge countries
to “[…] create opportunities for development-oriented
investments, including housing.” (United Nations,
2003, p. 9) Remittances are thus being associated
with other private investment flows, albeit tentatively.

The U.S. State Department, on the other hand, has been
much more forward about suggesting that remittances
can play an important role in development finance and
promoting economic growth. Its 2005 document, the
U.S. Approach to International Development: Building
on the Monterrey Consensus (U.S. Department of
State, 2005), labels remittances as a “development
resource” and places remittances in the same category
as domestic savings and foreign private investment.
A search on the State Department’s website reveals
dozens of official statements and remarks made by
officials emphasizing the size of remittances sent
from the U.S. and suggesting that these funds are
being used to facilitate economic development in
the recipient countries. For example, a press release
produced by the State Department in 2007 (US State
Department 2007) again places a statement about the
amount of remittances sent by US residents directly
after a statement about the amount of FDI originating
from the US. The continual association of remittances
with FDI in the State Department’s public statements
clearly implies that these officials consider the two
types of flows to be fundamentally similar in their
economic impact.

Policy-oriented economists have also made similar
claims about remittances. Ratha (2003), for example,
calls remittances “an important and stable source of

external development finance” but mainly suggests

that remittances could and should enhance economic

development rather than show that remittances have

actually done so.

Given the importance that policymakers and

economists increasingly place on remittances as a

potential source of development finance, it is critical

to know whether this optimism is truly warranted. This

paper provides a brief analysis of the main ways that

remittances are believed to affect macroeconomic

performance, followed by an overview of the main

empirical findings regarding the impact of remittances

on economies that receive significant remittance

inflows. The purpose of this paper is both to assess

whether remittances appear to have made significant

contributions to economic development to date, and

to suggest the most likely ways that remittances can

be used to facilitate future economic development.

The sum of the existing evidence on the macroeconomic

impacts of remittances leads to a disappointing

conclusion: so far, remittances have contributed

very little if anything to economic development. The

lack of a consistently positive or negative impact of

remittances on growth is due to the existence of

multiple paths through which remittances can affect

aggregate economic activity. These paths include

important negative as well as positive influences of

remittances on economic behavior whose effects

may simply cancel each other out. Our findings imply

that the naïve perspective that anticipates a positive

impact on development simply because remittances

represent additional resource inflows is not justified. In

other words, remittances do not inherently facilitate or

finance economic growth and development.

None of these results imply, however, that remittances

cannot or should not be managed more actively as

a tool of development policy. Indeed, the analysis

of the potential mechanisms by which remittances

can facilitate economic development presented in

this paper suggest concrete policies that may be

successful in directing a significant share of remittances

to the financing of development. Several options are

presented at the end of this paper.


RemIttANces AND II.
DeveloPmeNt: A gRoWtH-

In this paper, we employ a growth accounting
framework both because it serves as a convenient
organizing principle and because the proof that
remittances contribute to economic development is to
be found in measurable contributions of remittances
to economic growth. These contributions, moreover,
should be robust to different measurement methods.
Remittance inflows on the scale described above can
be expected to potentially have large effects on the
rate of growth of productive capacity in the receiving
economies. This section examines the channels
through which remittance receipts may exert such
effects. We consider such channels within a “growth
accounting” framework—that is, as effects that
operate through capital accumulation, labor force
growth, and total factor productivity (TFP) growth. We
discuss each path in turn.

Remittance Inflows and capital A.

There are various ways through which inflows of
worker remittances can affect the rate of capital
accumulation in recipient economies. The most
obvious of these, of course, is by directly financing
an increase in capital accumulation relative to what
would have been observed if the recipient economies
had been forced to rely only on domestic sources of
income to finance investment. From a microeconomic
perspective, if domestic households face financial
restrictions that constrain their investment activities—
for example, as the result of poor domestic financial
development—remittance inflows may directly serve
to ease such constraints, permitting an increase in the
recipient households’ rate of accumulation of physical
and human capital.

But the effects of remittance inflows on the financing
of domestic investment need not operate simply
through the additional resources that such inflows
provide. If access to remittance inflows improves the
creditworthiness of domestic investors, then large
remittance inflows may lower the cost of capital in the
domestic economy. In this case, additional borrowing
would allow the amount of new investment that can
be financed in the presence of remittance flows during
any given period of time to exceed the magnitude

of remittance flows during that period, since future
inflows can be used to service the accumulated debt.
In other words, remittances may effectively augment
household collateral.

A third mechanism through which remittance inflows
may affect domestic capital accumulation is through
their effects on domestic macroeconomic stability. To
the extent that inflows make the domestic economy
less volatile, they would tend to reduce the risk
premium that firms demand in order to undertake
investment, and thus make domestic investment more
attractive. Chami, Hakura and Montiel (2009) show,
using a large sample of remittance-receiving countries,
that remittances do reduce output volatility.

However, none of these effects need necessarily
materialize in remittance-receiving economies, and
even if channels such as these are operative, their
effects on growth need not be positive in every
case. First, given their compensatory nature, it is
quite probable that remittances will be received
by households with a high marginal propensity to
consume, and therefore, simply may not be directed in
significant quantities toward investment. For example,
Abdih, Barajas, Chami and Ebeke (2011) show that
remittance flows into the Middle East and North Africa
region fuel consumption of domestic and foreign
goods and raise tax revenue on such goods, with very
little going to investment.

Second, if remittances are perceived to be permanent,
they may tend to stimulate additional consumption
rather than investment, even in the presence of credit
constraints. This would imply positive effects on
household welfare, but not necessarily on aggregate
economic growth. Finally, the more highly integrated
an economy is with world financial markets, and the
more highly developed the domestic financial system,
the less likely it is that remittance receipts will stimulate
investment by relaxing credit constraints.

As discussed above, remittance receipts could
conceivably stimulate additional investment in the
form of human capital accumulation. They could do
so by financing the cost of this investment directly,
or by reducing the need for younger members of the
household to abandon formal schooling in order to
work and contribute to household income. However,
the effects on domestic economic growth will depend
on the recipients’ subsequent participation in the
domestic labor force. Positive growth effects obviously
would not be forthcoming if the extra education funded

1) New ThiNkiNg surrouNdiNg remiTTaNces aNd developmeNT

2) maximisiNg The developmeNT impacT of remiTTaNces

by remittances makes it possible for the recipients
themselves to emigrate, for example.

Remittance Inflows and labor b.
Force growth

Remittance receipts may also influence growth through
their effects on the rate of growth of labor inputs (while
holding the level of human capital fixed). One channel
through which remittances could impact labor inputs
is through labor force participation.61 Remittance
receipt would be expected to have a negative effect
on labor force participation, for the following reasons.
To the extent that remittance inflows are simple
income transfers, recipient households may rationally
substitute unearned remittance income for labor
income. In addition, regardless of their intended use,
remittance transfers may be plagued by severe moral
hazard problems, an idea that was first formalized
by Chami, Fullenkamp, and Jahjah (2003). Because
these flows occur under asymmetric information and
in a context in which monitoring and enforcement are
made extremely difficult by the distance separating
remitter and recipient, moral hazard problems
may induce recipients to divert resources to the
consumption of leisure, thereby reducing their labor
market effort.62 Anecdotal evidence of the labor
effort effect is abundant, and academic studies have
detected such an effect as well.63

Remittance Inflows and tFP c.

Remittance receipts may affect TFP growth through
effects on the efficiency of domestic investment
as well as through effects on the size of domestic
productive sectors that generate dynamic production
externalities. Whether such effects actually arise in a
remittance-receiving economy, however, depends on
a variety of factors which may vary from one economy
to another.

Remittances may affect the efficiency of investment by
altering the quality of domestic financial intermediation.
There are at least two ways in which this can occur.
First, if remittances are primarily disguised capital
inflows—that is, if the recipients are investing on
behalf of the remitter—then efficiency of investment
is affected to the extent that the agent making the
investment decision, whether the remitter or the
recipient, possesses some informational advantage
or disadvantage relative to formal domestic financial

intermediaries. For example, if the agent making the
investment decision is a family member who receives a
migrant’s remittances, and if that family member is less
skilled in allocating capital than are domestic financial
intermediaries, then having the resource flow take the
form of a remittance receipt rather than a capital inflow
intermediated by the domestic formal financial system
would reduce the efficiency of domestic investment.
It is unclear, however, what portion of remittances are
intended to be invested, and whether those investing
the remittances have informational advantages or
disadvantages, on average, relative to banks or other

Remittances may also affect the ability of the recipient
economy’s formal financial system to allocate capital.
Remittances are likely to expand the quantity of funds
flowing through the banking system.64 This in turn
may lead to enhanced financial development and
thus to higher economic growth through one or both
of two channels: (1) increased economies of scale
in financial intermediation, or (2) a political economy
effect, whereby a larger constituency (depositors) is
able to pressure the government into undertaking
beneficial financial reform. But again, neither of the
efficiency-enhancing effects just described is certain.
For example, the political economy mechanism arising
from a larger banking system may actually have an
adverse effect on financial development: depositors
may lobby the government for reforms favoring safety
over improved efficiency in intermediation, increasing
bank concentration and causing banks to increase their
holdings of safe assets rather than more productive,
but possibly riskier, forms of lending.

A different mechanism through which remittances may
affect TFP growth is by changing the size of dynamic
production externalities generated by an economy.
Remittance inflows may lead to real exchange rate
appreciation, which in turn implies a potential for Dutch
disease effects in remittance-receiving countries. Such
effects would materialize if equilibrium real exchange
rate appreciation results in the contraction of sectors
of production that generate dynamic production
externalities (such as manufacturing exports). As with
the mechanisms described previously, however, this
is not a necessary result. Its emergence depends not
just on whether remittance inflows indeed result in real
exchange rate appreciation, but also on whether the
nature of traded goods production in the remittance-
receiving country is actually likely to generate dynamic
production externalities.


There are also broader political economy effects of
remittance flows that could affect growth through all
three growth accounting channels considered above.
In particular, to the extent that remittances provide
a source of income for domestic households that is
independent of the domestic production process, the
presence of remittance inflows reduces the incentives
for private citizens to monitor and manage the domestic
government’s policy performance. Moreover, since the
costs of poor domestic macroeconomic performance
are at least partially shifted on to migrants, who increase
their transfers to domestic residents when things go
badly at home, remittances create a moral hazard
problem for the domestic government. The upshot
is that large remittance inflows may undermine good
domestic governance, with widespread implications
for the quality of the domestic policy environment that
may have adverse effects for capital accumulation,
TFP growth, and growth in labor inputs. Recently,
Abdih et al. (2008) find evidence that remittance flows
adversely impact the quality of institutions in recipient
countries. In particular, remittances expand the tax
base, enabling the government to appropriate more
resources and distribute them to those in power. By
acting as a buffer between the government and the
people, remittances allow government corruption
to be less costly for households that receive those

Overall, this discussion shows that there are many
potential effects of remittances on economic growth,
but these effects are of highly uncertain magnitude
and conflicting direction. The main implication that
emerges is that the effects of remittance inflows on
the economic growth of the recipient economy are
theoretically ambiguous. In the next section we review
recent empirical work on the remittance-growth
nexus and show that it too finds effects of uncertain
magnitude and conflicting direction.

ReceNt evIDeNce oN III.
tHe gRoWtH eFFects oF

Studies of the growth effects of remittances tend
to be of two types: attempts to detect specific
channels through which remittance inflows may affect
growth; and estimates of the effects of remittance
inflows on economic growth, in the tradition of the
cross-country growth literature. Although relatively

little research has focused on estimating specific
transmission mechanisms through which remittances
can affect economic growth, there is a growing
literature investigating so-called Dutch disease
effects of remittances. In general, this literature finds
that remittances do tend to lead to real exchange
rate appreciation, which is a necessary condition
associated with Dutch disease effects. Barajas et al
(forthcoming), for example, estimates that remittances
do lead to real exchange rate appreciation, though the
effect is small. Acosta et al (forthcoming) also show
that remittances tend to lead to real exchange rate
appreciation. They also find evidence of a shift into
nontradables at the expense of the export sector,
but only in economies that maintain a fixed nominal
exchange rate.

There is a much larger literature that attempts to
estimate the impact of remittances on growth via
reduced form macroeconomic models. The earliest
such study, by Chami, Fullenkamp, and Jahjah (2003),
found that whereas domestic investment and private
capital flows were positively related to growth, the
ratio of workers’ remittances to GDP was either not
statistically significant or negatively related to growth.
Since this time, many subsequent studies have been
performed, and their main findings can be summarized
in the following way.

The estimated impact of remittances on growth is
highly sensitive to the choice of conditioning variables,
time period, estimation method, and instrumental
variables. Results from different studies65 cover the full
gamut from negative effects, to no discernible effects,
to positive effects.

When a positive effect of remittances on growth is
found, it tends to be a conditional effect. For example,
the findings of Giuliano and Ruiz-Arranz (2005)
suggest that remittances have a positive impact on
GDP growth when the financial markets are relatively
underdeveloped (measured by M2/GDP ratios66). The
argument is that in this setting, remittances would
loosen the credit constraints imposed on households
by a small financial sector. It should be noted, however,
that even these conditional findings are not robust to
changes in data or estimation technique.

The most accurate conclusion that can be drawn about
the impact of remittances on growth appears to be
that there is no robust evidence that remittances have
made the sort of contribution to economic growth that
has been hoped for. A recent study by Barajas et al

1) New ThiNkiNg surrouNdiNg remiTTaNces aNd developmeNT

2) maximisiNg The developmeNT impacT of remiTTaNces

(2009) performed a comprehensive set of estimations
that included nearly all of the conditioning variables,
instruments, specifications and estimation techniques
previously employed in the literature, and added new
instruments as well. The estimated coefficients and
their significance were highly sensitive to the choice of
conditioning variables and estimation method. Most
of the estimated impacts of remittances on growth
were small in magnitude and lacking in significance,
especially when a larger set of conditioning variables
was included in the specification. And when the
estimated effect of remittances on economic growth
was statistically significant, it tended to be negative
rather than positive. Perhaps the most persuasive
evidence in support of the claim that remittances have
not made significant contributions to economic growth
is the lack of a single example of a remittances success
story: a country in which remittances-led growth
contributed significantly to its development. Given that
some countries’ remittance receipts exceeded 10% of
GDP for long periods of time, we should expect to find
at least one example of this phenomenon during the
past four decades. But no nation can credibly claim
that remittances have funded or catalyzed significant
economic development.

PolIcY oPtIoNsIv.

Part of the reason why remittances have not
spurred economic growth is that they are generally
not intended to serve as investments but rather as
social insurance to help family members finance the
purchase of life’s necessities. Remittances lift people
out of poverty but they do not typically turn their
recipients into entrepreneurs. The intriguing possibility
remains that remittances can be channeled somehow
into achieving both of these ends, but this will require
the development of policies and institutions that can
help recipients of remittances make the most of the
transfers they receive.

Given the above discussion of the potential impacts
of remittances, we recommend the following policy

Each country should study how remittances are •
currently being used by their recipients. Most
evidence on remittance receipt and usage is
limited and out of date, so that policymakers do
not have an understanding of the obstacles that
prevent remittances from being used to facilitate

development, or what kinds of development-friendly
activities (i.e., education, business formation,
investment) remittance recipients would be most
likely to engage in.

Upgrade financial infrastructure at the retail level, •
increase the bancarization rate, and improve
financial literacy. Although remittances are large, at
best only a share of them will be used for investment,
since they are primarily used to meet a family’s basic
human needs. Thus, remittances must benefit
from the leverage available in the financial sector
in order to finance significant development. But
this means that remittance-receiving households
must be willing and able participants in the financial

Facilitate the use of remittances as collateral for •
loans (again at the retail level) to finance productive
investments in human and physical capital. Since
remittances are a relatively stable source of income,
they mimic the characteristics of employment
income from a secure job. Thus, programs can be
designed to promote the acceptance of remittance
income as collateral for private loans, or to
subsidize loans for which remittances are pledged
as collateral, provided that the loans are used to
finance productive investments.

Take advantage of the fiscal space created by •
remittance flows to engage in public investment
in infrastructure and institutions. An alternative
approach to a private-sector-focused program is
for the government to increase expenditures on
infrastructure - and institution-building projects.
Recent work by Abdih et. al. (2011, 2008)
provides empirical evidence that remittances fuel
consumption, thereby expanding the tax base and
with it government revenue. Remittances effectively
provide governments with additional fiscal space
that they could potentially utilize by borrowing and
investing the proceeds in public infrastructure.


The main argument of this paper echoes the recent
criticisms of foreign aid presented by Rajan and
Subramanian (2005) and others, who point out that
there is very little evidence that decades of official
transfers have contributed much to the growth of
developing economies. Similarly, historical experience
and academic research both suggest that decades


of private income transfers—remittances—have
contributed little to economic growth in remittance-
receiving economies and may have even retarded
growth in some. This outcome reflects several
realities regarding remittances that need to be better
appreciated by those who wish to channel them into
economic development. First, there are many ways
that remittances can affect economic activity, some
beneficial and some harmful. Second, remittances
do not naturally flow into growth-enhancing activities
and may in fact tend to flow into growth-reducing
activities because of the moral hazard problems
associated with them. Finally, a country that wishes
to reap a development benefit from remittances faces
two demanding conditions. On one hand, it must
have institutions and infrastructure in place that would

enable it to channel a higher portion of remittances

into growth-enhancing activities through the private

sector, and the financial system in particular. On

the other hand, it must have the political will to use

the fiscal space granted by remittances wisely,

by investing in high-returning public goods and

infrastructure. To this extent, our argument follows the

spirit of the Monterrey Consensus, which emphasizes

the importance of having well functioning domestic

institutions as a prerequisite for faster economic

development. Remittances do have the potential to

facilitate economic growth, but they will realize this

potential only with the support of strong social and

economic institutions.

1) New ThiNkiNg surrouNdiNg remiTTaNces aNd developmeNT

2) maximisiNg The developmeNT impacT of remiTTaNces


Abdih, Yasser, Adolfo Barajas, Ralph Chami, and Christian Ebeke (2011). Determinants and Fiscal Impact of
Workers’ Remittances in the Middle East and Central Asia. International Monetary Fund.

Abdih, Yasser, Ralph Chami, Jihad Dagher, and Peter Montiel (2008). Remittances and Institutions: Are
Remittances a Curse? IMF Working Paper 08/29, International Monetary Fund.

Acosta, Pablo A., Emmanuel K. K. Lartey, and Federico Mandelman, forthcoming, (2010). Remittances, Exchange
Rate Regimes, and the Dutch Disease: A Panel Data Analysis, Review of International Economics.

Adelman, Irma, and J. Edward Taylor (1990). Is Structural Adjustment with a Human Face Possible? The Case of
Mexico. Journal of Development Studies, Vol. 26, pp. 387–407.

Aggarwal, Reena, Asli Demirguc-Kunt, and María Soledad Martínez Pería (2006). Do Workers’ Remittances
Promote Financial Development? World Bank Policy Research Paper 3957, World Bank.

Barajas, Adolfo, Ralph Chami, Connel Fullenkamp, Michael Gapen, and Peter Montiel (2009). Do Workers’
Remittances Promote Economic Growth? IMF Working Paper 09/153 (Washington: International Monetary

Barajas, Adolfo, Ralph Chami, Dalia Hakura, and Peter Montiel (2010). Workers’ Remittances and the Equilibrium
Real Exchange Rate. IMF Working Paper 10/287, International Monetary Fund.

Catrinescu, Natalia, Miguel León-Ledesma, Matloob Piracha, and Bryce Quillin (2006). Remittances, Institutions,
and Economic Growth. IZA Discussion Paper No. 2139.

Chami, Ralph, Adolfo Barajas, Thomas Cosimano, Connel Fullenkamp, Michael Gapen, and Peter Montiel (2008).
Macroeconomic Consequences of Remittances. IMF Occasional Paper No. 259, International Monetary

Chami, Ralph, Connel Fullenkamp, and Samir Jajah (2003). Are Immigrant Remittance Flows a Source of Capital
for Development? IMF Working Paper 03/189 International Monetary Fund.

Chami, Ralph, Thomas F. Cosimano, and Michael T. Gapen (2006). Beware of Emigrants Bearing Gifts: Optimal
Fiscal and Monetary Policy in the Presence of Remittances. IMF Working Paper 06/61, International Monetary

Chami, Ralph, Dalia Hakura and Peter Montiel (2009). Remittances: An Automatic Stabilizer? IMF Working Paper
09/91, International Monetary Fund.

Faini, Ricardo (2006). Migration and Remittances: The Impact on the Countries of Origin. University of Rome.
Available at: http://www.eudnet.net/download/Faini.pdf

Fargues, Phillipe (2007). The Demographic Benefit if International Migration: A Hypothesis and Its Application
to Middle Eastern and North African Contexts in International Migration. Economic Development and Policy,
World Bank.

Giuliano, Paola and Marta Ruiz-Arranz (2005). Remittances, Financial Development, and Growth. IMF Working
Paper 05/234, International Monetary Fund.

International Monetary Fund (2005). Two Current Issues Facing Developing Countries, in World Economic

Itzigsohn, Jose (1995). Migrant Remittances, Labor Markets, and Household Strategies: A Comparative Analysis
of Low-Income Household Strategies in the Caribbean Basin. Social Forces, Vol. 74, pp. 633–55.

Kozel, Valerie, and Harold Alderman (1990). Factors Determining Work Participation and Labour Supply Decisions
in Pakistan’s Urban Areas. Pakistan Development Review, Vol. 29, pp. 1–18.


Nishat, Mohammed, and Nighat Bilgrami (1991). The Impact of Migrant Worker’s Remittances on Pakistan
Economy. Pakistan Economic and Social Review, Vol. 29, pp. 21–41.

Rajan, Raghuram and Arvind Subramanian (2005). What Undermines Aid’s Impact on Growth? IMF Working
Paper 05/126, International Monetary Fund and NBER Working Paper 11657 (October).

Ratha, Dilip (2003). Workers’ Remittances: An Important and Stable Source of External Development Finance, in
Global Development Finance. World Bank.

Cox, Donald and Odek Stark (2004). On the Demand for Grandchildren: Tied Transfers and the Demonstration
Effect. ZEF Bonn, Center for Development Research (September).

United Nations (2003). Monterrey Consensus on Financing for Development. New York: United Nations
Department of Economic and Social Affairs, Financing for Development Office.

U.S. Department of State (2005). The U.S. Approach to International Development: Building on the Monterrey
Consensus. U.S. Department of State at www.state.gov.

U.S. Department of State (2007). The United States and International Development: Partnering for Growth. Fact
Sheet (Press Release), Office of the Spokesman, December 31. www.state.gov.

World Bank (2006). The Development Impact of Workers’ Remittances in Latin America. Vol. 2: Detailed Findings,
Report No. 37026, World Bank.

World Bank, (2010). Migration and Remittances. Factbook 2011.

1) New ThiNkiNg surrouNdiNg remiTTaNces aNd developmeNT

2) maximisiNg The developmeNT impacT of remiTTaNces


See World Bank (2010).59

See, for example, Nishat and Bilgrami (1991) and Adelman and Taylor (1990).60

Another channel may be through fertility. Fargues (2007) finds strong positive and negative correlations 61
between remittance receipts and fertility rates for Egypt and Morocco, respectively. But the author argues
that remittances may simply be proxying for the transmission of social attitudes rather than having a causal
impact on fertility. In addition, Cox and Stark (2005) argue that parents provide financial help to encourage
the production of grandchildren through what the authors identify as the “subsidization effect”, or a child’s
willingness to furnish parents with attention and care conditioned on prior parental example.

Chami, Gapen and Cosimano (2006), using a dynamic general equilibrium model with remittances, show that 62
these flows reduce labor supply, thereby increasing the correlation between labor and output. Thus, higher
remittances can lead to greater output volatility.

For example, Kozel and Alderman (1990) studied labor force participation and labor supply in Pakistan 63
using data from the 1986 survey by the Pakistan Institute of Development Economics and found
a significant negative impact of remittances on the labor force participation of males. Similarly,
Itzigsohn (1995) also found, in a sample of Caribbean Basin cities, that remittances significantly
reduce the labor force participation of household heads as well as other members of remittance-
receiving families. For a discussion of the literature on the impact of remittances on labor supply.
See http://programs.ssrc.org/intmigration/AnthologyT16/. The papers there point to a reduction in labor

Aggarwal, Demirguc-Kunt, and Martínez Pería (2006) show that this is the case; using panel estimations over 64
99 developing countries for the 1975–2003 period, remittances are found to be associated with higher ratios
of both banking deposits and credit to GDP.

See, for example, IMF (2005), World Bank (2006), Faini (2006), Catrinescu et al (2009).65

The M2 ration of GDP indicator is used to measure the broad money (cash, deposits and quasi cash) supply 66
into the GDP.

(Transition Page to be created according to the cover)

parT Two

faciliTaTiNg remiTTaNces flows aNd

eNaBliNg fiNaNcial iNclusioN

1) New ThiNkiNg surrouNdiNg remiTTaNces aNd developmeNT

2) maximisiNg The developmeNT impacT of remiTTaNces


The link between remittances and development lies at
an intersection that can transform the material base
of migrants, their relatives, and their societies. The
theoretical and empirical review looks at the effects
of these flows on the economic and financial system
of a country. The units of analysis utilized that link with
remittances are macroeconomic factors, financial
institutions, and assets. As aggregate flows, remittances
influence national reserves, foreign currency exchange
and saving and credit ratios. Remittances also play
a role in providing financial access to both migrants
and remittance recipients, and thus help people build
financial assets. The following work aims at explaining
research that shows that remittance recipients are
more likely to save and have bank accounts than non-

Within this conceptual and empirical framework on
remittances and development, the second area of work
will introduce tools and lessons learned that integrate
strategies that governments and other stakeholders
can adopt to help migrants and families build assets
and accumulate wealth. These tools include technical
assistance mechanisms for financial product design
as well as mobile technology transfers, among other

tHeoRY AND coNcePts oN II.

What Are Remittances: Academic A.
and technical Definitions

Remittance transfers are defined by various groups
and predominantly in reference to migrant workers.
Worker remittances have generally been understood
as the earnings migrants send from a country other
than their own to a relative in their country or origin
for the purpose of meeting certain economic and

financial obligations. The point of departure for
remittances is the migration of people who respond to
the complex reality of the foreign labor marketplace,
political circumstances and/or emergencies that
influence one’s decision to move in order to meet their
responsibilities at home.67

Within the context of the recipient of the funds, and
from a development policy context, remittances are
a share of a household’s total income. Depending on
the region in the world and within a country, income
dependence on remittances represent between 50 to
80% of all income. The highest dependence is found
among populations with large seasonal labor migration
and the lowest among those with longer time receiving
and having other sources of income. Comparatively
these households’ incomes are larger relative to those
who do not receive remittances, typically by 30%.68

How Are Remittance transfers b.

Central Banks have taken on the task of accounting for
these flows following some basic methodologies (Millis
and Orozco 2008).69 Various sources of data collection
are utilized by Central Banks, among them are
international transactions reporting system (ITRS), direct
reporting by remittance service providers, particularly
from money transfer operators, and household survey
data using different methodologies. The first source
is the typical requirement by governments on banks
to report any international foreign currency transfer.
The second is that provided by MTOs predominantly.
A third source is from household surveys that include
questions on who receives and how remittances are
received. Most countries rely at least on one source or
a combination. An effective method consists of relying
on the three methods. The Armenian government,
for example, utilizes ITRS and MTO data, but runs
large sample household surveys in order to estimate
a coefficient of informality (Orozco 2008). One of the
challenges of collecting data from ITRS and MTOs
is determining what constitute a remittance among
all transfers received. Not all bank wires or transfers

1. RemIttANces AND Assets: coNcePtuAl, emPIRIcAl
AND PolIcY coNsIDeRAtIoNs AND tools

Manuel Orozco
Director Remittances and Development Program

Inter-American Dialogue


to MTOs are worker remittances, and some Central
Banks give these institutions the discretion to decide
what constitutes a remittance (typically anything under
US$1500). Household surveys also are not always
reliable as they depend on the expertise of surveyors
of knowing how to collect data on migration issues.
Those countries where the size of the immigrant
population is better known and informal flows are low,
are more successful in getting more accurate data.

Are there theoretical c.

Studies on remittances have approached the subject
from various angles. On the determinants, there have
been two approaches, first an approach associated
to the material circumstances shaping remittance
transfers (income, education and occupation, wealth
and number of dependents in the home country,
informality of markets). A second approach is about
the motivations of remitting. Here the literature
has argued that motivations can be altruistic, self-
interested, contractual or risk mitigating. Altruistic
approaches argue that senders do so as a mere
sense of personal satisfaction to help the family. The
self-interested perspective stresses that people remit
with the interest of gaining a material or symbolic

return in the future (joint property, inheritance, etc.).
The contractual perspective has looked rather at the
assumption that the household makes a decision to
invest on a member of the family to emigrate and
remit. The risk mitigation approach argues that people
remit in order to prevent risks in the future. Each of
these theories have been tested and proven right
under different case studies but there is no conclusive
evidence. Moreover, there exist disagreement as to
whether the conceptual frameworks correspond to
the complexities of real life challenges and needs to

emPIRIcAl coNsIDeRAtIoNs: III.
A globAl RevIeW oF

Migrants have become substantively and more directly
involved in different economic and social activities
in their countries of origin. This is due in part to the
dynamics of globalization and to new opportunities
resulting from political and economic opening in their
home societies. An immigrant’s economic linkage with
their home country extends to at least four practices:
family remittance transfers, demand of services, capital

Table 1. Geographic distribution of remittances (as % of total flows received)


SE asia/


Europe Russia/Kaz arab Oil Exp. africa

East Asia & Pacific 37% 41% 12% 0% 1% 0%

Europe & Central Asia 5% 18% 46% 11% 1% 0%

Latin America &
Caribbean 2% 77% 15% 0% 0% 0%

Middle East & North
Africa 2% 14% 44% 0% 8% 0%

North America 4% 38% 51% 0% 0% 0%

South Asia 4% 30% 18% 0% 11% 0%

Sub-Saharan Africa 3% 19% 45% 0% 3% 5%

(87% of the world) 10% 35% 31% 5% 3% 0%

Source: Orozco, Manuel (2007). Estimating Global Remittance Flows: A Methodology. Washington, IAD. IFAD (2007).
Sending money home: Worldwide remittance flows to developing countries, Rome.

1) New ThiNkiNg surrouNdiNg remiTTaNces aNd developmeNT

2) maximisiNg The developmeNT impacT of remiTTaNces

investment, and charitable donations.

The estimated volume of remittances may
conservatively be around US400 billion.70 Looking at
the regions in the world described in Table 1, shows
that remittance flows go to all regions in the world
but with differences within some regional areas. First,
nearly 90% of all flows come from these five regions
of the world, 35% and 31% of which originates from
North America and Western Europe respectively.
Second, these regional corridors show variations
in the dependency on remittances. Most of Latin
America receives from North America, particularly the

United States, whereas Africans mostly receive from

West Europe (see Table 1).

Dimension and characteristics of A.
senders and Recipients.

Although migrants throughout the world send money

home, the percentage of migrants that remit varies by

region. In most industrialized nations of the West, less

than 70% of migrants remit back home compared to

those working in South East Asia, or the Gulf countries,

where the percentages can be as high as 90%.

Table 2. characteristics of migrant remitters

from Sending to

percent of
who remit

amount frequency




tive to




Moldova 60% 300 7 2,100 4 27% 7,908.50 Apr-07

Georgia 60% 300 8 2,400 5 30% 7,908.50 Apr-07

Azerbaijan 60% 300 6 1,800 5 23% 7,908.50 Apr-07

Senegal 60% 372 10 3,722 9 17% 21,879.90 Mar-10

Morocco 60% 434 10 4,342 10 23% 18,956.20 Mar-10


Philippines 80% 300 12 3,600 9 40% 8,901.00 Apr-09

Nigeria 80% 100 5 500 4 7% 6,766.00 Apr-09

Peru-Ecuador 80% 225 12 2,700 7 31% 8,726.00 Apr-09

Morocco 80% 150 7 1,050 5 9% 11,944.00 Apr-09

Colombia 80% 250 12 3,000 6 26% 11,371.00 Apr-09


Bolivia 75% 300 11 3,300 6 14% 23,198.92 Apr-08

Colombia 75% 200 14 2,800 7 13% 22,263.16 Apr-08

Dominican Rep. 75% 190 12 2,280 8 12% 19,421.05 Apr-08

El Salvador 75% 260 12 3,120 6 15% 20,833.33 Apr-08

Ethiopia 75% 150 12 1,800 8 7% 26,883.12 Apr-08

Ghana 75% 217 12 2,600 8 11% 24,327.96 Apr-08

India 75% 400 12 4,800 6 17% 27,741.94 Apr-08

Mexico 75% 230 12 2,760 6 17% 16,618.42 Apr-08

Nigeria 75% 208 12 2,500 7 10% 24,095.74 Apr-08

Paraguay 75% 200 12 2,400 6 10% 23,411.76 Apr-08

Filipinas 75% 350 12 4,200 6 17% 24,329.90 Apr-08

Honduras 75% 229 12 2,748 5 12% 22,219.10 Apr-08

arabia Bangladesh 90% - - - - - - -

Japan Philippines 80% 600 7 4,800 4 15% - May-05
Source: Orozco, Manuel and Mariellen Jewers, (2010). Skilled Diasporas: An Imagined or Real Community? Survey data

collected by the author between 2007 and 2010.


Their average amount sent also varies predominantly
in relationship to their income and their family needs
back home. In Canada, the United States, Western
Europe and Japan migrants remit an average of
US$5,000 a year to their relatives, whereas migrants in
Russia and the Gulf countries remit less than half that
amount, and migrants moving to regional places such
as West Africa, South America, or Central Asia remit
less than US$1,000 to predominantly rural areas.

Moreover, migrants are predominantly low income
and financially disenfranchised with little access to the
banking system. This condition curtails their ability to
improve their material circumstances.

Those who receive remittances include households
where a spouse or a mother of a migrant is the main
recipient. Depending on the countries, the percent of
households receiving remittances ranges from 1 to
30%. One of the key issues of remittances among
recipients is the extent of income dependence on
those flows. In most cases, recipients do not depend
exclusively on these flows, dependence ranges from
50 to 90% depending on households and countries.

market Place Issuesb.

Remittances are sent through either official or licensed
channels (money transfer operators, banks, postal
unions) or informal mechanisms. In most industrialized
countries, about 60% of migrants use predominantly
licensed mechanisms.71 In Africa, intraregional flows
are predominantly, if not exclusively, informal because
laws do not allow outbound international transfers
of individuals except in extreme circumstances and
through the ownership of bank accounts.

Either method employed by migrants carries a
transferring cost. The cost of remitting ranges from
2% to 10% depending on which part of the world a
person is remitting from and to. For example, transfers
from Russia to the Community of Independent States
is 2.5% the value of the amount sent, 5.5% from the
United States to Latin America and the Caribbean, to
South East Asia and 10% to most African countries
from Europe, or the United States.72 The causes
of informality and costs are often related to the
infrastructure available to transfer flows to the home
country, the regulatory environment in the home country
restricting payments only to banking institutions (for
example, excluding MFIs, and small savings banks),
the economies of scale of the transfers, the extent
of interdependence between the migrant’s home

and host countries, and the level of private sector
competition across corridors.

Table 3. Worldwide fee costs (as % of sending US$200)

Region 2008 2009 2010

Central Asia 2.93 2.44 2.50

Central America 5.26 5.12 4.95

Southern Asia 7.97 6.96 6.27

Southeast Asia 9.43 7.24 6.56

Mexico 5.80 6.31 7.42

Northern Africa 12.29 9.67 8.19

Eastern Europe 7.30 8.38 8.22

Western Africa 9.50 9.39 8.23

Caribbean 10.81 9.66 8.48

Western Asia 6.29 7.46 8.61

World Average 9.13 8.88 8.68

South America 7.64 7.47 9.13

Eastern Africa 14.03 11.69 9.78

Eastern Asia 12.88 13.20 12.09

South Pacific - 12.00 12.44

Southern Africa 15.32 15.18 13.13

South Africa 15.93 14.71 14.76

Central Africa 12.75 15.01 15.11

East Asia 16.16 20.46 20.47

Source: Data compiled by the author for the World Bank
in collaboration with DMA. The data represents a
sample of 76 countries receiving remittances from
2008 to 2010.

What Remittances Are Notc.

Migrants engage in significant economic activates
related to their home countries, such as nostalgic
trade, philanthropic donations through hometown
associations, and investments. These are activities
different from remittances and can’t be confused as
at the moment of policy design, mixing or lumping one
activity with another, may have ineffective results.

RemIttANces AND Iv.
DeveloPmeNt: AssessINg
tHe RelAtIoNsHIP

Defining the RelationshipA.

1) New ThiNkiNg surrouNdiNg remiTTaNces aNd developmeNT

2) maximisiNg The developmeNT impacT of remiTTaNces

Migrants and their families’ financial activities not only
impact the economies and the financial systems of
their countries, but also demonstrate a capacity to
build assets that in turn correlates to remittances.
From a policy perspective, remittance flows have an
unparalleled effect on poverty reduction and, especially
when properly leveraged, on economic development.

The literature on poverty has looked more specifically
at the ways in which the poor cope with their reality
with regard to wealth accumulation. Moser’s analysis
of asset accumulation as a differentiated practice
from livelihood strategies and social protection is
important when thinking about the ways it enables
people to have a better quality of life.73 An asset-
based approach to development provides clues about
people’s capabilities to expand their resources.74

Asset accumulation is thus of critical importance and
directly intertwined with financial access.75 Together
they provide the means with which to strengthen or
enhance a person’s material base. Overall, a strong
financial basis provides opportunities to build wealth,
and thus promote development. Research has shown
that lower cash-to-deposit ratios and higher deposit-
to-GDP ratios are linked to higher per-capita GDP
levels.76 Such resources are more efficient when made
available for credit and investment in local economies,
and are efficiently distributed when such credit is made
universally accessible to anyone seeking to expand
their capacities.

According to Beck and de la Torre, there are three
possible problems with credit access that countries
might face: 1) potential borrowers (for non-economic
reasons) cannot or do not tap into credit; 2) creditors
are not fully exploiting their outreach possibilities and
hence are inefficient; and 3) creditors are operating at
an unsustainable level where excess credit is being
granted. They suggest further that both government
and financial institutions have a role to play in
addressing these challenges, both separately and

measuring Development Impact b.
Resulting From Inflows of

The link of remittances to development has been
observed in some areas, such as poverty reduction,
economic growth and financial institutional
development. At the micro level, within the households,
recipients of remittances have been able to build

assets. Here we review some of the findings from the

Poverty and social effectsc.
Studies have shown that remittances tend to reduce
poverty. Richard Adams’ (2005) work on remittances
and poverty reduction found a statistical relationship
between remittance and poverty trends worldwide.
His analysis showed that a ten per cent increase in
international remittances from each individual will lead
to a 3.5 per cent decline in the share of people living
in poverty.78 Adams (2004) study on remittances and
poverty in Guatemala based on household survey data
found that international remittances reduce the level
of poverty by 1.6 per cent and the depth of poverty
by 12.6 per cent.79 Mauricio Orbe’s 2006 study found
that the Gini coefficient dropped from 0.54 to 0.52 as
a result of incorporating remittances into the income
equation, indicating that remittances reduce income
inequality. In general remittances make recipients
wealthier across all income groups.80

About the macroeconomics of D.

Few studies in the remittance literature have looked
at remittances as one macroeconomic determinant.
These studies have argued that remittances as a
source of national income have a positive effect on
economic growth, capital flows, foreign exchange,
and financial activities. The following section will focus
on the latter.

Remittances and Financial e.

The point of departure in remittances and development
is their effect on income. Remittances have a direct
effect in increasing disposable income which typically
turns into saving accumulation. Meaning that out of
all income earned, remittances included, savings are
set aside and built, and they increase as disposable
income increases from the amount of remittance
received. Thus, at the level of the household,
remittances fulfill the function of contributing to build
liquid and fixed assets. In turn the flow of money has
an effect over financial institutions. More importantly
is that there exist differences among people receiving
remittances from non-recipients in their financial
practices. In general, remittance senders tend to think
and consider investment options and remit for savings


or investment in the household. Moreover, recipients
tend to have a higher ability to save, invest, and open
bank accounts.

In many countries, the percent of people holding banks
accounts is higher among remittance recipients than
non-recipients. A similar pattern is found among those
who save, where the percent among recipients is
also higher. Empirical evidence shows that those who
receive remittances in larger amounts are more likely
to have bank accounts, savings and investments.81
Using national survey data Orozco found that in
Guatemala and Nicaragua the percent of people
with bank accounts is higher among those receiving
remittances. More importantly it was found that for
every additional dollar received, savings increases by
at least 30 percent.82

Using household survey data for three CIS countries
(Georgia, Azerbaijan and Moldova) exploring the
relationship between finances and remittances, Orozco
showed that remittances are positively and statistically
associated to the ownership of a bank account and
already existing asset ownership.83 In Georgia those
owning accounts are more likely to express an interest
to invest in some asset building activity. Thus, as the
extent to which people receive remittances in larger
amounts is associated with an interest to build assets,
business and policy strategies are prime opportunities
to leverage the flows.

sending for savings and sending F.
for business and loans84

Investment in business and real estate, in particular,
and migrant donations to their local communities are
unambiguous and concrete forms of financial asset
accumulation at the individual and community levels. In
the case financial issues we find that between one and
two in ten migrants invest in their home country, and
nearly three in ten build savings at home. Statistical
analysis showed that females remit about 9 percent
less money than do males, that the amount of funds
remitted increases by about 5 percent for each year
of age, and that the longer an individual has lived in
the United States, the less they remit. However, the
longer a person has been remitting the more money
they tend to remit.

When examining the relationship between remittance
sending and financial obligations, the results
demonstrate that when an immigrant has a bank
account, it increases the amount remitted by 9

percent. In addition, individuals who report having a
savings account in the home country remit nearly one-
quarter more dollars.

The demand for financial services, however, has yet
to be met by a supply of these products from financial
institutions. This is due to a combination of factors
such as misperceptions of behavioral spending among
recipients, lack of access to remittance receiving
locations, financial literacy and business models
geared toward high-income groups. For example,
fieldwork research worldwide has shown limited efforts
to provide financial intermediation among remittance
senders or recipients.

A case study: guatemala and g.

Here we take a closer look at the case of remittance
recipients in Guatemala and Nicaragua who withdraw
their money at banking institutions.85 In both countries
over 65% of remittances are paid at bank branches,
and some banks seek to offer financial services to
recipients more actively than others. BanRural, one of
the largest banks in Guatemala has been the leader in
paying remittance transfers to families with migrants
abroad and also pursued a strategy to offer financial
products, savings in particular, to this population.
Those receiving remittances through BanRural are
predominantly families living in rural areas. In Nicaragua,
BanPro, one of the largest banks in the country, has
also been a leader in remittance payments and until
2010 started to offer financial products to recipients.
Most of its recipients are people living in urban areas.
This comparison shows increases in the amounts
saved, and people’s response of mobilizing their
savings when businesses offer financial products.

First, over 70% of remittance recipients from both
countries are women and have earnings. Among
Guatemalans the main source of remittance transfers
was the United States (over 90%), whereas among
Nicaraguans it was the United States (50%) and Costa
Rica (25%).

Second, the share of remittance dependence
varies between the two nationalities. Among rural
Guatemalans 75% of total income comes from
remittances as opposed to 57% for Nicaraguans. These
groups received US$4,400 and 3800 respectively in a
year. Part of the reason for such relates to the extent
to which there exist other sources of income for the
beneficiary. Two differentiating factors are rural location

1) New ThiNkiNg surrouNdiNg remiTTaNces aNd developmeNT

2) maximisiNg The developmeNT impacT of remiTTaNces

and gender. The data on Guatemala is collected only in
rural areas to predominantly (80%) women recipients.
Women in rural Guatemala are much less integrated in
the country’s labor force than any other group in the

Third, nearly half or more among both populations
were saving regardless of gender, rural location, age
or income. The percent of Guatemalan remittance
recipients saving was higher than those in Nicaragua.
Thus, despite that Guatemalans are more remittance
dependent, they are still saving. Using data from six
countries where financial education has been carried
out, Nicaraguans are the group with the lower savings.
The reasons are mainly that remittance recipients in
Nicaragua have lower incomes, and therefore higher
economic needs for basic consumption.

Finally, there is a relationship between savings and
account ownership related to financial intermediation.
When a financial institution is more proactive in their
outreach, the number of people mobilizing their
savings and the amount saved increases. Banrural has
been active in bringing people into their branches to
deposit their savings, whereas Banpro is only recently
strategizing these methods. Part of these strategies
includes removing barriers to entry. In Nicaragua, one
key restriction is that a person wanting to open a bank
account needs to provide two personal references with
fixed telephone landlines, but in the entire Nicaragua
there are less than 150,000 fixed lines.

One important incentive by financial institutions on
remittance recipients is financial literacy. When people
are provided with tools on how to budget and formally
save, behavior modification changes through a
formalization of financial products.86

In sum, finance and access to financial resources
are cornerstone components of material asset
accumulation, which is a key element of economic
development. Migrant remittance family transfers
directly interplay with financial matters, further
highlighting the importance of integrating these flows
into formal financial activities.

PolIcY tools AND solutIoNs v.
to leveRAge FloWs FoR

Significant challenges such as poor financial access
(especially for recipients in rural areas), regulatory
environments that restrict participation in money
transfers limiting competition, and problems relating to
expensive remittance transfer costs persist. As a result,
migrants often invest informally and development
projects do not have expected impacts. Over all
trends, asset building is a key intersecting component
between remittances and development. Increases in
remittances lead to increases in the stock of savings
and other assets, but for the most part are informal.
The development policy lies in formalizing assets in
ways that they function as development leveraging
instruments. The formalization of assets resulting
from increases in disposable income as a byproduct
of growing inflow of remittance in a household brings
up questions and options for policy design and
implementation in key strategic development fields.

Table 4. Receiving remittances and Savings


Guatemala Nicaragua

Does not
save Save

Does not
save Save


27.5% 72.5% 55.2% 44.8%


Q28,332 Q39,964 C$49,125 C$69,594

Source: Orozco, Manuel. Financial literacy projects in
Guatemala and Nicaragua, 2010 and 2011.

As people receive more remittances, amounts of
savings among recipients also increase:

Table 5. Remittances received and amounts saved


Guatemala Nicaragua from USa

from costa


Under 1500 268 509.96 310.95

1500 to

336 729.63 419.65

2501 to

414 570.33 366.45

Over 3500 788 1,099.00 504.05

Source: Orozco, Manuel. Financial literacy projects in
Guatemala and Nicaragua, 2010, 2011.


The field experience about migration and development
shows that there are a range of tools or policy
instruments available to practitioners as the means to
bring change. The table below offers a summarized
perspective. This section reviews some of the policy
options (see table 6).

Product DesignA.

Financial product design is central to the success of
financial intermediation for remittance recipients. Its
production and distribution depend on three specific
components: product and service identification, design
of attributes and properties, and product marketing.
Tailoring and marketing products that meet the needs
of migrants and households receiving remittances is
central to an effective strategy that operationalizes the
leveraging of remittances for development.

Policymakers must know their target market before
designing financial services interventions. Moreover,
lessons learned from previous worldwide experiences
should be considered when designing new products.
Identifying the product to be offered also involves
careful selection of the partners to be involved which
can include collaboration among financial institutions,
government agencies and civil society to develop
access to the target population, and collaboration
with remittance service providers.

Financial educationb.
Financial Education has proven to be an efficient tool
to effectively build assets in a society.87 People who
receive appropriate tools that introduce principles and
concepts on budgeting and savings, and who are
also paid to advertise how to formalize their savings at
trusted financial institutions, improve their condition.
Financial education will improve the usability and
openness of financial products among remittance
recipients. Low levels of financial literacy reflected
in many people’s struggle to strike the right balance
between income and expenditure, a necessary first
step to build assets and attain financial independence.
Designing a financial literacy intervention requires
selecting the vehicle, methodology, content, audience,
and expected results of the program.

Regulations governing money transfers guarantee the
movement of funds through a licensed mechanism.
Regulation can have an important impact on the cost of
sending and especially on the geographic distribution
of remittance payout locations. For example,
some countries’ regulatory environments restrict
participation in money transfers for entities such as
microfinance institutions, which tend to have a good
rural presence where banks and remittance payout are
limited. Regulations can also limit competition in the

Table 6. policy instruments on remittances and development

policy instruments Objective Methods

Technical assistance Strengthen institutions and
address a particular policy need

Financial product design, research, training,
project formulation and evaluation

Communication and outreach Engage a policy community

Workshops, policy dialogues, visits, meetings

Funding facility Provide material resources to
achieve a concrete outcome

Loan, grant and investment schemes

Partnerships Collaborate with stakeholders on
mutual grounds

Cooperative agreements between
governments, diasporas, NGOs, financial
institutions, or other foreign governments

Regulation Enforce norms to benefit the
public good

Legal review and reform

Education Form needed skills among
remittance senders and

Financial education

1) New ThiNkiNg surrouNdiNg remiTTaNces aNd developmeNT

2) maximisiNg The developmeNT impacT of remiTTaNces

marketplace, which creates high costs of sending. In
most developing countries where nationwide banking
penetration is relatively minimal, access to payments or
other financial services is highly restricted and enjoyed
only by a minority of the society. Legal reform such as
outlaw exclusivity agreements could help strengthen
access to remittances and financial inclusion.

technological InnovationD.

Technology applications in development finance are
increasingly proving their validity as vehicles that ensure
financial access and asset building. Businesses and
policy-makers have found an important link between
remittances and various forms of technologies as the
means by which people can increase their lot with their
finances. A host of new remittance transfer methods
have been developed in recent years, such as mobile
phone transfers, card-based transfers, and Internet

Current technologies such as Card-based, Internet, and
mobile payment systems offer at least four advantages
to the remittance and financial industries: functionality,
innovated value-added competencies, business and
development impact, and cost effectiveness.

These technologies all require infrastructure to enable
the successful use of these technologies by end users.
Ensuring a deep and accessible payment network
that enables remittance recipients to use the money
on their card, in their account, or on their mobile
phone is essential to the success of any technology-
based model. The international donor community
has expressed interest in working on modernizing
payment systems adopting and adapting new
technologies. Governments can support both the tax
exemptions for importing POS devices and explore the
regulatory environment that can permit international
foreign currency transfers in a mobile device account
associated with a bank.



Adams, Richard (2004). Remittances and Poverty in Guatemala. World Bank Policy Research Working Paper No.
3418. World Bank.

Adams, Richard and John Page (2005). The Impact of International Migration and Remittances on Poverty.

Maimbo and Ratha (2005). Remittances: Development Impact and Future Prospects. The World Bank.

Beck, Thorsten and Augusto De la Torre (2006). The Basic Analytics of Access to Financial Services. World Bank
Policy Research Working Paper No. 4026.

IAD and IFAD (2007). Sending money home: Worldwide remittance flows to developing countries.

Millis, Bryanna, Manuel Orozco, and Zaki Raheem, (2008). Mining remittance data: practical considerations on
survey design and administration microreport #119.

Moser, Caroline (2007). Reducing Global Poverty: The Case for Asset Accumulation. Brookings.

OECD (2005). Improving Financial Literacy: Analysis of Issues and Policies.

OECD (2008). Financial Education and Awareness on Insurance and Private Pensions.

Orbe, Mauricio (2006). Capacidad de las Remesas. Inter-American Dialogue.

Orozco, Manuel with Fedewa, Rachel (2005). Regional Integration? Trends and Patterns of Remittance flows
within South East Asia. Inter-American Dialogue.

Orozco, Manuel (2005). Transnational Engagement, Remittances and Their Relationship to Development in Latin
America and the Caribbean. Institute for the Study of International Migration, Georgetown University.

Orozco, Manuel (2006). Conceptual considerations, empirical challenges and solutions in measuring remittances.
Centro de Estudios Monetarios Latinoamericanos (CEMLA).

Orozco, Manuel (2007). Estimating Global Remittance Flows: A Methodology.

Orozco, Manuel and Bryanna (2007). Millis. Remittances, competition and fair financial access opportunities in
Nigeria. Report commissioned by the United States Agency for International Development.

Orozco, Manuel. (2007). Migrant Foreign Savings and Asset Accumulation.

Orozco, Manuel (2007). Central America: remittances and the macroeconomic variable. Inter-American

Orozco, Manuel (2007). Worker Remittances and the Financial Sector: issues and lessons in the South Caucasus.
European Bank for Reconstruction and Development in cooperation with Bendixen and Associates.

Orozco, Manuel (2010). A Scorecard in the Market for Money Transfers: Trends in Competition in Latin America
and the Caribbean. Inter-American Dialogue.

Orozco, Manuel and Mariellen Jewers (2010). Skilled Diasporas: An Imagined or Real Community?

Orozco, Manuel, and Elisabeth Burgess, Nancy Castillo and Landen Romei (2010). Remittances and development:
Financial literacy in an international perspective. Inter-American Dialogue.

Orozco, Manuel (2010). Financial literacy projects in Guatemala and Nicaragua.

Orozco, Manuel (2012). The Money in Between, Migrant remittances and development in the global economy.

Peachey, Stephen, and Alan Roe (2006). Access to Finance: What Does It Mean and How Do Savings Banks
Foster Access? World Savings Banks Institute.

1) New ThiNkiNg surrouNdiNg remiTTaNces aNd developmeNT

2) maximisiNg The developmeNT impacT of remiTTaNces


Orozco, Manuel (2006). 67 Conceptual considerations, empirical challenges and solutions in measuring
remittances. Report presented before the Centro de Estudios Monetarios Latinoamericanos (CEMLA).

These estimates are based on surveys conducted worldwide by the author with information about the ratio 68
between annual remittances received and annual income.

Millis, Bryanna, Manuel Orozco, and Zaki Raheem (2008). 69 Mining remittance data: practical considerations
on survey design and administration microreport #119.

We used migration statistics applied to survey and money transfer data we have estimated the global flows 70
on a corridor by corridor basis for a total of 50,000 bilateral corridors worldwide producing an estimated
amount of US$411 billion. For further details, see, Orozco, Manuel (2007). Estimating Global Remittance
Flows: A Methodology. Washington, IAD and IFAD (2007). Sending money home: Worldwide remittance
flows to developing countries, Rome. Other sources cite lower volumes but acknowledge that their figures
may be about 50% of what they should be, see World Bank 2006. See also WB revisions to 2007 flows
estimated to 257 billion.

Orozco, Manuel. 71 The Money in Between, Migrant remittances and development in the global economy,
forthcoming, 2012.

Orozco, Manuel and Bryanna Millis (2007). 72 Remittances, competition and fair financial access opportunities
in Nigeria. Washington, DC. USAID. Orozco, Manuel with Fedewa, Rachel (2005). Regional Integration?
Trends and Patterns of Remittance flows within South East Asia. Washington, DC. Inter-American Dialogue.
Orozco, Manuel (2010). A Scorecard in the Market for Money Transfers: Trends in Competition in Latin
America and the Caribbean. Washington, D.C. Inter-American Dialogue.

Moser, Caroline (2007). 73 Reducing Global Poverty: The Case for Asset Accumulation. Washington, DC:


Assets are defined as stocks of human and material resources that contribute to wealth creation. Assets are 75
fixed (property) and liquid (cash).

Stephen and Roe (2006). 76 Access to Finance: What Does It Mean and How Do Savings Banks Foster Access?
World Savings Banks Institute: Brussels.

Beck, Thorsten and Augusto De la Torre (2006). 77 The Basic Analytics of Access to Financial Services. World
Bank Policy Research Working Paper No. 4026. Available at SSRN: <http://ssrn.com/abstract=934963>.

Adams, Richard (2004). 78 Remittances and Poverty in Guatemala. World Bank Policy Research Working Paper
No. 3418. World Bank, Washington, DC.

Adams, Richard and John Page (2005). 79 The Impact of International Migration and Remittances on Poverty,
in Samuel Munzele Maimbo and Dilip Ratha (eds.), Remittances: Development Impact and Future Prospects.
Washington DC: The World Bank, pp. 277-306.

Orbe, Mauricio (2006). 80 Capacidad de las Remesas. Report commissioned by the Inter-American Dialogue,
Quito, Ecuador.

Orozco, Manuel, and Elisabeth Burgess, Nancy Castillo and Landen Romei. (2010). 81 Remittances
and development: Financial literacy in an international perspective. Inter-American Dialogue,
Washington DC. Paper presented at the Inter-American Development Bank’s Multilateral Investment
Fund’s “Remesamericas 2010, Remittances for the Future,” in Mexico City, May 6, 2010.
Orozco, Manuel (2007). Migrant Foreign Savings and Asset Accumulation. Orozco, Manuel et al. (2005).
Transnational Engagement, Remittances and Their Relationship to Development in Latin America and the
Caribbean. Institute for the Study of International Migration, Georgetown University.


Orozco, Manuel (2007). 82 Central America: remittances and the macroeconomic variable. Washington, DC:
Inter-American Dialogue.

Orozco, Manuel (2007). 83 Worker Remittances and the Financial Sector: issues and lessons in the South
Caucasus. Report commissioned by the European Bank for Reconstruction and Development in cooperation
with Bendixen and Associates.

Orozco, Manuel (2005). 84 Transnational Engagement, Remittances and Their Relationship to Development in
Latin America and the Caribbean. Institute for the Study of International Migration, Georgetown University.
This section is reproduced from the report section 4b of this report.

The data analyzed here is based on intake evaluation forms performed on 12,000 and 9,000 remittance 85
recipients in Guatemala and Nicaragua respectively. These individuals received financial advising as part of
a worldwide program on financial literacy conducted in Moldova, Georgia, Azerbaijan, Paraguay, and the
Dominican Republic.

Orozco, Manuel, and Elisabeth Burgess, Nancy Castillo and Landen Romei (2010). 86 Remittances and
development: Financial literacy in an international perspective. Inter-American Dialogue, Washington DC.
Paper presented at the Inter-American Development Bank’s Multilateral Investment Fund’s “Remesamericas
2010, Remittances for the Future,” in Mexico City, May 6, 2010.

OECD (2005). 87 Improving Financial Literacy: Analysis of Issues and Policies. OECD (2008). Financial Education
and Awareness on Insurance and Private Pensions.

1) New ThiNkiNg surrouNdiNg remiTTaNces aNd developmeNT

2) maximisiNg The developmeNT impacT of remiTTaNces


Access to reliable and accurate data is taken for
granted in many industries and disciplines. However,
this is not the case in the remittances industry. There
are challenges in the areas of gathering macro
level data, which has an impact on the ability to
make informed policy decisions to fully harness the
development potential of remittances. In addition,
and of equal importance, is the lack of transparency
that the user of remittances experiences in trying to
make their transactions. This article focuses, after an
initial exploration of policy implications, mainly on the
impact that lack of transparency has on consumers
and presents examples on some of the solutions that
have been introduced in a number of countries to
improve access to information. Where available results
from these initiatives are included.

Access to AccuRAte II.
RemIttANces Is vItAl FoR
PolIcY mAkeRs

Remittances as a phenomenon has attracted significant
attention over the last decade or so. Yet, there is still
a lack of quality and consistent data around the world
on many of the fundamental indicators for remittances.
For a policy maker it is vital that they understand such
relatively basic measures as:


The size of flows into or from a country•

Which countries does the money come from and •
how much comes from each country

Which countries does the money go to and how •
much goes to each country

What are the costs that are associated with each •

How much money is moved through informal •


What is the money that is received used for•

Which methods are used to move money•

What are the factors that inhibit the efficient •
operation of the remittance market.

There are many other areas where detailed information
would be helpful to policy makers but currently it is
clear that access to the quantitative measures list
above would be extremely helpful to policy makers.
The quality of information is extremely variable and
inconsistent. An example would be in the case
of Ghana where the World Bank estimates that
remittances to the country were $114 million88 in 2009,
whilst the Bank of Ghana in a separate estimate puts
the number at $1.9 billion.89

It is not the purpose of this paper to go into the reasons
for the lack of available data. The World Bank has a
work stream under the Global Remittances Working
Group to develop enhancements in this area but
undoubtedly remittances are often categorized and
recorded in different areas of a country’s Balance of
Payment reports. In many countries it is simply not
captured. There are, however, a number of examples
where good quality data is captured. An example
of this would be Russia where the Central Bank of
Russia publishes, on a quarterly basis, the volumes
of remittances sent into and out of the country. This
data includes where the money is sent to or received
from.90 Further examples would be the State Bank of
Pakistan and Bangladesh Bank.

Without access to the types of information detailed
above it is challenging for policy makers to make
decisions that will help both the senders and receivers
of remittances directly but also to introduce policies
that will harness the financial power of these flows.
If regulators are able to understand which methods
are used by remitters, in particular how much money
flows informally,91 and the respective costs, they

2. tHe vItAl Role oF INFoRmAtIoN IN eNHANcINg tRANsPAReNcY

By Leon Isaacs
Managing Director – International Association of Money Transfer Networks (IAMTN)

Chief Executive Officer - Developing Markets Associates Limited (DMA)


may be able to introduce policies that will encourage
consumers to transfer money by other means – the
Pakistan Remittances Initiative (PRI) is a good example
of this. (See box 4).

coNsumeRs Is vItAl

If information for policy makes is important then it is
critical for consumers. For remitters sending money
home to their family is the most important, the largest
and the most regular payment that they make. Many
remitters are sending home up to a third of their
income on a regular basis.

They frequently have a limited range of choices
and within those choices there is a limited range of
information available to them to make the best decision
that meets their individual circumstances.

It is, therefore, not surprising the General Principles on
Remittances92 has Transparency as the first of the five
principles. Key elements of this principle state:

‘Transparency in Remittance services, combined •
with adequate consumer protection helps to foster
a competitive and safe market for remittances.’

‘It is useful for senders (and receivers) to be able to •
have full information about the service in advance’

‘Particularly relevant is transparency about the total •
price and speed of the service’.93

‘At the moment the market for remittances is not •
always fully transparent’.

‘Even if individual Remittance Service Provider •
(RSPs)94 are fully transparent it may not be easy
for end users to compare the price of different

It is vital that consumers have full information about
the service that they are buying before they complete
the transaction. There are some good examples of
transparency in the remittances market place and the
majority of operators are fully transparent but in many
markets it is still not easy for consumers to compare
the different operators prices and product features.
The following sections will highlight some existing
initiatives that aim to improve transparency.

RemIttANce customeR Iv.

In early 2008 the UK Remittances Task Force (UKRTF)95
developed and issued a customer charter. This
document, presented below, was introduced following
consumer research and was directly prompted by the
publication of the General Principles of Remittances.

The aim of the Charter was to provide a tangible
commitment to consumers by the money transfer
industry so that where remitters see the Charter
symbol they know that they will receive a certain
minimum level of service and transparency. This was

box 4. pakistan Remittances Initiative

In late 2009, the Government of Pakistan put in place an incentive scheme for the remitters and beneficiaries
whereby the Central Bank reimburses USD 6.50 per transaction to the banks in Pakistan provided that the
remitter and the beneficiary should not be charged any remittance fee. The distribution bank and the foreign
entity share the reimbursement amount as per their mutually agreed terms.

The aim of the scheme was to attract more transactions to enter Pakistan through the formal financial
system because Pakistan is a country where informal service operators account for significant volumes of

Since the service began Pakistan has been the fastest growing receive market and total transaction volumes
have increased from USD 8.7 billion for the fiscal year to June 2009 to a projection of in excess of USD 11
billion for the 12 months to June 2011. This would represent an increase of over 23 percent for the latest
fiscal year.

In a short space of time the service has proved to be remarkably successful in terms of generating increased
transactions through the formal sector although clearly there is a price to be paid by the government to fund
the scheme.

Source: N Bhurgri (2010). Salient Features & Benefits of PRI Scheme

bOX 4 a VERIfIER paUla

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2) maximisiNg The developmeNT impacT of remiTTaNces

an industry driven initiative which had the support of

The Charter provides consumers with a written
explanation of the information that they will be provided
with prior to agreeing to undertake a transaction. This
includes information on the fee and foreign exchange
rates that will be provided, how long it will take for the
money to arrive, what the receiver has to do to collect
the money and how to make a complaint if something
goes wrong.

It then goes on to describe what the customer will
receive in writing after the completion of the transaction.
This covers the items that have been provided before
the transaction was completed as well as providing a
unique transaction reference number and the amount
that will be collected in the currency of the receiver.

The specific terms of the charter were prompted by
the (proposed96) consumer protection elements of
the Payments Services Directive (a pan-EEA piece
of legislation). In a sense, therefore, the Charter was
introduced in anticipation of a regulatory change.
(See picture 1).

Agreeing on the terms that were eventually included
in the charter proved to be a long process. In
particular the banks, who are not the main senders of
remittances from the UK, were reluctant to commit to
a number of the clauses, especially those concerning
foreign exchange rates. Ultimately agreement was
reached although the conditions were somewhat
diluted in comparison to the terms contained in the
original draft.

The charter was translated into eight different languages
to cover the majority of the Diaspora communities in
the UK that transfer money home.

Adoption of the charter is voluntary and the process
is currently policed on a self- certification basis.
This means that oversight is limited. However, each
company that wishes to join the charter scheme must
be registered or authorised by the Financial Services
Authority (to ensure that they are operating legally). The
overseer of the charter scheme monitors complaints
received from the public to monitor compliance with
the terms and conditions.

The UK has around 35,000 locations that offer
remittance services and since its launch over 50% of
the money transfer outlets in the UK have signed up
for the charter.97 Providers that have signed up to the
Charter include some of the largest operators, such as

MoneyGram, Coinstar and Ria Envia, as well as small
individual operators. Due to the voluntary nature of the
scheme there is one large company that decided not
to join the scheme and all of the banks opted out.
However, the absence of the banks has not hindered
the effectiveness of the Charter as the market share of
the main banks in the remittances market is minimal.

key learnings

Engage with consumer groups during the design •
process for a charter

Develop wording that meets the needs of the •

Ensure the contents of the charter are relevant, •
deliverable and written in an easy to understand

Obtain the buy-in of the providers at as early a •
stage as possible

Self-certification, whilst economically viable, is not •
the most suitable method to achieving consistency
of compliance across all operators

Publicising the existence of the charter is extremely •

At the current time this appears to be the only
Customer Charter Scheme that exists in the global
market but there is no reason why a similar scheme
should not be introduced.

It should also be noted that the Payments Services
Directive (PSD)98 came into law after the Charter had
been introduced and therefore the clauses in the
Charter are now a legal requirement for all operators
throughout the European Economic Area who are
transferring money from one EEA country to another.
It is therefore difficult to determine the full impact of the
Charter. Nonetheless, its existence is still considered
valid as a marketing tool to provide confidence to

PRIce comPARIsoN WebsItesv.

Another tool that promotes transparency and provides
valuable data is a remittance price comparison site or
database. This section outlines the benefits of well
run price comparison sites and provides a detailed
example of one of these.

Whilst these can be a valuable tool as they are easily


picture 1. UK Remittances customer charter

1) New ThiNkiNg surrouNdiNg remiTTaNces aNd developmeNT

2) maximisiNg The developmeNT impacT of remiTTaNces

accessible via the internet it needs to be emphasised
that they are only part of wide customer communication
to remitters as many of them do not have access to
the internet and so can not view the information in that
format. The actual information in the database can be
distributed in a number of formats including by leaflets
or via SMS messaging.


For consumers:

Makes it much easier to shop around and compare •
the service offerings of different providers

For regulators, governments and development

Can help to bring more transparency to the market •

Can lead to a reduction in prices. Often, simply the •
act of publishing directly comparable pricing data
can lead to some RSPs cutting their prices so as to
appear more competitive.

Can be used as a tool for assisting with financial •
literacy for consumers

Can assist with encouraging more consumers to •
use the formal channels. Highlights the fact that
prices through formal channels may be lower
than previously understood by consumers. One
of the key reasons for using informal channels is
that they are often perceived to be cheaper than
formal channels; the publication of information that
contradicts this impression can be a useful tool in
meeting this challenge.

For the Private sector:

It helps to demonstrate the competitive advantage •
of a particular service provider. This may be shown
through having the cheapest price, the widest
network, the fastest service etc.

In some countries that have such price comparison •
websites, an increasing number of providers are
using this online platform to notify the public of new
offers and network expansions etc., recognising
the key role they can play as a contact point with
existing and potential customers.

tHe sItuAtIoN toDAYvII.

A growing number of countries are currently offering
remittance price databases and these are listed below.
Many of these began operations more than two years
ago and were established independently of each
other. Therefore the methodologies and approaches
that were used were different with some being more
consumer focused and transparent than others. For
example, some of the sites do not collect or show
foreign exchange rates and therefore the transparency
value of the site is more limited. In order to ensure a
more consistent and customer focused approach, the
World Bank through the Global Remittances Working
Group has developed some guidelines for remittance
price databases and has also introduced a certification
structure for sites that meet these guidelines. World
Bank approved sites are able to display a certification
logo. (See box 5).

There are currently three sites that meet the criteria:
Australia and New Zealand, Italy and Central America.
It is anticipated that more countries will introduce their
own sites and that all new sites will be compliant with
the global standards. (See table 7).

It is useful to illustrate how these sites operate by taking
the example of www.sendmoneypacific.org. The site
was started in 2009 at the initiative of the Australian and
New Zealand governments. They wished to implement
a tool that could be used as a focal point of activities
to reduce the cost of remittances from these countries
to eight Pacific Island nations. The flows were some
of the most expensive in the world and remittances to
receiving countries such as Samoa and Tonga make
up a significant portion of their GDP. Therefore any
activities that could help lead to a reduction in price
were to be widely welcomed.

Funding for the site comes from the development
arms of the Australian and New Zealand governments
and the design, maintenance and data collection were
outsourced to a private sector consultancy (Developing
Markets Associates Limited).

The site consists of a number of separate areas. The
focal point of the site is the ‘Compare costs’ section
which contains the data for sending money from
Australia or New Zealand to one of the Islands. Data
is collected for two price points ($200 and $500). It
is collected on a monthly basis and is obtained by
mystery shopping the main operators for each country.
This method is used in order to ensure that the data
contains a picture that is as representative of the true
consumer experience as possible. The ‘Compare


costs’ page shows information on:

The operator •

The method of transfer•

The fee charged•

The exchange rate•

The total cost to the consumer•

How much is received in the receiver’s currency•

How long it takes to arrive; and,•

Where it is available•

It is possible for the person viewing the site to sort
the data by any of these variables depending on what
their requirements are.

The site (see picture 2) is much more than purely a
price comparison tool. It is a vital information source
for the Diaspora communities in the host countries
and is used by governments and community groups
alike to provide information for the community. For
instance, picture 3 shows one of the pages in the
community information section for Samoa. The site
has been used to display information ranging from the
times of church services to news from Samoa.

box 5. World bank Requirements for national remittance price databases99








•The datamust be gathered by an institution, company or entity totally independent from themarket
industry (RSPs), with a transparent methodology designed to avoid any possible conflict of interest

•A mystery shopping process (either by phone or in person) should be used, where necessary and




Optional elements include:




transaction should be available

• Interbankexchangerateor themostcommonexchangerateapplied inagivencountryat the timeof
undertaking the survey


1) New ThiNkiNg surrouNdiNg remiTTaNces aNd developmeNT

2) maximisiNg The developmeNT impacT of remiTTaNces

In New Zealand a section of the site is also used for
financial education activities. These include specific
details on certain financial products that are available
to the migrant groups in the country.

Ultimately the site or database is primarily a tool that
contains data that can then be used for a variety of
purposes. It can also be used as a catalyst for other
outreach and community activities. Picture 4 shows
how the information has been turned into a leaflet,
(produced in English and in some instances Diaspora
languages) which also contains financial literacy
information. This was then distributed at markets and
specific events for the Diaspora.


In relative terms, consumer price databases are a

relatively new innovation and there is limited research
on their effectiveness. It is not possible to isolate the
impact that the introduction of one of these databases
has compared to other initiatives that have been
aimed at reducing prices. However, analysis has been
undertaken in three cases to compare the change
in pricing between the launch of a database and the
current time.

the united kingdomA.

A website (www.sendmoneyhome.org) was started by
the Department for International Development in 2005.
Although this site no longer offers objective pricing for
remittance services another site, www.moneymove.
org, does. Between 2005 and 2010 the total prices
to consumers have fallen by 49.7% across the six key
markets that were originally measured.100

Table 7. list of Remittance price comparison sites

Sending country Website address comments

Australia www.sendmoneypacific.org Has World Bank approval

France www.envoidargent.fr Does not collect FX rates

Germany www.geldtransfair.de Does not collect FX rates

Italy http://www.mandasoldiacasa.it Has World Bank approval

Netherlands www.geldnaarhuis.nl Collects FX rates but does not calculate the cost to the customer

New Zealand www.sendmoneypacific.org Has World Bank approval

United Kingdom www.moneymove.org Collects FX rates and calculates the cost to the customer

Central America www.enviacentroamerica.org
Has World Bank approval. Is the only site that is run by
a receive area – it is managed by CEMLA and covers six
receive markets

Worldwide Remittanceprices.worldbank.org World Bank price database covering two hundred corridors that is updated twice a year


picture 2. Screen shot of ‘compare costs page’ on SendMoneypacific

New Zealandb.

The www.sendmoneypacific.org site was launched in
March 2009 and after 2 years, prices had fallen by
19.78% since their launch.


The www.sendmoneypacific.org site was launched in
March 2009 and after 2 years, prices had fallen by
10.84% since their launch.

In the cases of Australia and New Zealand there were
very few other activities at the time and therefore a
high proportion of the reduction can not be attributed
to factors other than the existence and promotion of

keY lessoNsIX.

Compliance with the global standards on price •
databases ensures that there is true transparency

The databases are one component of a larger •

The production of databases has had a positive •
impact on remittance price reductions

Nearly all of the initiatives have been funded by the •
public sector and a business case for running these
databases on a commercially viable basis has yet
to be developed in the remittances space

The production of a database is a visible sign that •
governments are committed to making a difference
in the remittances space.

PolIcY RecommeNDAtIoNsX.

1) New ThiNkiNg surrouNdiNg remiTTaNces aNd developmeNT

2) maximisiNg The developmeNT impacT of remiTTaNces

picture 3. pacific communities page

picture 4. community based leaflet


The following policy recommendations should be

1. Actions should be taken to ensure the more accurate
development of data on remittances. These should
include measures to capture both quantitative and
qualitative data.

2. Policy makers should introduce all measures
possible that enhance transparency. These may

a. Working on the development of a remittance
customer charter. This should be a collaborative
process between the public sector, the private
sector and remitters.

b. The development of a remittances price database.
This should be constructed in compliance with
the World Bank requirements and should be
relevant to the key corridors that are present in
the country involved

c. Using remittance price databases as a key
component in a broader initiative around financial
inclusion and consumer education.


Obtaining better quality, broader and deeper

information is vital for all stakeholders. Policy makers

need it in order to achieve a greater understanding

of the whole remittances market so that it can inform

appropriate policies. Consumers need it so that they

can make the most informed choices and select the

remittances product that meets their needs.

By providing this information the private sector benefits

as a whole because it helps to build up trust in the

industry. Individually the private sector entities benefit

as this allows them to demonstrate the competitive

elements of their customer proposition.

There are a number of simple tools that can be used

to produce greater transparency and these include

Customer Charters and remittance price databases.

1) New ThiNkiNg surrouNdiNg remiTTaNces aNd developmeNT

2) maximisiNg The developmeNT impacT of remiTTaNces


Ratha (2003). Why should we care about workers’ remittances? And what should we do?

World Bank and Bank for International Settlements (2007). General Principles on Remittances.

World Bank (2011). Migration and Remittances Fact Book 2011.



World Bank (2011). 88 Migration and Remittances Fact Book 2011.

Bank of Ghana Website: www.bog.gov.gh.89

See http://www.cbr.ru/eng/statistics/print.aspx?file=CrossBorder/.90

Informal remittances are those which do not flow through regulated businesses. These are estimated to 91
increase the total global flow of remittances by between 30 and 50%. See Dilip Ratha (2003). Why should
we care about workers’ remittances? And what should we do?

World Bank and Bank for International Settlements (2007).92 General Principles on Remittances.

The total price includes the fee, the foreign exchange rate and any charges paid by the receiver.93

This is a generic term for any business that makes remittance payments and includes banks, money transfer 94
companies, mobile payments operators, etc.

This was a public-private sector partnership whose membership comprised of remittance companies, banks, 95
payment systems and consumer groups. The organisations operational expenses were provided by DFID.

At the time that the charter was produced the PSD was still at its consultation phase. The PSD eventually 96
came into effect on 1 November 2009.

Seymour Fortescue (2010). 97 UK Remittances Task Force report 2010.

Directive 2007/64/EC, published on 5 December 2007.98

See http://remittanceprices.worldbank.org/~/media/FPDKM/Remittances/Documents/99

The six countries were China, Bangladesh, India, Ghana, Kenya and Nigeria.100

1) New ThiNkiNg surrouNdiNg remiTTaNces aNd developmeNT

2) maximisiNg The developmeNT impacT of remiTTaNces


Established in 1874, the Universal Postal Union
(UPU) is the principal forum for cooperation between
governments, Posts and other postal sector
stakeholders. A specialized agency of the United
Nations since 1948, the UPU now has 191 member
countries. The UPU international postal money order
(MO) network was created in 1878, when the first
intergovernmental treaty on international postal MOs
was signed by the organization’s member countries.

PostAl PAYmeNt seRvIces II.

As a United Nations specialized agency, the UPU is
a key player in efforts to implement the Millennium
Development Goals set out in United Nations General
Assembly resolutions A/RES/59/220 (2004) and A/
RES/60/1 (2005). These resolutions are aimed at
reducing poverty and the digital divide, and reaffirm the
need to adopt policies and take measures to reduce
the cost of transferring migrant workers’ remittances
to developing countries; they reinforce the efforts of
governments and stakeholders in this regard.

Over the past 10 years, the UPU has been transforming
the traditional international paper and telegraph-based
postal payment network into a worldwide electronic
payment network equipped with state-of-the-art
technologies for the exchange of electronic postal
payments between postal operators. Consequently,
the development and modernization of this market
segment in support of the development and promotion
of a worldwide electronic postal payment network have
become key strategies of postal operators worldwide,
and represent priority activities on the UPU’s agenda.
The objectives of the UPU are as follows:

make the postal payment services offered through •
the electronic network affordable, secure and
accessible to all citizens of all UPU member

contribute to the development of account-based •
financial services and make them accessible to all
citizens of UPU member countries;

offer all member countries the opportunity to •
modernize postal payment services and increase
access to those services as well as improving their

apply the international regulations designed to •
combat money laundering and the financing of

help to achieve the Millennium Development Goals •
and to combat poverty.

Facilitating the transfer of remittances between
migrant workers and their families has become one
of the UPU’s biggest priorities. The costs associated
with international money transfers remain high, with
charges of up to 20% levied on transactions in some
cases (World Bank, 2011). With an average sum of 200
USD being transferred, it is important for the people
sending these sums to benefit from the best possible
conditions. The UPU is offering a solution based on its
member countries’ wealth of experience in this area
and the strength of its network. The organization is
also convinced that access to secure, affordable postal
payment services via the electronic postal network will
help discourage the emergence of parallel networks,
which can lead to money laundering and the financing
of terrorist activities. Priority is being given to helping
developing countries develop their capability to offer
electronic money transfers in all post offices, including
those in rural zones.

3. RemIttANces AND FINANcIAl INclusIoN:
tHe Role oF tHe uNIveRsAl PostAl uNIoN (uPu)

By Serguei Nanba
Postal Financial Services Coordinator,


Nils Clotteau
Partnerships and Resource Mobilization Expert



tHe uPu RemIttANces III.

A multilateral FrameworkA.

Since 1878, the UPU has developed principles for
the exchange of international postal MOs, which are
now enshrined in an international treaty: the Postal
Payment Services Agreement and its Regulations.
These provisions enable exchanges through the UPU’s
worldwide electronic postal payment network. Among
its key elements are interoperability, transparency and
customer protection, as well as safeguards against
money laundering and the financing of terrorism.

International Financial system b.

The UPU has created a network and family of
software applications, collectively referred to as IFS,
the International Financial System.101 The UPU has a
specialized Postal Technology Centre which manages
a secure and legally protected electronic network and
a family of software for electronic data interchange
(EDI) and processing of postal payment information
between postal operators.

In order to develop the worldwide electronic payment
network, the UPU continuously strives to guarantee,
under the terms of the Postal Payment Services
Agreement and on a non-exclusive basis, the neutrality
of the organization as regards the technological
choices to be made with a view to facilitating and
maintaining the interoperability and interconnection of
the UPU’s networks and systems with other networks
and any strategic partnerships.

Software and networks are the joint property of all
UPU members, and development costs are shared
among all. The aim of the UPU is to offer high quality
international postal payment services at the lowest
possible charges. The installation and use of IFS for
electronic postal payments allows postal operators to
reduce by up to 50% the tariffs to be paid by customers.
This is influencing the international remittance market
to the extent that other remittance operators are also
reducing their tariffs.

The know-how and expertise of the UPU in building
the worldwide electronic postal payment network take
into account the following parameters:

The UPU is the keeper of treaty obligations and •

regulations and is the ideal focal point for creating
and managing a multilateral agreement for the
worldwide electronic postal payment network.

The information sent through the UPU network is •
fully secured and is confidential. The interests of
the users, both senders and beneficiaries, are fully

The UPU has developed a quality control system •
(QCS), which forms an integral part of the system.
The QCS includes a global website for accessing
statistics and performance and quality measurement
reports. It also has a track and trace capability.

All types of transactions can be processed (cash-•
cash, cash-account, account-cash, account-
account). For each type of transaction, the system
can support two different speeds of processing,
according to the service guarantee offered by
the postal operators to their customers. Postal
operators are being encouraged to help customers
direct funds received into savings and more
productive investments, including the development
of microfinance.

The UPU systems also come with a complete •
domestic and international accounting module.
In addition, a comprehensive set of reports is

The UPU operates a 24-hour, five-day-a-week •
helpdesk, along with a professional service team
with a regional presence.

The UPU is developing best practices intended to •
help the postal operators promote the service to all
citizens and small and medium-sized enterprises.

clearing and settlementc.
Within the UPU multilateral framework, ensuring
secure transfers and payments as well as settlements
between designated operators is a top priority. New
rules to ensure the sound functioning of financial
relationships between postal operators have been
defined in the UPU Acts. Based on these rules,
a system to automate clearing and settlement of
accounts between operators on the network is
currently being finalized (start of production planned
for January 2012).

oNe eXAmPle oF uPu Iv.
suPPoRt to DeveloPINg

1) New ThiNkiNg surrouNdiNg remiTTaNces aNd developmeNT

2) maximisiNg The developmeNT impacT of remiTTaNces


Posts have the world’s largest physical network, with
a total of 660,000 post offices (UPU 2009). According
to a World Bank (2006) study, there are almost twice
as many post offices and postal agencies (500,000) as
commercial bank branches (275,000) in the developing

In Sub-Saharan Africa, there are currently 14,412 post
offices (UPU 2008), compared with about 10,000 bank
branches.102 A UPU study (Ansón and Toledano 2008)
showed that only 19% of post offices were located in
the three biggest cities, leaving more than 80% of post
offices in the region’s many small and medium-sized
towns and rural areas, where 82.5% of the population
lives. In contrast, banks focus on cities with denser
populations believed to be more interested in financial

The experience of Brazil’s Banco Postal shows that
focusing on rural areas and small and medium-sized
towns, where formal banking has been unavailable,
can be a winning strategy for Posts. At the start of
the Banco Postal project, between 2002 and 2006,
agencies were established primarily in these locations.
This approach proved successful in terms of profits,
and also benefited the more traditional postal business
with a 100% increase in foot traffic in rural post offices
where Banco Postal services were available (PlaNet
Finance 2010). Banco Postal had a tremendous
impact in terms of financial inclusion (Ansón and
Bosch Gual 2008): half of the total savings of Banco
Postal were held in 50% of the poorest municipalities,
which accounted for less than 30% of the population.
Also, 25% of Banco Postal’s loans and microloans
were granted in 20% of the poorest municipalities,
where only 10% of the population lived. This means
that savings collections in these communities have
been redirected through small loans in favour of local
economic development.

The UPU is currently experimenting with a similar
approach in western, eastern, and central Africa.
Since 2006, the UPU, with the support of the French
Post, has helped 20 Sub-Saharan countries develop
money transfer services. Because of limited financial
resources, postal operators in these African countries
initially focused on larger cities where more business
was expected. This, however, had mixed results, as
the ser¬vices offered faced competition from both
external and internal sources. Clients in urban areas

have many options for transferring money. First,
in larger cities, the total number of bank branches
exceeds the number of post offices. Furthermore,
money transfer companies have pre-existing
relationships not only with banks but also with a wide
array of shops and small businesses. Meanwhile, most
Posts in Sub-Saharan Africa have signed agreements
with various money transfer partners. Some of them
require Posts to sign exclusivity arrangements.
“These agreements effectively “lock” more than half
of all available payout locations” (IFAD, 2009). They
cover post offices in locations such as small towns
and rural areas, even though these partners are much
less likely to deploy the service there. This situation
limits competition, keeps prices artificially high, and
results in Posts not being able to develop their own
electronic MO service. Advocacy efforts are being led
by various international organisations to ensure that
such exclusivity arrangements are banned.

To address these issues, the UPU partnered with the
French Post and the International Fund for Agricultural
Development (IFAD) to launch a pilot programme in
six West African countries (Benin, Burkina Faso, Mali,
Mauritania, Niger and Senegal). The programme’s
objective was to develop a postal money transfer
service, called MEI,103 in the rural areas and smaller
towns of these countries. The six countries have a total
of 510 post offices, 404 (79%) of which are located
in rural areas.104 In 2009 the project connected 355
rural post offices, either directly by Internet connection
(when available), or through the establishment of
call centres and the use of phones or faxes. Under
the programme, MOs can be paid within two days,
and much more quickly (in a few minutes) if both the
sending and the paying post offices were online. Within
the framework of the project, procedures were also set
up to facilitate cash management, and a number of
joint marketing activities were conducted among the
six participating countries and the French Post. The
pricing of the services is listed in table 8A and 8B.

Rural post offices have started issuing and receiving
MOs. Furthermore, Gabon, which attracts a number of
West African immigrants, is acting as a development
engine within the region, issuing a significant number
of MOs to France, the pilot countries, and other African
countries (most notably Cameroon and Togo).105
This shows that an operator that has sufficiently
developed its capacities and has good leadership
and governance capability can seize remittance
development opportunities.


Table 8a. and table 8b. pricing of remittance services – pilot programme in West africa

Table 8a

france to Sub-Saharan africa:
Range in EUR (as of December 2009) cost in EUR cost as % at maximum of the range

0–100 8 8

100.01–200 12 6

200.01–300 15 5

300.01–750 20.5 3

750.01–1,500 27 2

More than 1,500 35 n.a.

Table 8b

between Sub-
Saharan african
countries, in EUR

(as of august 2010)

cost in EUR
cost as % at

of the range

cost as % of annual
per capita income

in Niger106

cost as % of annual
per capita income

in Senegal

0–152 6 4.01 2.41 0.81

152–305 9 3.00 3.62 1.21

305–457 12 2.67 4.82 1.62

457–610 15 2.50 6.03 2.02

610–762 18 2.40 7.23 2.42

762–915 21 2.33 8.44 2.83

915–1,067 24 2.29 9.64 3.23

1,067–1,220 27 2.25 10.85 3.63

1,220–1,372 30 2.22 12.06 4.04

Source: UPU, 2009.
n.a. = not applicable.

1) New ThiNkiNg surrouNdiNg remiTTaNces aNd developmeNT

2) maximisiNg The developmeNT impacT of remiTTaNces

In Burkina Faso, we used data from 2009107 and
separated the issue and payment of international MOs
between the two biggest cities, Ouagadougou and
Bobo-Dioulasso (urban), and the rest of the country
(which for this analysis can be considered rural). The
results are summarized in table 9.

A number of interesting results appear:

Around 90% of international MOs sent to other •
countries are concentrated in the two biggest cities
of Burkina Faso.

“Rural” areas (that is, those outside major cities) •
account for 35% of the number of MOs paid and
40% of the total amount paid.

The average amount sent in urban areas (425 EUR) •
is greater than that sent in rural areas (303 EUR).
For those amounts, the commission paid by clients
is, respectively, 2.82% and 2.97% of the amount

The average amount paid in urban areas (412 EUR) •
is lower than that paid in rural areas (498 EUR). For
those amounts, the commission paid by clients
in the sending countries is, respectively, 4.98%
and 4.12% of the amount sent (if from France), or
2.91% and 3.01% (if from any Sub-Saharan African

uPu cooPeRAtIoN v.

The project with IFAD in West Africa had various
positive results:

Equipment was purchased, installed and tested in •
rural post offices, enabling the connection of 355
post offices to the UPU’s worldwide electronic
payment network.

Secure postal procedures were implemented in •
rural areas for the payment of MOs. Accounting
and cash management procedures were also set

Traffic in 2010 increased by 104% compared with •

Tariffs were reduced by 30 to 50%.•

Encouraged by this first positive experience, the UPU
and IFAD sought ways to extend their cooperation into
other regions. Two new projects were approved in late
2010; they will involve the development of postal and
social payment services in seven countries in Asia-
Pacific and Central Asia.

The UPU is also receiving attention and support from
various international organizations for the work it
undertakes in favour of facilitating electronic money
transfers. Organizations such as the World Bank and
the International Organization for Migration support
UPU electronic payment development programmes.
The cooperation with the World Bank will further
develop in 2011 with joint capacity-building activities
to be led in Sub-Saharan Africa.

PostAl FINANcIAl seRvIces: vI.

Table 9. Distribution of MO flows and amounts, burkina faso

Ouagadougou – bobo-Dioulasso Rest of the country

MO sent/total MO sent/total MO sent/total MO sent/total

Number of
MO amount

Number of
MO amount

Number of
MO amount

Number of
MO amount

86% 89% 65% 60% 14% 11% 35% 40%


amount EUR

amount EUR


amount EUR

amount EUR

- 425 - 412 - 303 - 498

Source: UPU and SONAPOST (2010).


tHe keY to FINANcIAl

The activities led by the UPU in the field of remittances
are a part of the solution to foster financial inclusion
through postal networks. Other important activities
include linking the provision of remittance services
with account-based services to facilitate savings. UPU
research developed since 2008 shows that Posts are
already key actors in the field of financial inclusion.

Many Posts are leveraging their physical networks to
further develop their financial services business, which
generally consists of basic savings and payment and
remittance services. This no-frills approach, combined
with Posts’ accessibility, has generated a high level
of customer trust in Posts – trust that proved a key
success factor during the recent global economic and
financial crisis. In Switzerland, for example, total savings
deposited by customers at post offices increased by
69% in two years, from 48.3 billion CHF on average in
2008 to 73.3 billion in 2009, and 81.6 billion in the first
half of 2010 (PostFinance 2009, 2010).

Postal financial institutions tend to attract a high
proportion of low- and middle-income customers.
Many immigrants hold postal savings accounts and
use them to remit money to their countries of origin.
One common attribute of postal financial services
seems to be their high level of financial inclusion. For

The French Post established a banking subsidiary, •
La Banque Postale (LBP), which has almost 10
million account holders, most of whom use LBP as
their main bank. In contrast to accounts opened
by traditional banks, applications for LBP’s Livret
A, a personalized microsavings account, cannot
be refused; these accounts offer free transactions
from 1.50 EUR (Kugemann 2009).

Correios, the Brazilian postal operator, acts as an •
agent for Bradesco, a private bank. Together, they
launched Banco Postal, a postal financial services
business, which leverages the Post’s physical
net¬work to promote access to financial services.
From 2002 to 2010, Banco Postal brought basic
savings accounts to 10 million citizens, most of
whom did not previously hold bank accounts
(Kugemann 2009).

India Post, with its 155,000 post offices (139,000 •
located in rural areas), has adopted a multi-agent

banking approach: it distributes financial services
on behalf of several partner institutions thus acting
as an agent for each of them, in addition to the
development of its own savings accounts. Either
directly or through various partnerships, 220 million
savings accounts had been opened with India Post
by the end of 2009 (Kugemann 2009). The Post is
“the largest micro insurance player in the 13 billion
USD Indian life insurance game” (India Knowledge
Wharton 2011), and also processes an average of
100 million MOs per year, most of them migrants’

Posts are depended on for payments (for example, •
invoice payments and social benefits) and
remit¬tances. According to UPU research (Ansón
and Toledano 2010), 1.5 billion people worldwide
currently go to post offices for these types of
transactions, but only 400 million have accounts.
One strategy, adopted by Posts in a number of
countries, is to use cash-based services as an
introductory product to account-based services
and savings. Following that model, the 1.1 billion
people who use Posts to access certain financial
services without an account could potentially move
from informal to formal savings.


The state-of-the-art UPU electronic postal payment
network and the regulatory framework developed by
the UPU enable Posts to provide secure, reliable and
affordable remittance services to migrants and their
families. Posts are trusted and accessible everywhere,
which are two key factors to convert informal money
transfers into formal services. This ensures that clients
are adequately protected and that rules against
money laundering and the financing of terrorism are

The postal money orders, with their simplicity,
accessibility and affordability, address the needs of
migrants and ensure that a maximum amount of money
arrives in rural areas, where migrants’ remittances
have a huge developmental impact. At the UPU level,
efforts will continue to ensure that such services are
offered to all citizens of the world through the UPU
electronic network.

Posts have great potential to further develop
remittances and to foster financial inclusion. Indeed,
payment services are a first step towards financial

1) New ThiNkiNg surrouNdiNg remiTTaNces aNd developmeNT

2) maximisiNg The developmeNT impacT of remiTTaNces

inclusion, as payments can be linked to account-based

services such as savings or micro-insurance. To do so,

however, governments need to fully grasp the potential

of the Posts and to include postal development into

their poverty reduction strategies. On their side, postal

financial institutions need to continue to adopt new

technologies and develop affordable and convenient

products that address the needs of the poor.

The UPU is already working with partners such as the

IFAD, the World Bank and the Bill & Melinda Gates

Foundation to tackle these challenges. Posts, through

the provision of financial services, can contribute to

socio-economic development, especially in rural

areas, but they need to have the support of their

governments and of international donors to fulfil that




Ansón, José and Joëlle Toledano (2008). Postal Economics in Developing Countries. Universal Postal Union.

Ansón, José and Joëlle Toledano (2010). Between Financial Inclusion and Postal Banking: Is the Survival of Posts
Also There? Working Paper. Universal Postal Union.

Ansón, José and Laia Bosch Gual (2008). Financial Access and Inclusion through Postal Networks: Evaluating
the Experience of Brazil’s Banco Postal. In Postal Economics in Developing Countries, ed. José Ansón and
Joëlle Toledano. Universal Postal Union.

CGAP (2009). Measuring Access to Financial Services around the World. Report. CGAP. The World Bank

Conseil Supérieur des Burkinabè de l’étranger, General Secretariat (2008). Rapport du Secrétariat général.
Government of Burkina Faso.

India Knowledge Wharton (2011). As Traditional Services Go Digital, India Post Finds New Life as an Insurance
Provider. In http://knowledge.wharton.upenn.edu/india/.

Kugemann, Monika (2009). UPU–AFI Workshop on Financial Inclusion and Postal Banking. Report. Universal
Postal Union.

Orozco, Manuel (2009). Sending Money Home to Africa. International Fund for Agricultural Development (IFAD).

PlaNet Finance (2010). The Banco Postal Model (for the Bill & Melinda Gates Foundation and the UPU). Report.
PlaNet Finance.

PostFinance (2009). Press Release. Swiss Post.

PostFinance (2010). Press Release. Swiss Post.

SONAPOST (Post of Burkina Faso) (2010). Internal Database.

UPU (2009). QCS Finance Statistics Database.

UPU Postal Technology Centre (2010). QCS Finance Statistics Database.

World Bank (2006). The Role of Postal Networks in Expanding Access to Financial Services. GICT, World Bank.
Discussion Paper. The World Bank Group.

World Bank (2011). http://remittanceprices.worldbank.org/.

1) New ThiNkiNg surrouNdiNg remiTTaNces aNd developmeNT

2) maximisiNg The developmeNT impacT of remiTTaNces



This figure is estimated at 6,000 by the World Bank (2006). It is estimated that there are five bank branches 102
for 100,000 adults in the urban areas of Sub-Saharan Africa, compared with 0.5 in rural areas (Consultative
Group to Assist the Poor 2009). These figures, combined with 2009 data of the United Nations Department
of Economic and Social Affairs, Population Division, 2009, translate to 9,250 urban bank branches and
1,565 rural bank branches, for a total of 10,815 branches.

Mandat express international 103 (“international money order”).

In the context of this project, rural areas have been defined as areas outside the two to five major towns of 104
each country.

In Gabon, the market share of MEI, compared with the total remittance outflows from Gabon, is estimated at 105
5.6% in 2009 (computed with data from the World Bank (2010)).

Niger has the lowest annual per capita income of the countries participating in the UPU–IFAD project, at 249 106
EUR; Senegal has the highest, at 743 EUR (World Bank 2008).

SONAPOST (Burkina Faso national postal operator) data, 2010.107


Every year migrant workers send home at least $350
billion dollars to developing countries across the globe.
Remittances are the single largest financial flow to
many developing economies, dwarfing development
assistance, net exports and foreign direct investment.
As a result, remittances represent the most direct and
tangible impact of international migration.

As the United Nations’ rural poverty agency, the
International Fund for Agricultural Development
(IFAD) recognizes the tremendous contribution made
by millions of migrant workers to the economic
development of their families, communities and
nations. IFAD’s goal is to empower remittance senders
and their families to use remittances to stimulate
families’ livelihoods in order to achieve financial

To this end, the European Commission, the
government of Luxembourg and IFAD jointly created
the Financing Facility for Remittances (FFR) in 2006
to focus specifically on the contribution of remittances
to the rural poor. Subsequently joined by the Inter-
American Development Bank, the Consultative Group
for Assistance to the Poor, the government of Spain
and the United Nations Capital Development Fund,
the FFR has become a specialized testing-ground for
financial sector interventions.

Operating through demand-driven calls for proposals
that seek-out innovative projects, the Facility has grown
into an almost $20 million fund for projects in as many
countries around the globe with a market-oriented
multi-sector approach. Drawing from its 40 projects,
150 project-partners and member institutions, the FFR
is a center of expertise, an advocate for regulatory and
market reform, and a platform for exchange of ideas
between the private and public sector actors that
shape the remittances marketplace.


Due to the fact that the Facility was designed as a
laboratory for innovative projects, the Facility provides
grant financing to projects undertaken by a range of
public, private and civil society organizations and in a
number of remittance-related areas;

Reaching out into rural areas - The first priority
of the FFR is to ensure the availability of remittances
and related financial services in rural areas. In order to
achieve this, the Facility has focused on generating
projects that examine the contribution of three models
to reach underserved areas;

Postal networks•

Mobile financial services•

Micro-finance networks•

Expanding access to finance - Building on these
three models that stimulate remittance “capillarity”, the
next step is to provide services that go beyond simply
cashing-out a remittance transfer. From the provision
of basic financial services such as deposit accounts,
to more sophisticated products such as insurance or
housing loans, the facility’s projects aim to expand
the range of choices available to remittance recipients
while generating revenues for financial institutions
exploring how best to provide for the needs of this
market segment. Projects include:

Access to basic financial services•

Financial literacy•

Deposit accounts•

Innovation in financial services•


Housing loans (mortgage and home improvement)•

4. emPoWeRINg tHe RuRAl PooR tHRougH RemIttANces

Pedro de Vasconcelos

International Fund for Agriculture Development
Financing Facility for Remittances

Robert Meins
Remittance Specialist

International Fund for Agriculture Development
Financing Facility for Remittances

1) New ThiNkiNg surrouNdiNg remiTTaNces aNd developmeNT

2) maximisiNg The developmeNT impacT of remiTTaNces

(Micro-) Insurance•

Migrant Investment - Remittances form the potential
basis for migrant entrepreneurship and investment
activities. A number of projects are currently in
execution, exploring how migrant capital can create
jobs in local communities as well as creating a sound
investment opportunity for the migrant.

Migrant investment•

Agricultural cooperatives•

Small and medium enterprise development •

New areas - During the 2010 Call for Proposals,
the Facility included a number of new potential topic
areas for projects. Because remittance-recipient
households often also receive government-to-person
payments with similar characteristics to remittances,
projects including these payments were solicited in
2010. Institutional interest in the topic of securitizing
remittance flows to achieve development objectives
resulted in the inclusion of this category. Lastly, the
calls for proposals include an “open thematic area”
which is intended to attract innovative proposals in
cutting-edge areas that yet to be identified.

scAlINg uP: tHe PostAl II.
NetWoRks INItIAtIve

Building on the results of the Sending Money Home to
Africa report108 and the results of a project undertaken
by the Universal Postal Union in six West-African
countries, the FFR has launched a Postal Networks
Initiative in 2011. With 660,000 locations worldwide,
the number of post offices is almost double the
386,000 agent locations of the world’s largest
remittances company. The vast majority (75%) of post
offices are located in developing countries, meaning
that post offices can effectively address both the first
mile and last mile of remittance transfers.109 For this
reason, IFAD is expanding its work on postal networks
by drawing on the lessons learned from its initial
project with the Universal Postal Union (UPU).

The UPU’s Postal Payment Services Agreement (2004)
and International Financial System (IFS)110 application
effectively provide the tools to manage the entire
remitting process from sender to recipient within the
postal system. In the “last mile” postal networks have
a unique strength. With 500,000 post offices located
outside of the most populated urban centers there is

no network of brick-and-mortar locations better suited
to delivering value-added financial services than the
postal networks.

Postal networks are in many ways ideal conduits
for offering the kinds of financial services that banks
are unable (or unwilling) to offer lower income rural
individuals. In most developing countries, however,
utilizing this potential requires a systematic addressing
of a number of key bottlenecks including:

human and technical capacity to offer basic •
remittances services,

access to efficient means of conducting international •

regulatory challenges that restrict the offering of •
value-added financial services,

exclusivity agreements that limit competition.•

Given IFAD’s mandate to promote the financial inclusion
of rural communities and the FFR’s specialized
experience in the field of remittances, the Facility
has a core competence in advancing this agenda.
Furthermore, the Facility can draw on its experience
with postal network related projects in a broad range
of countries including Benin, Burkina Faso, China, Mali,
Mauritania, Niger, Senegal and Sri Lanka. Given the
results of our recently completed project with the UPU,
the increasing interest it has generated, the strong
partnerships and expertise that we have developed,
and the tremendous opportunity postal networks
represent, we strongly believe that this initiative has
the potential to improve the lives of millions of rural
remittance recipients around the world.

PolIcY: tHe tuNIs III.

Central to the Facility’s policy work is the bi-annual
Global Forum on Remittances. Held in Washington
together with the Inter-American Development
Bank in 2007, and in Tunis together with the African
Development Bank in 2009, the forum focuses on
global topics while focusing on one specific region
each year. The event brings together public- and
private sector representatives as well as civil society
groups to discuss the most relevant issues affecting
migrant remittances. Each Forum is accompanied by
the publication of the FFR’s flagship Sending Money
Home series of reports which highlight region-specific


characteristics, challenges and opportunities.

At the 2009 Global Forum on Remittances
the participants jointly formulated the Tunis
Recommendations on the African Remittances
Marketplace,111 which have guided the FFR’s work
on the topic since they were presented by IFAD’s
Associate Vice President at the G8 Remittances
Working Group meeting in Rome in 2010.

INcReAse comPetItIoNIv.

Encourage more actors to enter the marketplace.•

Widen the types of payment networks. •

Discontinue exclusivity agreements when they •
hamper competition.

Competition is essential to reducing the cost of
sending money home, encouraging innovation in the
types of products offered to remittance recipients and
expanding the geographical reach of remittances. By
encouraging a broad range of actors to play a role in
the marketplace products and services that meet the
needs of every market segment can be developed,
expanding and deepening access to finance. Lastly,
it is recommended that exclusivity agreements be
discouraged and/or discontinued in mature markets
by working closely with governments and regulatory
bodies The continued existence of agreements that
block agents of a particular money transfer company
from offering similar products from other companies
maintains monopolies, restricts competition and
reduces the amount of hard-earned funds that remains
in the hands of migrant workers and their families. In
the context of Africa, the Tunis recommendations were
brought to the attention of Governments during the
G8 process in 2009. Since then, this has enabled a
close dialogue with central banks and other regulatory
bodies to promote a more competitive and open

emPoWeR mARket ActoRsv.

Facilitate market actors’ access to payment system •
infrastructure to the maximum possible extent.

Build the capacity of market actors to meet •
regulatory requirements.

Foster cooperation and partnership between •


In order for a broader range of actors to participate
effectively in the remittances marketplace it is essential
that a number of conditions are met. Of primary
importance is regulatory approval of an actor to engage
in remittances-related services. The subsequent role
the actor plays in the remittances value-chain will
define their share of the revenues generated. The
degree to which non-bank financial institutions are
able to access to payment system infrastructure
plays an important part in defining their revenue share
-and as a result, their commercial interest-. In order
to be able to take advantage of regulatory approval
and/or access to the payment system infrastructure,
it is a prerequisite that non-banks have the technical
and human capacity to offer services in an efficient,
regulation compliant, and secure manner. Finally, as
jurisdictions and specific markets may have particular
dynamic, it is vital that cooperation and partnerships
are encouraged between market actors and regulators

AcHIeve eFFectIve AND vI.
eFFIcIeNt RegulAtIoN

Ensure that regulations are robust, but also •
commensurate to the level of risk and to the benefit
of all.

Encourage consistent standards of regulations •
across jurisdictions.

Consult and evaluate impact before regulating.•

Identify and adhere to minimum standards of client •

The primary purpose of financial regulation is to
maintain the integrity of the financial system. While
these regulations have traditionally being drawn with
banks in mind, the remittances marketplace continues
to develop. Regulatory priorities and commercial
interests must be balanced with developmental goals
and the interests of remittance recipients.

For the private sector actors to operate efficiently it
is essential that regulations be clear, transparent
and that a level playing field exists between different
kinds of financial institutions. Further harmonization of
regulations and standards, such as the World Banks’s
General principles international remittance services112
both at the domestic and international levels will

1) New ThiNkiNg surrouNdiNg remiTTaNces aNd developmeNT

2) maximisiNg The developmeNT impacT of remiTTaNces

help reduce the cost of sending money home while
ensuring maximum protection for the financial system.
A risk-based approach to regulation is also essential,
keeping in mind that encouraging the formalization of
informal flows may reach many of the same objectives
enhanced regulation.

As remittance recipients include groups that have
had only rudimentary contact with financial intuitions
it is essential that their interests be served. The
identification of minimum standards of client protection
will encourage a level playing field for remittance
companies while ensuring that sensitive groups are
not taken advantage of.

ADoPt NeW tecHNologIesvII.

Modernize technology in payout networks.•

Improve payment systems infrastructure and •
integrate at regional and sub-regional levels.

Encourage development of standards and •

Minimize the risk for end users.•

Mobile telephones, the internet and debit/credit cards
are each helping transform the traditional paper-
based, cash to cash transfer. By making it possible
for recipients to receive money electronically in remote
locations these technologies provide convenience,
speed and increased safety. Companies benefit from
increased efficiency and a greater range of information,
while regulators are provided with the information they
need to ensure the integrity of the financial system.

One area where efficiency gains can be enhanced is in
the interoperability of platforms. Establishing common
standards and ensuring the use of interoperable
systems will encourage smaller market participants
can participate in the marketplace without being linked
to a specific proprietary solution that locks them in.

eXPAND Access to vIII.
FINANcIAl seRvIces

Encourage remittance recipients to maintain their •
assets in financial institutions.

Promote financial literacy to all stakeholders, •
particularly to migrants and their families.

Encourage the ability of the undocumented to •
access formal financial channels.

Design financial services with the specific needs of •
women and men in mind.

Use the world-wide postal network to give •
customers access to financial services.

Ensure that remittances are not subject to specific •

Remittances are a vital first step on the road to financial
independence. While the majority of remittances pay for
daily necessities, the 20-40% that is saved or invested
can contribute significantly to the household’s ability
to increase its possibilities.113 Traditionally, however,
financial institutions have not serviced the needs of
this segment of the market while remittance recipients
have not always been convinced of the benefits of
opening a bank account.

In order for both migrant workers and their families to
maximize the value of their income it is essential that
they are empowered with all the relevant information.
Financial literacy is the first step in this process, as
trans-national families face different issues than many
of their neighbors. Understanding budgets as well as
relationship dynamics that transcend borders can help
migrants and their families achieve their financial goals
while making it possible to.

The gender aspects of transnational families have
important implications for remittances. With different
patterns of sending, saving and investing, male and
female migrants and their counterparts heading
households back home have different preferences and
needs. It is important that service providers understand
these needs and tailor products to meet them.

Simply by maintaining their savings in a bank account,
as opposed to “under the mattress”, recipients can
benefit from earning interest and building a credit
history. At the same time, the institutions that accept
the deposit can lend these funds out to others in the
communities, stimulating local economic growth.

Lastly, conference participants identified taxation of
remittances as a significant hurdle to families sending
and receiving funds. Because the income remitted
home has been taxed in the country in which it is earned,
taxing remittances amounts to double taxation. While
this may generate funds for recipient governments, it
reduces the amount of money in the hands of those
for whom it is intended and encourages senders to
use informal channels to send their funds.


mAke moRe FINANcIAl IX.
seRvIces AvAIlAble IN RuRAl

Encourage market actors, especially Microfinance •
institutions (MFIs), postal offices, credit unions, etc.,
to act as pay-out locations.

Build the capacity of MFIs and non-bank financial •
institutions in rural areas to provide remittance

Encourage the ability of MFIs to take deposit of •
rural savings.

Identify specific ways to link rural areas with non-•
cash (including mobile) instruments.

The cost of remittances are generally taken as being
financial alone, families in rural areas face very different
realities from those in urban centers with access to
financial institutions. The true cost of remittances is
particularly high in the rural areas that receive between
30-40% of worldwide remittances.114 Recipients in
some regions must walk up to two days, simply to
collect their funds. The costs incurred, time spent
and potential dangers faced during this process each
diminish the impact of remittances in the areas that can
benefit from them the most. Eliminating the costs and
risks associated with travel can contribute significantly
to the impact of remittances on rural families. By
enabling existing institutions such as MFIs and post
offices to offer financial, the hidden cost of receiving
remittances can decrease significantly. For MFIs
remittances can play an important role as a source
of income. While earning commissions on remittances
transfer is of interest, the ability to mobilize the money
saved is of even greater value.


Over the last decade, development agencies such as
IDB, and the World Bank IFAD, have been identifying

and analyzing remittance markets and the regulatory
framework in which these operate. These market and
regulatory analysis, highlighted in major reports such
as the General Principles and Tunis recommendations,
have paved the road towards creating a better enabling
environment for remittances markets and the people
who send and receive them. Doing so will enable
stakeholders in the market place to begin deepening
and expanding the frontiers of products and ultimately
benefit the end user: migrants and their families.

While there is still much about remittances that is
unknown in the developing regions of the world, some
important success stories and innovations can be
highlighted however. African countries, for instance,
are leading the way in the use of new technologies,
regulatory and market reforms and alternative strategies
to expanding rural financial access. What is clear is that
if remittances were brought into the financial system,
many more options would be provided to families
through small business loans, housing mortgages,
savings and other products. When remittances are
deposited in a bank or a microfinance institution
instead of being kept “under the mattress” the money
can be mobilized for other investments. That way,
remittances become a motor for local development,
as well as a poverty reduction tool.

It is a difficult, but also an exciting time for the
remittances market. Great strides can be made
towards expanding financial services and maximizing
their benefits in every corner of the continent. Perhaps
most importantly, tens of millions of families throughout
developing regions in the world would be offered a
chance to begin to invest in their own futures.

1) New ThiNkiNg surrouNdiNg remiTTaNces aNd developmeNT

2) maximisiNg The developmeNT impacT of remiTTaNces


World Bank (2007). General principles for international remittance services. See http://siteresources.worldbank.

Manuel Orozco & IFAD (2007). Sending Money Home: Worldwide remittance flows to developing and transition
countries. IFAD. See http://www.ifad.org/remittances/maps/brochure_f.pdf.

Manuel Orozco (2009). Sending Money Home to Africa: Remittance markets, enabling environment and
prospects. IFAD, - http://www.ifad.org/remittances/pub/money.htm.

IFAD (2009). Tunis Recommendations. See http://www.ifad.org/remittances/events/recommendations.pdf.



Manuel Orozco (2009). 108 Sending Money Home to Africa: Remittance markets, enabling environment and
prospects. IFAD. See http://www.ifad.org/remittances/pub/money.htm.


The IFS is a end-to-end information technology platform to for electronic postal payment services.110


General principles for international remittance services, World Bank, 2007, http://siteresources.worldbank.112

Manuel Orozco & IFAD (2007). 113 Sending Money Home: Worldwide remittance flows to developing and
transition countries. See http://www.ifad.org/remittances/maps/brochure_f.pdf.


1) New ThiNkiNg surrouNdiNg remiTTaNces aNd developmeNT

2) maximisiNg The developmeNT impacT of remiTTaNces

(Transition Page to be created according to the cover)

parT Three

addressiNg social developmeNT

ThoughT remiTTaNces

1) New ThiNkiNg surrouNdiNg remiTTaNces aNd developmeNT

2) maximisiNg The developmeNT impacT of remiTTaNces

ILO estimates that some 105 million of the total 214
million people living outside their countries of origin
are economically active, employed, self-employed or
otherwise engaged in the world of work.115

Migrant workers’ remittances are an important driver
and outcome of international migration. Remittances
express the solidarity of migrant workers with
their families and communities in their countries
of origin; as a private and autonomous type of
financial resource that crosses borders. They can be
pivotal in transforming the benefits of migration into
development. Remittance flows exceed ODA and FDI
to many developing countries.

Remittances: a major financial resource for poor
households in origin countries:

Providing incomes for better nutrition, housing, •
education, health care.

Fostering the creation of enterprises and jobs in the •
countries/ areas of origin.

Preventing further out-migration from rural areas by •
providing livelihoods for families left behind.

Investments are traditionally not the primary use of
remittances in countries of origin. There is however
scope for defining smart fiscal and other incentives
and public policy initiatives to attract more savings
into productive investments, which can be a factor in
upgrading the informal into formal economy.

Remittances and their use vary according to gender.
Research indicates that women migrant workers have
a tendency to remit and invest more in the health and
education of their families.116 Also, women recipients
of remittances seem to prioritize household needs
such as food, clothing, housing, education and
health, whereas men often use resources for savings
and investments to generate greater benefits in the

Time horizons and immigration status also matter, e.g.
it is a known fact that migrants remit less in the early
stages of their migration experience.

The issue of remittances has become even more topical
with the financial and economic crisis. Remittances
have usually been thought to be countercyclical with
the GDP in recipient countries, with migrant workers
expected to increase support to their families in times
when family income back home shrinks. However,
remittances also respond to the state of economic
activity in the host countries as the current crisis
illustrates. Indeed, it appears that remittances (along
with trade, foreign direct investments and private
equity flows) have contributed to transmitting the
effects of the host economy contractions to the
recipient economies. These contractions then hamper
growth and efforts in poverty reduction in a number
of developing countries with significant remittances
inflows. Particularly in this context, it will be important to
capitalize on remaining opportunities, e.g. by reducing
transfer costs and making sure that remittances are
productively invested in diversified and innovative
activities, e.g. in the creation of green jobs.

tHe Ilo APPRoAcH to I.

Remittances: A migrant worker’s

The ILO has a constitutional mandate to protect
migrant workers and has been dealing with labour
migration issues since its inception in 1919. ILO
adopts a rights-based approach to labour migration
and promotes tripartite participation in migration policy.
It has pioneered international Conventions to guide
migration policy and protection of migrant workers.

Along with the International UN Convention on the
Protection of the Rights of all Migrant Workers and
Members of their Families, the ILO Migration for
Employment Convention, No 97 (revised) 1949,
and the Migrant Workers Convention No 143
(supplementary provisions), 1975, provide principles
and rules which aims at protecting migrant workers’

1. RemIttANces: mAkINg globAlIZAtIoN WoRk FoR mIgRANt
WoRkeRs AND tHeIR FAmIlIes

Statement by Assane Diop
Executive Director for Social Protection, International Labour Organization (ILO)


rights and guaranteeing decent working conditions to
migrant workers and their families.

ILO Convention No 97 states that “Each Member for
which this Convention is in force undertakes to permit,
taking into account the limits allowed by national laws
and regulations concerning export and import of
currency, the transfer of such part of the earnings and
savings of the migrant for employment as the migrant
may desire.”

The ILO Multilateral Framework on Labour Migration,
Non-Binding principles and guidelines for a rights-
based approach to labour migration, adopted by a
tripartite meeting of experts in 2005 highlights that
“the contribution of labour migration to employment,
economic growth, development and the alleviation
of poverty should be recognized and maximized for
the benefit of both origin and destination countries”
(Chapter IX).

globAl Ilo INItIAtIves II.
INcluDINg tHe RemIttANces’

In November 2005 the ILO Governing Body adopted
the ILO policy on social finance which flags remittances
as a priority work item.

At the 2008 International Labour Conference, the
international community adopted an ILO Declaration on
Social Justice for a Fair Globalization. From the angle
of this Declaration remittances are significant because
of the scope for improving the social protection of
the families left behind. Remittances can provide
financial resources to migrant workers’ families and
ensure their access to health care services. Migrant
workers abroad can also cover their families by paying
directly contributions to a micro-insurance mechanism
covering their families in the country of origin.

The ILO Global Jobs Pact (GJP), adopted in 2009
as a policy framework to accelerate job rich crisis
recovery, calls for “building a stronger, more globally
consistent, supervisory and regulatory framework for
the financial sector, so that it serves the real economy,
promotes sustainable enterprises and decent work
and better protects savings and pensions of people”.
The GJP recognizes that specific policy measures are
needed to counter the negative effects of the financial
and economic crisis and emphasizes the need for
measures to facilitate the access to finance for the

families of migrants in the home countries, including
by microfinance institutions.

Ilo ActIoN to ImPRove tHe III.
beNeFIts oF RemIttANces

The ILO intervenes on the:

1. Supply side of financial services in order to foster the
use of remittances for income generating activities:
this involves working with the financial institutions
so that they develop adequate and innovative
financial services;

2. Demand side of financial services: this involves
working with migrant workers and their families,
benefiting from remittances, to strengthen their
capacity to make informed and rational choices
about the use of remittances and remittances-
linked services, leading to poverty alleviation.

Workers’ and employers’ organizations have an
important role to play at the sending and receiving
ends of remittances:

Employers’ organizations: encourage •
entrepreneurship development in low income
countries through investment of remittances, and
in the migrants’ host countries, facilitate payroll
deduction, provide financial orientation and access
to financial payment facilities such as ATM facilities
on shop floor or specific financial services developed
in partnership with financial institutions.

Workers’ organizations: provide financial orientation •
for migrant workers and their families, both in
countries of origin and destination, advocate for
more accessible financial infrastructure, support
the development of financial schemes for migrant
workers to facilitate access to financial services.

Results so FARIv.

The ILO, through different departments and field
offices – have developed a series of initiatives to share
knowledge and build institutional capacity, involving
governments, social partners, migrant organizations,
financial institutions, migrants and their families.

In November 2000, the Social Finance Program
of the ILO (SFP) organized a major international
conference “Making the best of Globalization – the

1) New ThiNkiNg surrouNdiNg remiTTaNces aNd developmeNT

2) maximisiNg The developmeNT impacT of remiTTaNces

role of remittances”. It was an opportunity to examine
systematically the private and social costs and benefits
of remittances, and especially to look at remittances
from migrant workers’ point of view.

SFP has carried out action research on migrant workers’
remittances and microfinance in Bangladesh, Mexico,
Nepal, Senegal and South Africa, mapping remittance
patterns between and within countries and assessing
the availability of suitable transfer services and the
transaction costs involved. ILO projects in South–East
Europe (Albania, Moldova) provided assistance to the
Governments to develop a strategy and an action plan
on remittances, also helping with the implementation
of specific measures to improve the environment for
formalization and investment of remittances.

ILO projects implemented in Africa, Asia, Central
Asia and the Caucasus by the International Migration
Programme (MIGRANT) all include a remittance
dimension, whether through research incorporating
the remittance factors in the analysis of migration
or through technical assistance, developing training
programmes in financial capability for migrants and their
families, or involving financial institutions in providing
support for reintegration of migrant workers.

At the International Training Center of the ILO (ITCILO),
training courses are provided in different languages on
labour migration issues with some specific modules
dedicated to remittances. Besides, within the
framework of projects implemented in Africa on labour
migration issues, the ILO provides in its training courses
to trade unions a specific component on remittances
in order to enhance trade unions’ capacities to inform

and support their members.

The ILO through its Micro-insurance Innovation Facility
is currently assessing the feasibility to link remittances
with social protection. The Social Finance Program and
the International Migration Programme of the ILO along
with the ILO Regional Office for Africa and Professor
Alain Letourmy from the INSERM are currently working
on mechanisms for extending social protection
coverage to migrant workers’ families left behind
in origin countries, through health micro insurance
initiatives financed by remittances from Senegalese,
Malian and Comorian migrant workers abroad. A
study on the feasibility of such an approach is nearing
completion in Kayes (Mali) and Matam (Senegal), two
rural areas with high levels of out-migration. These
studies include surveys of migrant workers in France
and of family members in origin countries to ascertain
the amount of financing migrant workers would be
willing to provide for health insurance and the needs
of their family members. The next stage will be to pilot
a micro-health-insurance.

In many developing countries the proportion of people
working in the formal economy and covered by
national social security schemes is comparatively low.
Therefore, the number of migrant workers which may
be covered by bilateral social security agreements
still remains small. In such a context, it is particularly
important to explore different strategies to extend the
social protection of migrant workers and their families.
Using remittances to protect migrant workers’ families
left behind in origin countries is one such option.


ReFeReNces AND Ilo PublIcAtIoNs

Manuel Orozco and Elisabeth Burgess (2010). Remittance transfers in Senegal: Preliminary findings, lessons and
recommendations on its marketplace and financial access opportunities. ILO.

Manuel Orozco et Elisabeth Burgess (2010). Transferts des migrants au Sénégal: résultats préliminaires, leçons
et recommandations quant à l’organisation du marché et aux opportunités d’accès au marché financier.

Kirsten Schüttler (2008). The Contribution of Migrant Organisations to Income-Generating Activities in Their
Countries of Origin. ILO.

S. Thieme (2003). Savings and Credit Associations and Remittances: The case of Far West Nepalese Labour
Migrants in Delhi, India.

T. Siddiqui and C.R. Abrar (2003). Migrant Worker Remittances and Micro-Finance in Bangladesh.

Catherine Cross (2003). Migrant Worker Remittances and Micro-Finance in South-Africa.

C. Sander and I. Barro (2003). Etude sur le transfert d’argent des émigrés au Sénégal et les services de transfert
en microfinance.

ILO (2000). Workshop report on Making the best of Globalisation: Migrant Worker Remittances and

S. Puri & T. Ritzema (1999). Migrant Worker Remittances, Micro-finance and the Informal Economy: Prospects
and issues.

T. Sparreboom and P. Sparreboom-Burger (1996). Migrant worker remittances in Lesotho: a review of the
deferred pay scheme. ILO.

M. Lopez Espinosa (2002). Remesas de mexicanos en el exterior y su vinculación con el desarrollo económico,
social y cultural de sus comunidades de origen. ILO.

most of these publications can be downloaded from www.ilo.org/socialfinance

A. Jampaklay & S. Kittisuksathit (2009). Migrant workers’ remittances: Cambodia, Lao PDR and Myanmar. ILO
Regional Office for Asia and the Pacific.

S. Sisenglath (2009). Migrant worker remittances and their impact on local economic development. ILO Asia
Pacific Working Paper Series.

T. Scutaru (2008). The market of financial services in Moldova, a presentation of loans and deposits for physical
persons, in English and Romanian.

M. Orozco (2008). Planting the Seeds of Financial Inclusion: financial literacy for remittance recipients in

T. Kring (2007). Enhancing the Impact of Migrant Workers’ Remittances in Albania, an ILO / IOM Working paper.

E. Abazi & M. Mema (2007). The potentials of Remittances for Income - generating activities leading to local
economic development in Albania, the case of Durres. ILO.

Q. Balliu (2007). Enhancing the Impact of Migrant Workers’ Remittances in Albania by creating an integrated
Migrant Remittance System, Study on remittances for potential local economic development in Vlora Region
(Albania). ILO.

T. Kring (2007). Moldovan Migrants in Italy: Remittances and the Role of Labour Market Partners. ILO.

1) New ThiNkiNg surrouNdiNg remiTTaNces aNd developmeNT

2) maximisiNg The developmeNT impacT of remiTTaNces

training material

ILO (2011). Budget Smart: Financial education for migrant workers and their families.

Chisinau (2008). Building Financial Capability for Vulnerable Households, a manual for individual training /
counseling sessions. ILO.



ILO (2010). 115 International Labour Migration, a rights-based approach.

Gloria Moreno Fontes (2008). 116 Migration, Gender Equality and Development. Overview Paper for the
International Conference on Gender, Migration and Development: Seizing opportunities, upholding rights.

GMG (2010). 117 Mainstreaming Migration into Development Planning: A handbook for policy-makers and

1) New ThiNkiNg surrouNdiNg remiTTaNces aNd developmeNT

2) maximisiNg The developmeNT impacT of remiTTaNces

Ladies and Gentlemen,

At the outset, I wish to thank Mr. Supachai
Panichpakdi, Secretary-General of UNCTAD, for the
invitation to participate in this important and timely
expert meeting. It is indeed an honour for me to be
part of this distinguished panel.

I bring greetings to you from UNFPA’s new Executive
Director, Dr. Babatunde Osotimehin.

I would like to focus my remarks on a topic which
is of particular importance to UNFPA – women and
remittances. In 2006, UNFPA dedicated its flagship
publication, the annual State of World Population
report to Women and International Migration. It was
entitled: A Passage to Hope. In it we pointed out that
despite migrant women’s contributions to poverty
reduction and struggling economies, it is only recently
that the international community has begun to grasp
the significance of what migrant women have to offer.

In my remarks today, I will speak about the
proportion and contribution of women migrants, the
impact of their remittances, the effects of the financial
crisis, and the need to protect the rights of women
migrants and take other measures to maximize the
development impact of the remittances they send.

coNtRIbutIoN oF WomeN

At 49.2 per cent, female migrants constitute half of
the international migrant population. In some regions
of the world, they outnumber their male counterparts.
We see this in Europe, Northern America and Oceania,
but also in individual countries in other regions.

As per data from the United Nations Population
Division, female migrants outnumber men slightly in
developed countries where they constitute 51 percent

of international migrants between 20 and 64 years
of age. In developing countries, women account for
43 per cent of the international migrants in that age

Indeed, women are not just passive players who
accompany or join migrating husbands or other family
members. Migrant women are in many cases the only
contributor to family income. Many women increasingly
migrate on their own in search of better opportunities
for themselves and their families. And they contribute
to improvements in the quality of life in both countries
of origin and destination.

Every year, migrant women send large sums of
money in the form of remittances to feed families,
clothe and educate children, support older persons,
provide health care and generally improve living
standards for families left behind.

In host countries, many migrant women are
employed in households of working families, taking
care of their children, the elderly and the household.
Others contribute technical and professional expertise
as teachers, nurses, scientists, technicians and
business owners.

RemIttANces oF WomeN II.

Despite the growing number of women migrants and
the importance of the remittances they send to families
left in countries of origin, there has been little analysis
of the relationship between gender and remittances.
Remittances are typically not disaggregated by the
sex of remitters and receivers. As a result, not much
is known about gender differences in the sending
patterns, the use and impact of remittances, or the
contribution of migrant women to local development
in countries of origin.

However, despite the lack of data, some studies do

2. RemIttANces oF WomeN mIgRANts

Statement of Purnima Mane
Deputy Executive Director (Programme)

United Nations Population Fund


provide a glimpse into the realities behind the gender
aspect of remittances. Studies suggest that the sex of
the sender affects three factors: namely the volume,
the frequency and the sustainability of resources
over time.

While globally, women remit approximately the same
amount as men, research suggests that women tend
to send a higher proportion of their income regularly
and consistently, even though they generally earn less
than men. Also, remittances sent by women are more
able to respond to emergency situations. However,
by sending smaller sums more often, women tend
to spend more on transfer fees. Therefore, reducing
transfer fees and making different transfer options
accessible would benefit women migrants and
maximize the positive impact of remittances on their
families and communities and development.

It should also be pointed out that remittances sent
via informal channels are not counted in the official
statistics. According to the World Bank, remittances
sent informally could add at least 50 per cent to the
globally recorded flows. Therefore, our sense is that
women remit more than the statistics show.

A 2008 UN study on gender, remittances and
local rural development examined Filipino migration
to Italy. The study concluded that the remittances
had increased and diversified the employment
opportunities available and improved the economic
empowerment of women.

Research shows that remittances sent by women
would have an even greater impact on families and
communities if women did not face wage, employment,
credit and property discrimination, and if they were not
excluded from decision-making within their families.

There are also gender differences in the utilization of
remittances: women tend to use remittances for daily
needs, health care and education while men tend to
spend remittance income on consumer items such as
cars and televisions, and some for investments such
as property or livestock.

Studies also show that migrant women benefit from
cultural exchange and being exposed to different ideas,
skills, attitudes and knowledge. These exchanges
boost socio-economic development and can advance
gender equality and women’s empowerment through
opportunities for greater independence and self-


Women who send remittances have the status,
autonomy, freedom and self-esteem that come with
employment. In addition, some women who receive
remittances take on new roles as they assume
responsibility for managing the additional income and
making financial decisions in the household.

However, we must keep in mind that while migration
and the sending of remittances by women migrants
can aid development and reduce poverty, typically,
the poorest families cannot afford to send migrants
abroad. They do not receive remittances.


Now let me turn to the impact of the financial crisis.
UNFPA recently prepared a Global Migration Group
Fact Sheet on the Impact of the Economic Crisis on
Female Migration. We found that while women typically
send a larger percentage of their earnings home to
their families, it remains to be seen how resilient these
remittances will remain during the economic crisis.

Female migrants are likely to find it increasingly
hard to obtain regular employment abroad. If they do
find jobs, it is likely that the jobs will pay less and will
have decreased benefits. This may impact the amount
of remittances they will be able to send home which,
in turn, will impact the quality of life for families who
count on remittances to provide the food, health care
and education they need.


In conclusion, I would like to stress that cooperation
and collaboration between sending and receiving
States should ensure flexible and coherent policies
that promote the orderly flow of migration and protect
the rights of migrants. Female migrants should be
viewed not only as workers but also as human beings
with rights. They should be protected from trafficking,
discrimination and abuse.

To maximize the development benefits of
remittances from women migrants, we need sex
disaggregated data and gender-sensitive research on

1) New ThiNkiNg surrouNdiNg remiTTaNces aNd developmeNT

2) maximisiNg The developmeNT impacT of remiTTaNces

the sending, use and impact of remittances. We need
to reduce the costs associated with migration, and
improve the financial literacy and entrepreneurship
skills of migrants and their families.

We need to reduce transaction fees of remittances,
and provide financial products and investment
opportunities tailored to the needs of migrants and

their families. We also need a sound investment
climate and regulatory framework.

And, finally, we must integrate the gender dimension
into the management of all aspects of migration.
Gender matters – for migration and for remittances.

I thank you and look forward to our discussions.


Mr. Chair, Distinguished Panel, Delegates,

I would like to thank UNCTAD for organizing this
very important and timely event.

There is no doubt that remittances represent
a significant resource for children and families in
countries of origin. One of the main benefits of
remittances, as highlighted by the UNCTAD report on
the Impact of Remittances on Poverty in Developing
Countries, is the positive impact on the reduction
of poverty through the diversification of household
income and the multiplier effects on the economy.
Furthermore, remittances can significantly improve the
welfare of children and families left behind by providing
additional resources for on-going needs. Research
has shown that remittances can play a pivotal role in
improving education, health, nutrition and overall living
conditions of those left behind.

However, while remittances can reduce the depth
and severity of poverty by raising household income
among those who receive them, the overall effects are
not distributed evenly within countries of origin. Indeed,
migration from some regions is more prevalent than
from others. In addition, the impact of remittances
depends on the economic behavior and income
allocation decisions of migrants and their families.

PsYcHosocIAl ImPActs I.
RemIttANces oN cHIlDReN
AND ADolesceNts leFt

Although remittances can increase household
income and generally benefit children economically, the
migration of parents also has the potential to generate
negative psychosocial consequences among those
left behind.

Children and adolescents left behind are by far the
most overlooked group within the migration debate.
They may be left in vulnerable situations when one
or both parents make the decision to migrate and—
depending on the age and circumstances in which they
are “left behind”—may face a number of challenges
to their emotional and physical wellbeing beyond the
economic benefits provided by remittances.

UNICEF’s country studies suggest that children
and adolescents left behind may be at greater risk of
abuse and domestic violence, drug abuse, teenage
pregnancy, psychosocial dysfunction and criminal
behaviour. They may also experience emotional
deprivation when left in the care of much older relatives,
as generational differences can be an obstacle to
effective communication and emotional support that is
crucial to their healthy and prosperous development.
They may also experience difficulties with their peers,
who may resent the benefits they receive as a result
of remittances.

RemIttANces AND geNDeRII.

The gender analysis of the social impacts of
remittances has identified the pivotal role of gender
norms, which impacts on the gender and age
composition of migrants; on the employment situation
in destination countries; and on the volume, use
and impacts of remittances. Indeed, gender norms
influence the decisions about who—men, women,
or young adults—will migrate, and clearly play an
important role in labor demands in host countries (e.g.
the increasing demand for female careworkers).

Furthermore, the gender of the migrating parent
can have significant impacts for children left behind.
UNICEF country studies indicate that the migration
of mothers generally has severe effects on children’s
emotional, psychological and physical health. Girls
left behind must frequently take on full household
responsibilities, as they “inherit” their mother’s

3. tHe ImPAct oF RemIttANces oveR FAmIlIes leFt beHIND

Remarks by Ms. Kirsi Madi
Deputy Regional Director for CEE/CIS, UNICEF

on behalf of the Chair of the Global Migration Group

1) New ThiNkiNg surrouNdiNg remiTTaNces aNd developmeNT

2) maximisiNg The developmeNT impacT of remiTTaNces

traditional roles. In several countries the research also
found that girls in left-behind households are highly
vulnerable to situations of sexual exploitation and

Minimizing the vulnerabilities, raising awareness
about the issues facing children, adolescents and
women affected by migration, and empowering them
to deal with these challenges, has never been more
pressing than today.

ImPAct oF tHe globAl III.
leFt beHIND

The global financial crisis, along with the food and
fuel crises which have affected most parts of the
world, has left us with valuable lessons and important
and difficult challenges lying ahead. The crisis severely
impacted the capacity of migrants to send money
back home, further deepening the vulnerabilities of
families left behind in many countries of origin.

While remittance flows have started to grow after
a significant decline in 2009, the crisis and its effects
on remittances are far from over. The uncertainty
associated with job creation in major migrant
destinations, and in industries where migrants tend to
be employed, remains high. In a fragile global economy,
high unemployment levels can affect the frequency and
amount of remittances sent back home. Experience
from previous crises indicates a range of potential
negative impacts on children such as cut backs on
children’s education and health-related expenses. We
know only too well what this means for children in the
immediate and longer term.

lookINg beYoND ecoNomIc Iv.

It is our view that any analysis of the impacts of
remittances on development has to go beyond
economic explanations so that potential vulnerabilities
can be adequately addressed.

Today’s meeting is intended to highlight four issues
in particular: (1) opportunities and challenges that
future trends on migration and remittances pose;

(2) the impact of remittances on poverty reduction,
economic growth and development; (3) facilitating
the flow of remittances to decrease the risk or cost of
sending money back home; (4) addressing the barriers
to remittance flows through facilitating a human rights-
based temporary migration.

These issues this meeting is addressing are
immediate and real for children, adolescents and their
families impacted by migration. However, we must
recognize that they are by no means a comprehensive
list of concerns. As mentioned earlier, one often
overlooked issue is that of children left behind and how
they are affected by remittances beyond its economic

The positive impacts of migration and remittances
can only be harnessed through sound economic and
social policies in countries of origin and countries of
destination. These policies must be based on the
basic principles of equity and social inclusion and must
protect the rights of migrants and those left behind.
UNICEF experience shows that their impact is greater
when they help families to improve their quality of life
beyond economic indicators.

Mr. Chair,

This year, we celebrate the International Year of
Youth, which promotes dialogue and understanding.
In that context, I would like to reiterate that age and
gender perspectives need to remain at the core of our
discussion of development in the context of migration.
It is crucial to keep in mind that greater efforts are
needed to address emerging challenges posed
by migration associated with climate change and
urbanization, particularly in the context of developing

As the Chair of the Global Migration Group during
the first half of 2011, UNICEF wishes to thank UNCTAD
for organizing this very important dialogue that no
doubt will yield valuable, practical perspectives from
countries and stakeholders. UNICEF looks forward to
working effectively with Member States, civil society
and GMG partners to identify comprehensive strategies
and operational responses to address the challenges
and maximize the positive impact of remittances on


The GMG looks forward to the recommendations
that will stem from this Experts Meeting and trusts
that these will be very pertinent to the Member State
discussion during the General Assembly informal

thematic debate and the Practicioners Symposium
hosted by the Global Migration Group in May.

Thank you.

1) New ThiNkiNg surrouNdiNg remiTTaNces aNd developmeNT

2) maximisiNg The developmeNT impacT of remiTTaNces

(Transition Page to be created according to the cover)

parT four

regioNal aNd couNTry experieNces iN

chaNNelliNg remiTTaNces for humaN

aNd ecoNomic developmeNT

1) New ThiNkiNg surrouNdiNg remiTTaNces aNd developmeNT

2) maximisiNg The developmeNT impacT of remiTTaNces

Remittances and its catalyst role by impacting on
the development of low-income countries have been
receiving increasing attention by the international
community, academia and media in recent years. For
nationals of the African, Caribbean and Pacific (ACP)
Group of States - which brings together 79 countries
from the six ACP regions – remittances and migration
represent an important livelihood strategy and driver of
development, increasingly included on the forefront of
governments’ political and programmatic agenda.

A sNAPsHot oN I.
RemIttANces INFloWs to
AcP couNtRIes

According to World Bank estimates, in 2010 the global
remittance flows have exceeded USD 440 billion with
the large majority (USD 325 billion) going to developing
countries (World Bank, 2010a). Considering that ACP
countries make up more than half of the developing
countries119 and given the increasing number of
migrants moving towards high-income countries, one
would expect significant amounts of remittances sent
back home. However, according to officially recorded
remittances, from the total amount of remittances
sent to developing countries in 2010 only about 9
per cent were transferred to ACP countries. On a
global scale, in 2010 ACP countries are believed to
only having received 6.7 per cent of all remittances
worldwide, equal to almost USD 30 billion.120 About
one third of this amount is estimated to have been
received by Nigeria alone (USD 9.9 billion), the only
ACP country which appears among the top ten
remittance-receiving countries worldwide. However,
there are different factors indicating that these figures
might underrepresent the actual flows, such as the
lack of capacity to capture remittances flows or the
transfer through informal channels and of goods.

A different picture appears when looking at remittances
flows as a share of the Gross Domestic Product (GDP)
of a remittance-receiving country: among the global top
ten remittance-receiving countries (as a percentage of
the GDP) four were ACP countries (Tonga, Lesotho,
Samoa and Guyana - with the first two, 28% and 25%
respectively, second only to Tajikistan; see figure 8),
and 13 ACP countries were placed within the global
top 30. Five of these ACP countries are located in
West Africa which receives the largest amount of
remittances of all six ACP regions121 with about 43 per
cent of all funds received from ACP migrants; more
than a quarter went instead to ACP countries in the
Caribbean (World Bank, 2010a).

A comparison between the inflows of remittances
with the Official Development Aid (ODA) highlights the
low ratio of ACP countries in Central Africa compared
to the countries in the other five ACP regions. This
is partially due to the lack of data reported for half
of the countries.122 In West Africa, ODA still exceeds
remittances with some notable exceptions (i.e. Cote
d’Ivoire, Nigeria, Senegal and Togo), while in Southern
Africa remittances received by ACP countries surpass
ODA (except in the case of Namibia) and in the
Caribbean remittances inflows are generally much
higher than ODA (exceptions are Suriname and St.
Vincent and the Grenadines) (Gallina, 2010 based on
UNDP, 2009 data).

soutH-soutH mIgRAtIoN II.

Developing countries are commonly seen as a source
rather than as a destination of migrants. However,
existing figures highlight the importance of intra-
regional movement: in 2010, “there were almost as
many migrants from developing countries living in

4. RemIttANces IN tHe AFRIcAN, cARIbbeAN
AND PAcIFIc couNtRIes118

Susanne Melde, Research Officer
ACP Observatory on Migration

Rudolf Anich, Research Officer
ACP Observatory on Migration


other developing countries (73 million) as migrants
from developing countries living in developed
countries (74 million)”.123 Human mobility within sub-
regions and continents has always been important,
but was seldom recognized as such. This applies in
particular to countries located in sub-Saharan Africa:
in 2010, 63 per cent of the Sub-Saharan migration is
intra-regional, directed mainly towards countries such
as South Africa, Burkina Faso or Kenya (World Bank,

Accordingly, remittances flows between developing
countries are likely to play an important role as well,
thus requiring an increasing focus on South-South
remittances. In particular outflows have been largely
overlooked, and little evidence is currently available
on the true extent of outflows. Indeed, some ACP
countries are important regional immigration hubs
and, consequently, record high figures in remittances
outflows. In Tanzania, for instance, in 2009 figures for
remittances outflows are estimated to be more than
three times higher as those for inflows (USD 17 million
in outflows compared to USD 54 million in inflows).124
Similarly, the amount of remittances sent from South
Africa in 2009 (USD 1.2 billion) exceed inflows

highlighting its importance as an immigration country
in the region.125 In some cases, remittances outflows
can be generated also in absence of large shares of
migrants, such as in developing countries rich of natural
resources where high profits from the mining industry
represent the large majority of remittances outflows.
Overall, officially recorded remittances outflows from
ACP countries are about eight times smaller than
inflows, with an estimation of USD 4.1 billion for 2009,
representing only 1.5 per cent of the global total and 7
per cent of remittances sent from developing countries
(equal to USD 58.7 billion).126 Most informal and in-
kind transfers, such as consumer items and food, are
not reflected in these figures.

Similarly as for inflows, for some ACP countries outflows
seem to play a more significant role if expressed as a
share of the GDP: Guinea-Bissau, Guyana and Tonga
appeared within the ten leading remittance-sending
countries in 2009 (5.4%, 5.2% and 4.3%, respectively;
see figure 9) and among the top 30 remittance-sending
five additional countries are part of the ACP Group of
States (i.e. Uganda, Seychelles, Jamaica, Togo and
Belize) (World Bank, 2010b).

Furthermore, when comparing 2009 figures for

figure 8. Top ten remittances-receiving countries as share of the GDp, 2009

Sources: World Bank, 2010a.











Tajikistan Tonga Lesotho Moldova Nepal Lebanon Samoa Honduras Guyana El Salvador







f G


1) New ThiNkiNg surrouNdiNg remiTTaNces aNd developmeNT

2) maximisiNg The developmeNT impacT of remiTTaNces

remittance outflows from ACP countries with those
registered in 2000, the relevance of outflows appears
even more clearly: in less than a decade remittances
outflows have increased almost ten-fold (USD 4.1
billion and USD 477 million, respectively). This
could be linked to enhanced capacities in collecting
remittances data, improved access to money transfer
providers and the high number of migrants moving to
or transiting in ACP countries.

When considering South-South flows one would
expect that the amount of remittances sent per migrant
are smaller compared to North-South remittances due
to the lesser wage differentials among ACP countries
and other developing countries. However, the size
of remittances sent appears to depend more on the
living costs in the country of origin rather than on the
country of destination (Page and Plaza, 2006). Thus,
the amount of remittance sent per migrant between
ACP countries might actually diverge less than
expected from the one being sent from high-income

Furthermore, a recent household study found out
that the use of remittances can significantly differ

depending from where the remittances have been
sent. In Nigeria, for instance, remittances received from
other African countries were mainly used for business
purposes and food items, while inflows coming from
outside Africa were devoted to the purchase of land
and education. In Kenya, instead, remittances from
Africa were primarily used for the construction of new
houses, while those originating outside the continent
were utilized for investment (World Bank, 2011). Such
differences highlight the contributions remittances
can make to the well-being of households but also
stress diverging needs ACP countries might have
when seeking to foster the flows of remittances from

Speaking of South-South flows, it should also be
mentioned that although many ACP countries are
characterized by large internal movements, their
impact on poverty reduction and development has so
far been largely overlooked. Consequently, only limited
information is available on internal remittance flows
in ACP and other developing countries. The case of
Kenya, for instance, highlights the need for increased
attention by researchers and policy makers on internal
flows: in 2009 more than half of all respondents to

figure 9. Top ten remittances-sending countries as share of the GDp, 2009

Source: World Bank (2010a).








Luxembourg Lebanon Oman Maldives Kuwait Bahrain Saudi Arabia Guinea-

Guyana Tonga








f G



a household survey on financial access conducted
by the Central Bank of Kenya and Financial Sector
Deepening (FSD) Kenya claimed to have received
internal transfers, compared to 16.5 per cent in

RemIttANces’ tRANsFeRs

Remittances patterns between developing countries
compared to flows from developed to developing
countries could differ significantly when it comes to
the channels used to transfer remittances. Although
the size of informal remittances is unknown, thus
not appearing in official statistics, it is believed that
remittance figures to developing countries could be up
to 75 per cent higher if the informal money transfers
would be accounted for in the official statistics (Freud
and Spatafora, 2005). In the case of many ACP
countries this share is likely to be even higher: Central
Africa is estimated to be the region with the largest
share of informal intra-regional transfers (Gallina,
2010); in Southern Africa informal channels are the
preferred option (being as high as almost 90 per
cent in Lesotho) (Crush et al., 2010) or estimated to
be the almost exclusive way in studies of the South
Africa-Zimbabwe corridor (Kerzner, 2009); informal
remittances flows are believed to be as high as 80 per
cent of all flows to Uganda (UN-OHRLLS and OSAA,
2006); and 60 per cent of those surveyed in a study
on the Tanzania-Uganda remittance corridor, indicated
they prefer sending money through informal systems,
such as bus drivers, money changers and sex workers
crossing the border regularly (IOM, 2009a). For other
sub-Saharan countries informal transfers are largely
unknown, thus not reported in official remittance
transactions in their Balance of Payments, including
countries such as the Central African Republic, the
Democratic Republic of the Congo (DRC), Somalia
and Zimbabwe that probably receive large remittance
flows (Mohapatra et al., 2010).

In addition to informal financial flows, goods such
as consumer and food items, are also transferred to
families and relatives in origin communities. These
items are usually not captured in official statistics nor
in remittances surveys.

Higher percentages can partially be explained by
differences in the challenge of financial inclusion i.e.
access and use of financial products by migrants (such

as savings accounts, financial literacy, investment
schemes etc.). While in high-income countries
banks and other financial institutions compete in
offering the most attractive product financially viable
for both migrant and remittance-sending agency,127
in many developing countries basic infrastructures
and networks of financial institutions operating in
their country still need to be created or substantially

Money transfers between two countries lacking a
well-functioning and diversified financial market -
favoring competition and thus more attractive prices
for customers - tend to be informal and costly. Indeed,
while transfer costs from developed to developing
countries have been reduced significantly during the
last decade, sending money between developing
countries usually implies the loss of a significant
part of the amount remitted (IFAD, 2010). Indeed,
remittances costs can be as low as USD 5 between
the United States of America and Mexico, and USD
1 between Gulf Cooperation Council (GCC) countries
and South Asia, while sending remittances between
sub-Saharan countries can cost between 5 and 15
per cent of the amount remitted. Most expensive sub-
Saharan remittances corridors include Burkina Faso-
Ghana, Nigeria-Ghana and Nigeria-Benin with costs
above 10 per cent of the amount remitted (World
Bank, 2011). Such high transfer costs, in particular
intra-regionally, remain a key obstacle for migrants
to sending money through official channels (IFAD,
2010). Possible explanations for high costs include
the requirement of Money Transfer Operators (MTOs)
to be attached to a commercial bank, the mandatory
conversion of remittances into the national currency
or legislation on exchange rates, banks controlling the
market, etc.

Besides, high transfer costs are faced in particular
by female migrants as often obliged to use informal
channels due to difficulties in accessing formal transfer
means, in addition to discriminations related to wages
and access to property. Such gender-based inequities
observed in some high-income countries are likely to
be even more pronounced in developing countries. In
the Southern Africa region, for instance, women send
significantly less due to lower wages and different
employment status (or lack thereof) (Dodson et al.,

A greater competitiveness in the formal sector can
reduce significantly transfer costs such as it was the
case in Nigeria thanks to the prohibition of exclusivity

1) New ThiNkiNg surrouNdiNg remiTTaNces aNd developmeNT

2) maximisiNg The developmeNT impacT of remiTTaNces

contracts of MTOs (Kerzner, 2009; Irving et al., 2010).
However, reducing costs and increasing awareness
may not necessarily lead to higher amounts of
remittances as the decision to remit remains primarily
an individual decision of the migrant which can lead to
fluctuations in the amount remitted.

Combined with awareness raising campaigns
highlighting different transfer options to migrants
(such as information consumer charts and transfer-
costs-comparisons websites), an opening of the
money transfer market to more competitors also
increases the number of access points and thus the
amount of remittances sent through formal channels.
For instance, a recent project in West Africa lead by
the Universal Postal Union (UPU) and the International
Fund for Agricultural Development (IFAD) resulted in
the creation of 355 new post offices in rural areas
which in turn increased of remittances inflows by
over 100 per cent to those areas between 2009 and
2010 (Nanba, 2011). More innovative options aiming
at facilitating access include mobile phone networks.
Their coverage is usually more extensive compared
to internet (i.e. online money transfers); however,
regulatory obstacles hamper the use of mobile phones
on a broad scale.

ResIlIeNce DuRINg tHe Iv.
globAl ecoNomIc AND

The global economic and financial crises over the past
years have highlighted the resilience of remittances
as compared to other financial flows such as Foreign
Direct Investments (FDI) and Official Development Aid
(ODA). Overall, remittances have shown to represent
a stable source of finance during times of crises, and
in relatively short time their growth rates were back to
those registered in pre-crisis years. This is particularly
true for ACP countries: the decline in remittances
during the 2008-2009 period was modest compared
to a 40 per cent decline in Foreign Direct Investment
(FDI), trust funds, private debt and portfolio equity flows
to developing countries (Gallina, 2010; Mohapatra et
al., 2010). From 2008 to 2009, remittances to ACP
States decreased by 4.1 per cent, which is lower than
the world average (-6.1%) or to developing countries
overall (-5.5%). Remittances increased by 4 per cent
between 2009 and 2010 indicating the recovery of
ACP countries from the crises.128

One would expect a similar resilience also for
remittances outflows as many ACP countries were
less affected at home by the economic crisis due to a
lower integration in the international financial market.
Instead, outflows decreased by 16.8 per cent between
2007 and 2008, indicating that ACP countries were
affected to a larger extent by the financial crises
initiating the global economic recession.129 This can
partially be explained by the contraction of economic
key sectors attracting foreign investment and thus
generating high profits leaving the country such as the
mining and oil industries in Angola. However, starting
from 2008 remittance outflows increased again by
about 16 per cent and recovered, like remittance
inflows, to pre-crisis levels.

Remittances’ countercyclical nature places them as
an invaluable source of external funding during shocks
and after disasters, for unexpected expenditures, such
as health emergency care and funerals, and for areas
affected by environmental degradation and can thus
help to mitigate negative impacts (UNDP, 2009; UN
OHRLLS and OSAA, 2006). Furthermore, the quick
recovery of remittances flows is particularly essential
for countries relying on this external source of income
as a mean to foster poverty reduction. Remittances
improve the standard of living and family welfare,
access to food, water, health care and education,
in particular for children, and thus impacting on
fundamental human rights (Bakewell, 2009; Ghosh,
2006; Luthria, 2009). This is the case for many ACP
countries: in Uganda, for instance, the percentage
of poor people decreased by 11 percentage points
thanks to regular inflows of remittances (Ratha and
Mohapatra, 2007). In Kenya, instead, a survey found
an increased dependence on remittances as sources
of income, with 21 per cent of surveyed Kenyans in
2009, up from 14.3 per cent in 2006; for young people,
these transfers have become the main income (60.1%
in 2009, 54.6% in 2006; Central Bank of Kenya and
FSD Kenya, 2009). Similarly, for almost 40 per cent
of the respondents in a household survey in Angola
remittances represent an essential (additional) source
of income and 16 per cent of households entirely
depend on remittances as income (Alvarez, 2010).
Overall, remittances contribute only in part to the total
income of a household (in average for developing
countries about 60% of all earnings) but it is likely that
in some ACP countries the dependency rate is much

Furthermore, the resilience of remittances shown


during the global economic crisis might increase the
number of households trusting in continuous money
flows from abroad and thus entirely rely upon them.
Such a development would expose in particular
children and other vulnerable family members (as
remittances increase household income to cover
basic consumption needs as well as educational and
health expenses) but also increase the social pressure
on the migrants often forcing them to live in precarious
conditions to save as much money as they can for
their families and relatives at home. Households relying
on remittances might also impact on existing social
structures as receiving remittances may increase
or decrease inequality between households with a
migrant and those without. On the other hand, an
increase number of households receiving remittances
might generate economic activities through (increased)
demand for goods and services through more available
income and enabling access to micro- and small
credits for small-scale entrepreneurs (UN-OHRLLS
and OSAA, 2006).

RecommeNDAtIoNs FoR v.
PolIcY INteRveNtIoNs
FosteRINg tHe ImPAct
oF RemIttANces oN tHe
DeveloPmeNt oF AcP

Remittances may be the most tangible part of the
migration–development nexus in ACP countries. When
considering possible initiatives aiming at fostering the
development impact of remittances, two aspects
should be kept in mind from the very beginning: i)
remittances are private monies; and ii) remittances are
much more than financial flows.

Since 2009, the International Monetary Fund (IMF)
considers remittances being composed of two
components in their Balance of Payments Statistics:
(1) ‘compensation of employees’ and (2) ‘personal
transfers’.130 As such, remittances remain private
capital or in-kind flows and no recipient household in
ACP countries can be obliged to use its private monies
for the development of the country. Remittances are
not a substitute for States’ responsibility to promote
development, provide employment opportunities
and guarantee satisfaction of basic needs to its own
population. National development should not be
pushed by ACP countries’ governments by motivating

its nationals to emigrate in order to increase remittances
inflows. They are not a substitute for public flows such
as Official Development Assistance (ODA) targeted at
the poorest parts of societies, debt relief or Foreign
Direct Investment (FDI) in the private sector.

Furthermore, remittances do not just concern financial
transfers, but can include other kinds of transfers by
migrants. So-called “social remittances” refer to a
wide range of contributions - such as innovative ideas,
networks, knowledge, political values, policy reforms,
and new technological skills, etc. – transferred by
migrants and diaspora members to their country of
origin both temporarily or permanently.

One area of intervention concerns the collection and
analysis of remittances data. Despite the overwhelming
attention granted to remittances, data collection still
faces several shortcomings (IFAD, 2007). Capacities of
national statistical offices need to be enhanced, data
collection and sharing of information requires better
coordination at national level (within the central bank
and among different national entities) and with major
ACP destination countries. Household surveys on
remittances can help to learn more about informal flows
and sending patterns and eventually lead to adapted
policy development. Examples include the Benin-led
proposal for an International Migrant Remittances
Observatory for Least Developed Countries (LDCs)
and the Africa Institute for Remittances. More technical
tools, such as the T21 model, can produce different
scenarios for different policy options131 (IOM, 2009b).

Another area includes initiatives aiming at facilitating
the transfer of remittances mainly by providing access
to money transfer channels, promoting financial literacy
programmes and fostering informed decisions through
information campaigns. Regulating financial operators
involved in remittance transfers including banks and
new service providers such as mobile MTOs, should
be strengthened with a view to decreasing the costs
of sending money (Irving et al., 2010). Self-regulation
of the remittance service providers (RSPs), such
as through an international remittances costumer
charter,132 can help to promote transparent markets
and adequate consumer protection – especially as
mistrust in financial institutions is often cited as reason
for remitting informally - and is easier to implement than
statutory regulation (Fortescue, 2009). Such initiatives
should take into account that access to formal
channels can be particularly problematic for specific
migrant groups. For instance, legislative provisions
requiring migrants to provide documentation on their

1) New ThiNkiNg surrouNdiNg remiTTaNces aNd developmeNT

2) maximisiNg The developmeNT impacT of remiTTaNces

legal status in the host country oblige migrants with
irregular status to find somebody able to send on
their behalf. Women tend to remit higher parts of their
salary and more regularly, and spend more on health
and education, thus access to financial services and
financial tools should be tailored to these specific

Other activities aim at providing information on how
to use remittances channels. A good example for
financial literacy is the project implemented by IOM
with the bank BANPRO in Nicaragua, where 4,000
people benefit from a personal financial educational
session on the importance of remittances, budgeting,
savings, credit and insurance. Raising awareness
between migrants on operators and costs of money
transfers are offered by different websites comparing
costs such as the World Bank website comparing
the costs of transfers in USD (http://remittanceprices.
worldbank.org). Transfer-costs-comparison websites
seems to be most reliable if the information is provided
directly by the consumers rather than the institutions
(for instance www.sendmoneypacific.org, www.

Electronic transfers such as the extend mobile
technology from domestic to cross-border
remittances set up by Kenyan diaspora members
offering domestic and international mobile transfer
services,133 represent a good example of innovative
practice trying to overcome obstacles in accessing
formal transfer channels. Every fourth person in Kenya
saves on their mobile phone through the M-PESA
service operating domestically in Kenya (Central Bank
of Kenya and FSD Kenya, 2009), which indicates the
great potential to increase savings for the ‘unbanked’
part of the population. Efficient ways are needed to
link money transfers to the existing banking system.
On the one hand, being a relatively new service,
transfers through mobile phone networks need to be
adequately covered by regulations to counter money
laundry. On the other hand, Anti-Money Laundering
and Combating the Financing of Terrorism (AML-CFT)
laws often hinder formal remittance flows as they are
not clear to remittance service providers and create
confusion (Mohapatra et al, 2010).

Linking remittances to financial products represents
a third area of intervention. The key challenge is
to identify products that can be attached to an
international money transfer leading to a win-
win situation with both sides benefitting from the
transaction. Cooperation between private actors and

public authorities can help to create a more sustainable
relationship with financial institutions by, for instance,
linking remittances to housing loans, like the Banque
Commerciale du Burkina (BCB Burkina Faso) and the
Banque de l’Habitat du Mali (Alvarez, 2009). Home
countries can offer investment information and create
attractive portfolios like the Senegalese ‘Caravane
des PMEs’ (SME mobile unit; IOM, 2009a) and the
diaspora investment website of the Government of
Cape Verde (http://ie.ic.cv/). Other options include
the provision of savings accounts, pension funds and
microfinance products, as recommended for Timor-
Leste (Shuaib, 2008; Alvarez, 2009). In Cape Verde the
special Savings Account for Emigrants offers higher
interest rates to emigrants investing or buying in Cape
Verde (IC, 2006). It is estimated that having a savings
account in the origin country can increase remittances
by up to 25 per cent (Orozco, 2011).

Diaspora engagement by channeling remittances into
community projects is another area requiring particular
attention by ACP countries. Important initiatives
promote community development by pooling together
remittances, such as ‘hometown associations’ (HTAs)
of Haitian migrants in the United States of America
or local infrastructure development in the Senegal
River Valley in West Africa stretching across Guinea,
Mali, Mauritania and Senegal (Bakewell, 2009;
Ghosh, 2006). Other forms of diaspora contributions
to their origin country and communities include
the recognition of market and trade opportunities,
including of ‘nostalgia’ goods; investment in capital
markets (such as deposit accounts, securitization
of remittance flows, transnational loans, diaspora
bonds, diaspora mutual funds and micro-insurance);
diaspora tourism; donations; volunteering returns and
advocacy roles, such as through voting from abroad
(Newland, 2010). Social networks, supporting the
traditional transnational networks of migrants, play
an increasingly important role. Diaspora contributions
go beyond remittances and include the transfer of
knowledge, skills, ideas and technology, diaspora
bonds and other options for diaspora engagement
should be strengthened (Newland, 2010; Mohapatra
et al, 2010).


In conclusion, one should first of all stress that
remittances remain private monies and that they


should neither replace government’s responsibility to
foster national development nor serve as a substitute
for official development cooperation. Policies and
programmes on migration and remittances should
be based on the protection of human rights and be
tailored to the needs of both men and women as their
sending patterns and transfers needs vary.

Secondly, to enhance the potential development impact
of South-South remittances and the contributions
of diaspora members from and in ACP countries,
it appears of upmost importance to promote data

collection efforts leading to more evidence-based
policy making as well as to develop innovative practices
maximizing the outcomes of remittances’ initiatives for
the benefit and wellbeing of all ACP nationals.

Finally, as the impact of remittances on human
development greatly depends on an enabling political,
economic and legal environment, both governments
and the international aid community should give
more attention on how to foster existing institutional
capacities in ACP countries.

1) New ThiNkiNg surrouNdiNg remiTTaNces aNd developmeNT

2) maximisiNg The developmeNT impacT of remiTTaNces


Alvarez Tinajero, S.P ( 2010). Angola: A Study of the Impact of Remittances from Portugal and South Africa. IOM,
Migration Research Series, No. 39, IOM.

IOM and the Italian Development Cooperation (2009). Enquête sur l’approche des banques et des institutions
financières pour favoriser les transferts de fonds et les investissements des femmes migrantes : Burkina Faso
et Mali.

Bakewell, O. (2009). South-South Migration and Human Development: Reflections on African Experiences.
Human Development Research Paper 2009/07, UNDP.

Crush, J., Dodson, B., Gay, J., Green, T. and C. Leduka (2010). Migration, Remittances and Development in
Lesotho. Migration Policy Series No. 52, Southern African Migration Programme, (SAMP).

Dodson, B., Simelane, H., Tevera, D., Green, T., Chikanda, A. and F. de Vletter (2008). Gender, Migration and
Remittances in Southern Africa. Migration Policy Series No. 49, Southern African Migration Programme,

Fortescue, S. (2009). An International Remittances Customer Charter: An Update. Presented at the International
Conference on Remittances, organized by the Italian Ministry of Foreign Affairs and the World Bank, 9
November 2009.

Freud, C. and N. Spatafora (2005). Remittances: Transaction Costs, Determinants, and Informal Flows. World
Bank Policy Research Working Paper No. 3704.

Gallina, A. (2010). Human Mobility Report 2011. Migration and Human Development in African, Caribbean and
Pacific Countries. The ACP Secretariat.

Ghosh, B. (2006). Migrants’ Remittances and Development. Myths, Rhetoric and Realities. IOM, Geneva, and
The Hague Process on Refugees and Migration.

Instituto das Comunidades (IC), Ministério dos Negócios Estrangeiros, Cooperação e Comunidades, Cape Verde
(2006). Manual do Emigrante.

IFAD (2010). Travailleurs migrants et transferts de fonds vers l’Afrique. Marchés, environnement porteur et
perspectives des transferts de fonds. IFAD, Rome.

IFAD (2007). Travailleurs migrants et envois de fonds. Flux mondiaux de fonds envoyés vers les pays en
développement et en transition. IFAD, Rome.

IMF (2009). Balance of Payments and International Investment Position Manual. 6th edition (BPM6).

IOM and UPU (2009a). Supporting an Affordable Electronic Remittance Transfer System Between Tanzania and
Uganda. IOM-Universal Postal Union – Pan African Postal Union Pilot Project Report, prepared by Dr. H.
Bohela Lunogelo.

IOM (2009b). The MIDA experience and beyond. Operationalizing Migration for Development Across Regions.

Irving, J., Mohapatra, S. and D. Ratha (2010). Migrant Remittance Flows. Findings from a Global Survey of
Central Banks. World Bank Working Paper No. 194.

Kerzner, S. (2009). Cash and carry: understanding the Johannesburg – Zimbabwe remittance corridor. Discussion
document prepared for the FinMark Trust, Centre for Financial Regulation and Inclusion (Cenfri).

Luthria, M. (2009). The Importance of Migration to Small Fragile Economies. Human Development Research
Paper 2009/55, UNDP.

Mohapatra, S., Ratha, D. and A. Silwal (2010). Outlook for Remittance Flows 2011-12. Recovery after crisis, but
risks lie ahead. Migration and Development Brief 13. Migration and Remittances Unit, World Bank.


Nanba, S. (2011). Maximizing the Development Impact of Remittances – Facilitating Flow of Remittances.
Presentation at the UNCTAD Expert Meeting on ‘Maximizing the Development Impact of Remittances’,
Geneva, 14 February 2011.

Newland, K. (ed.) (2010). Diasporas. New Partners in Global Development Policy. Migration Policy Institute.

Orozco, M. (2010). Migration, Remittances and Development in Latin America and the Caribbean. Presentation at
the UNCTAD Expert Meeting on ‘Maximizing the Development Impact of Remittances’, Geneva, 14 February

Page, J. and S.Plaza (2006). Migration Remittances and Development: A Review of Global Evidence. Journal of
African Economies, Volume 15, Issue suppl. 2, pp. 245-336.

Reinke, J. (2007). Remittances in the Balance of Payments Framework: Current Problems and Forthcoming
Improvements’, Seminar on Remittance Statistics. The Center of Excellence in Finance, Ljubljana, Slovenia,
26 February – 2 March 2007, IMF, Statistics Department.

Shuaib, F. (2008). Timor Leste Country Report. Monash Asia Institute, Institute for Regional Development,
University Of Tasmania. Foundation for Development Cooperation.

UNDP (2009). Overcoming barriers: Human mobility and development. Human Development Report 2009.

UN Office of the High Representative for the Least Developed Countries, Landlocked Developing Countries and
Small Island Developing States (UN-OHRLLS) and Office of the Special Advisor on Africa (OSAA) (2006).
Migrant workers’ remittances in Africa and LDCs: a new development paradigm. Issues Paper.

World Bank (2011). Leveraging Migration for Africa – Remittances, Skills and Investments.

World Bank (2010a).The Migration and Remittances Factbook 201. Migration and Remittances Unit.

World Bank (2010b). ‘Data Notes’. The Migration and Remittances Factbook 2011. Migration and Remittances

1) New ThiNkiNg surrouNdiNg remiTTaNces aNd developmeNT

2) maximisiNg The developmeNT impacT of remiTTaNces


Contribution of the African, Caribbean and Pacific (ACP) Observatory on Migration for the United Nations 118
Conference on Trade and Development (UNCTAD) publication following the two-day-expert meeting on
‘Maximizing the Development Impact of Remittances’ held in Geneva on the 14-15 February 2011 with
the aim to feed into the informal debate on International Migration and Development in May 2011 and the
second UN HLD Dialogue on Migration and Development to be held in 2013. The ACP Observatory is an
institution designed to produce data on South-South ACP migration for migrants, civil society and policy-
makers and enhance research capacities in ACP countries for the improvement of the migrants’ situation
and the strengthening of the migration-development nexus. The Observatory is an initiative of the ACP
Secretariat, funded by the European Union and with the financial support of Switzerland. This publication
has been produced with the financial assistance of the European Union. The contents of this publication are
the sole responsibility of the authors and can in no way be taken to reflect the views of the Secretariat of the
African, Caribbean and Pacific Group of States (ACP), the International Organization for Migration (IOM) and
the other members of the Consortium of the ACP Observatory on Migration, the European Union nor the
Swiss Federation.

According to the World Bank classification (see http://go.worldbank.org/QGUCPJTOR0) as the source of 119
the remittances figures. The same applies to the UNDP categorization of developing countries, being all
countries except for the ones with a very high Human Development Indicator (see http://www.acpmigration-

Own calculations based on World Bank (2010a). A complete aggregation and comparison of data for ACP 120
States is not possible. Despite the guidelines provided by the International Monetary Fund (IMF) (Guide for
Compilers and Users of International Remittances Statistics (2009), available remittances data varies between
countries due to, for instance, differences in methodology (e.g. use of citizenship instead of residency status)
and non-inclusion of data from other operators besides banks, such as money transfer operators (MTOs,
e.g. Western Union), post offices and mobile MTOs (Irving et al (2010); World Bank, 2010b). For some ACP
countries no data was available at all: Angola, the Bahamas, the Central African Republic, Chad, Cook
Islands, the Democratic Republic of the Congo (DRC), Cuba, Equatorial Guinea, Eritrea, the Marshall Islands,
the Federated States of Micronesia, Nauru, Niue, Palau, Somalia, Timor-Leste, Tuvalu and Zimbabwe.
Therefore, every fifth ACP country is not covered in these figures. Together with the unknown extent of
informal flows, remittances inflows in ACP countries are likely to be considerably higher.

The six ACP regions include the Caribbean, Western Africa, Central Africa, Eastern Africa, Southern Africa 121
and the Pacific.

Central African Republic, Chad, DRC and Equatorial Guinea.122

United Nations General Assembly (2002). 123 International migration and development. Report of the Secretary-
General. Document A/65/203.

Own calculations based on World Bank (2010b).124



The simply transfer of money often not enough to make remittances “financially viable” for a financial institution. 127
There is a need to attach the money transfer to a service in order to create a longer relationship between the
sender/receiver and the financial institution (e.g. saving account, pension funds, financial schemes…). For
instance, OXFAM/IAMFI combines remittances transfers with microcredit projects.

Own calculations based on World Bank, 2010b. No data available for 18 ACP countries.128



In addition, three items are considered supplementary, but not mandatory for remittances statistics: personal 130
remittances (the sum of personal transfers and net, or ‘take home’, compensation of nonresident workers),
total remittances (the sum of personal remittances and social benefits), and total remittances and transfers to
nonprofit institutions serving households (NPISHs, also includes donations). They are cumulative measures
of different items. See IMF (2009b) and Reinke (2007).

For further information see: http://publications.iom.int/bookstore/index.php?main_page=product_131

The Bank for International Settlements’ and the World Bank’s General Principles (2007) provide a guiding 132
framework: http://siteresources.worldbank.org/INTPAYMENTREMMITTANCE/Resources/New_Remittance_


1) New ThiNkiNg surrouNdiNg remiTTaNces aNd developmeNT

2) maximisiNg The developmeNT impacT of remiTTaNces


Based on recent experiences of China’s coastal areas,
especially those of Fujian Province in China, this paper
explores the links between migration and development
of source areas, and the roles of remittances in such
links. The paper examines some major characteristics
of recent migration-related development processes
in the coastal areas of China, including the important
role of overseas Chinese and non-mainland Chinese134
in linking the hometowns to the global networks,
the importance of migrant business networks, the
enthusiasm of international and cross-border migrants
from the coastal areas of China in sending remittances
to and investing in their hometowns, and the adoption
of certain local development strategies to bring the
developmental potential of migrants into full play while
avoiding the negative effects of migration such as the
development of the “culture of migration”. The paper
suggests that the experiences of overseas Chinese
and non-mainland Chinese in the coastal areas have
important implications for policy making regarding
migration and the development of migrant source
areas, and can be shared by other migrants and their
places of origin.


In recent years, “forge the link between migration and
development” (GCIM, 2005: 30) has reemerged as
a major issue attracting increasing attention. This is
particularly the case for migrant source areas. Contrary
to the conventional pessimistic views on the effects of
migration on source areas, studies have increasingly
demonstrated that migration can play much bigger
and more positive roles in the development of source
areas; However, there is also increasing evidence
suggesting that the realization of such roles depends
on whether there are right conditions; if conditions
are not right, migration can also have negative effects
such as “brain drain” and the development of a

“culture of migration” (GCIM, 2005: 29) causing over-
dependence on migrant remittances. Thus, exploring
ways to maximize the positive developmental effects
of migration while minimizing its negative effects on
the source areas, and identifying conditions under
which such results of migration can be achieved, are
important tasks for both academics and policy makers
in the field.

The experiences of China since the 1980s are of
great significance in this regard, and deserve close
examination. Observers have now noted that overseas
Chinese and Chinese in Taiwan, Hong Kong and
Macao, who are or whose ancestors were migrants,
have played important roles in the tremendous
development of Mainland China’s coastal areas in
the last three decades (eg. Hugo, 2003; Zhu, 2003;
Newland and Patrick, 2004). The significances of
these developmental effects of migration in China are
particularly reflected in the following two characteristics
of the migration-related development process since
the late 1970s.

First, examining the international literature on the
effects of migration on source areas, one can find that
the role of remittances in the development of source
areas occupies a central position (Newland and
Patrick, 2004), and less has been done on diaspora’s
roles in linking places of origin to the global networks
in terms of investment, production and trade. China’s
experience since the 1980s suggests that the latter is
of great importance. Since the 1980s investments in
Mainland China made by migrants from it has been
enormous, suggesting the need of going beyond
the approach focusing on migrant remittances, and
the importance of examining migrant transnational
networks and their links with migrant places of origin.
The role of remittances in China’s coastal areas
should be also examined in such a context. As will
be demonstrated by case studies later, remittance
investment, although in small amount, played crucial
roles in the early stage of development of China’s
coastal areas, and offers new perspectives for a better
understanding of remittance roles in migrant sending

5. tHe DeveloPmeNtAl eFFects oF mIgRAtIoN AND RemIttANces:
eXPeRIeNces oF cHINA’s coAstAl AReAs

Yu Zhu
Professor, School of Geography; and Director, Centre for Population and Development Research, Fujian

Normal University, China



Second, the migration-and-remittance-related
development in China has been achieved under some
conditions not well explored in other migrant sending
areas and inadequately examined in academic research
and policy-making. One of such conditions has been
the adoption of local development strategies similar to
those of “development from below” advocated in the
1970s and 1980s (Zhu, 1999). These strategies have
been important not only in bringing the developmental
potential of migrants into full play, but also in avoiding the
negative effects of migration such as the development
of the “culture of migration” mentioned earlier. This
offers a new perspective complementing existing
studies focusing on macro-economic, administrative,
and legal environments in the source areas.

Based on recent empirical evidence from China’s
coastal areas, especially its Fujian Province, this paper
attempts to explore the developmental implications
of migration and remittances for migrant source
areas in the context of the above two characteristics.
Fujian Province is one of the major source areas for
international and cross-border migration from China.
It is estimated that the number of overseas Chinese
originating from Fujian Province is more than 10
million, accounting for a quarter to one third of the
total number of overseas Chinese; the number of
international migrants from Fujian Province from the
late 1970s to the late 1990s amounted to around
half a million, accounting for one third to half of all
international migrants from Mainland China during
the same period (Zhu, 2001) The province is the
hometowns of 1.23 million Chinese living in Hong
Kong and Macao, and the ancestral home of 80 per
cent Taiwanese compatriots. The paper will mainly
draw on the experiences of this province to shed
light on the above mentioned migration, remittances,
and developments issues, focusing on the above two
characteristics of the migration-related development

FRom RemIttANces to II.
INvestmeNt: cHINese
DIAsPoRA’s Roles IN tHe
DeveloPmeNt oF tHeIR

One of the major successes of China since the 1980s
has been attracting enormous amount of foreign

investment. During the period 1985-2008, actualized
foreign investment135 in China amounted to US$ 898
billion (China State Statistical Bureau, 1986-2009).
By the end of 2009 China has ranked as the top
developing country in attracting foreign investment
for 18 years consecutively. Various sources suggest
that overseas Chinese and non-mainland Chinese
have been the major source of foreign investment in
Mainland China, and have made major contribution to
the above success. The OECD estimate shows that
the investments from overseas Chinese in Mainland
China accounted for 45 per cent of its total FDI in 2004
(GCIM, 2005: 30). Chinese statistical data suggest
that in the period 1985–2008, investments from
Hong Kong, Macao and Taiwan accounted for 47.85
per cent of the total foreign investment in Mainland
China (China, State Statistical Bureau, 1986-2009).
The correlation between the top 10 countries in terms
of the number of overseas Chinese from Fujian and
the top 10 countries in terms of the source of foreign
investment for Fujian Province in Table 1 reflects this
important role of overseas Chinese and non-mainland
Chinese to some extent, although cautions should be
taken in interpreting the table that such correlation
is affected by other socioeconomic factors, and that
foreign investments from Hong Kong, Macao and
Taiwan are not included in table 10.

Studies at the regional level, such as that done by
the author in Jinjiang and Fuqing Municipalities of
Fujian Province for the period 1979-1996 (Zhu,
1999: 166-170), shows clearly that the sources of
foreign investment in China are closely related to the
distribution of overseas Chinese and non-mainland
Chinese originating from it. In both places, Hong Kong
ranked the first as the source of foreign investment.
This is not only because many foreign investments
from overseas Chinese and non-mainland Chinese
were made through Hong Kong, but also because
Hong Kong itself was a major destination of migration
from the two places, especially Jinjiang. Apart from
Hong Kong, Taiwan and Philippines ranked as the
second and third most important sources of foreign
investments for Jinjiang. This is closely related to
the facts that there were one million Taiwanese with
Jinjiang origin, and that 69 per cent of the nearly 1
million overseas Chinese from Jinjiang or of Jinjiang
origin were living in Philippines. Similarly, Indonesia
ranked as the second most important source of foreign
investment for Fuqing, and this is closely related to
the fact that among the 268,365 overseas Chinese
who were from Fuqing or of Fuqing origin in early

1) New ThiNkiNg surrouNdiNg remiTTaNces aNd developmeNT

2) maximisiNg The developmeNT impacT of remiTTaNces

1990s, 73 per cent of them were living in Indonesia.
Case studies on various overseas and non-mainland
Chinese investors, including both business Tycoons
in Fuqing and small business owners coming back
from Hong Kong to invest in their hometown Jinjiang,
suggest that their links to their ancestral areas played
an important role in their decision to invest in Mainland
China. Studies in Fuqing Municipality show further that
through their business networks around the world,
overseas Chinese and non-mainland Chinese have
helped to attract more foreign investors, including
large consortia such as Samsung, Siemens, Toyota,
Shell, and BHP, which had no previous links to Fuqing
(Zhu, 2000).

Fujian is not the only province with overseas Chinese and
non-mainland Chinese as the major source of foreign
investments. Studies in other southeastern provinces
of China also demonstrate that these provinces are
the major sources of out-migration to other parts of
the world, and that this has been an important reason
for the influx of foreign capital into these provinces (Lin
and Liu, 1998: 1). Thus it is not a coincidence that
during the period 1985-2003, the amount of actualized
foreign investment in the coastal region accounted
for 83 per cent of the actualized foreign investment
of US$ 506 billion in Mainland China. Although such
concentration of foreign investment in this region may
be attributed to many factors, including its favorable
location, the fact that this region is the places of origin
of most overseas Chinese and Chinese in Hong Kong,
Macao and Taiwan is an important reason. These
investments have not only contributed directly to the
economic growth, but also provided both technology
transfer from and marketing channels to the outside
world, linking the coastal region closely to the rest of
the world (Lin and Liu, 1998: 48–50).

China’s international standing as a remittance

recipient is less impressive than its performance
in attracting foreign investment. This is particularly
evident when China and India are compared in terms
of the relative roles of investment and remittances in
the two countries. As noted by Newland and Patrick
(2006), direct investment from Chinese diaspora
was “twenty times the volume of India’s” whereas
“Indian remittances were seven times the Chinese
in the 1990s”. Although there may be problems in
the accuracy of such a strong contrast due to data
reliability, there is no doubt that “diaspora relations
with the Mainland [China] follow a business model with
investment as the main vehicle” (Newland and Patrick,
2006). However, this does not mean that remittances
have not been important in China’s development
since the 1980s. On the contrary, overseas Chinese
remittances have served as important initial capital in
the early stage of development in the coastal areas,
as will be detailed in the next section. In this sense,
remittances have paved the way for the influx of foreign
investment from overseas Chinese and non-mainland
Chinese into China’s coastal areas, and the latter can
be regarded as the continuation of remittance-based
development. This remittance-investment connection,
together with its developmental effects, is also an
important characteristic of the developmental roles of
overseas Chinese and non-mainland Chinese in their

In summary, the development of China’s coastal
areas since the 1980s has been closely related to the
international and cross-border migration from China,
including that of overseas Chinese and Chinese in
Hong Kong, Macao and Taiwan in the past. These
migrants have contributed to the development of their
hometowns through their remittances, investments and
other business activities in their hometowns, with direct
investment as the main vehicle. Thus, international and
cross-border migrants have served as active agents in

Table 10. Top ten countries in terms of number of overseas chinese from fujian and actualized investment in fujian

Number of overseas chinese from fujian (000s)

Malaysia Indonesia Philippines Singapore USA Burma Thailand Japan Vietnam Canada

2,873 2,472 1,607 1,410 413 3,302 236 182 119 62

actualized investment from the country, 1979-2004 (000s, US$)

USA Singapore Japan Philippines

Malaysia Indonesia Germany Canada Thailand

3,594,670 1,650,450 1,099,430 1,057,110 746,170 514,110 263,630 229,910 188,090 170,700

Sources: Compile from Fujian Economic and Social Statistics Yearbook (2004). Fujian Statistical Yearbook (2006),
and http://www.fjxy.com/hrst/28.htm.


linking their hometowns to the increasingly important
global networks of investment, production and trade.
These important roles of international and cross-
border migrants should be greatly promoted, and their
experiences can be shared by other migrants and
their places of origin.

FAcIlItAtINg tHe PosItIve III.
AND AvoIDINg tHe NegAtIve
eFFects oF mIgRAtIoN FoR
DeveloPmeNt: tHe Roles
oF mIgRANt busINess
NetWoRks AND locAl
DeveloPmeNt stRAtegIes136

The active role of overseas Chinese and non-mainland
Chinese in the development of their hometowns have
been facilitated by some favorable conditions. As
pointed out by some observers, government policies
that create an economic environment conducive
to local investment are critical for the productive
use of remittance and active role of migrants in the
development of source areas (Massey et al., 1998:
272-4). Furthermore, like other foreign capital,
investment of overseas Chinese and non-mainland
Chinese in their hometowns is not without any negative
effects, and need to be dealt with effectively so that
such negative effects can be avoided. It is beyond the
scope of this paper to give a comprehensive review
of Chinese government policies towards foreign
investment, especially those from overseas Chinese
and non-mainland Chinese. However, a review of
some case studies in this respect in Fujian Province,
especially its Jinjiang and Fuqing Municipalities (Zhu,
1999; 2000; 2002; 2003), two major source areas of
international and cross-border migration from China,
will contribute to the understanding of this issue.

Evidence from case studies in Fujian Province at the
macro-level suggests that in addition to the generally
healthy macro-economic environment of low inflation
and reduced economic uncertainty, which encourage
productive rather than speculative investment
(Massey, et al., 1998: 273), a friendly environment
has been created for foreign investment since the late
1970s, especially the late 1980s. Foreign investment
has been increasingly used as a means of overcoming
the shortage of domestic funds and of improving
management, productivity and competitiveness, and of
increasing employment. It has been greatly encouraged

by the government and by local authorities.

Various measures have been taken to attract foreign
investment, including the setting up of Special Economic
Zones and Technological and Economic Development
Zones. These offer many economic incentives such
as tax holidays and low tax rates for investors. Other
measures include delegating the approval authority
for foreign investment projects to local governments
and simplifying the relevant approval procedures.
Governments at various levels have also made great
efforts to develop and improve infrastructure to boost
the confidence of investors for positive returns (Zhu,
1999: 101-48). These measures have certainly played
important roles in attracting investment from overseas
Chinese and non-mainland Chinese.

These government policies and measures at the
macro-level are however still not complete explanations
of successful remittance uses and investment from
overseas Chinese and non-mainland Chinese. Case
studies from Fujian Province suggest that more
attention should also be paid to the following two
aspects at the regional and community levels.

the roles of migrant business A.

The first aspect is related to the role of Chinese
migrant business networks in the development of
their hometowns. As pointed out elsewhere, the
enthusiasm of overseas Chinese and non-mainland
Chinese in investing in their hometowns is closely
related to one of their culturally-underpinned business
practices, i.e. the construction of business networks
facilitated by their ethnic, historical and cultural links
to each other and to their hometowns (Zhu, 1999:
166-70). In fact, it has been found that the business
expansion of overseas Chinese and non-mainland
Chinese into Mainland China frequently uses old family
and dialect ties (East Asia Analytical Unit, 1995: 176).
Business networks are seen as an essential part of
their success in China as well as in other parts of the
world (Tracy, 1996: 8).

Evidence from both Fuqing Municipality, where the
investment has been dominated by large overseas
Chinese consortia, and Jinjiang Municipality, where
investment has been dominated by smaller investors,
many of whom were from Hong Kong, are consistent
with the above findings. As mentioned earlier, Fuqing is
a famous hometown for overseas Chinese in Indonesia,
and some of them are very successful in business.

1) New ThiNkiNg surrouNdiNg remiTTaNces aNd developmeNT

2) maximisiNg The developmeNT impacT of remiTTaNces

These overseas Chinese maintained close links with
their hometown, and had already made donations to
help develop public undertakings and industry in Fuqing,
before the 1980s. Such links readily transformed into
business ties when China adopted reform and open-
door policies, especially when China’s State Council
promulgated “the regulations encouraging foreign
investment” in October 1986. In April 1987, invited by
the local government of Fuqing County and initiated
by Liem Sioe Liong, an Indonesian Business Tycoon
from Fuqing, a “Fuqing-origin overseas Chinese
delegation” visited Fuqing, and decided to establish
the “Rongqiao Industrial Development Zone”.137 This
paved the way for the subsequent large-scale foreign
investment in Fuqing, and the establishment of more
development, investment and industrial zones (Zhu,
1999: 136-141; 166-70). In Jinjiang, many enterprises
started in the form of family workshops through
compensation trade and intermediate processing of
goods, and the family ties between local residents
and their overseas relatives played an important role in
such business activities (Zhu, 1999: 124-131). Thus,
making full use of the international migrants’ ethnic,
historical and cultural links to their hometowns and
connecting them to the migrant business networks
are important aspects in achieving full benefits of
migration for development.

the Role of local Development b.

The second aspect is related to the fact that the
productive use of remittances and efficient investment
from overseas Chinese and non-mainland Chinese
have been facilitated by certain development strategies
of migrant source areas. They have incorporated
some key elements of the “development from below”
approach (Stöhr and Taylor, 1981: 1-2), i.e. its
emphasis on labor-intensive and small-scale industries
and the use of “appropriate” rather than “highest”
technology, to effectively mobilize local natural,
human, and institutional resources of migrant source
areas, especially at the early stage of development.
One objective of this approach has been to enable
remittances and foreign investments to benefit the
majority of community members. In the meantime,
these development strategies have avoided some
important limitations of the conventional “development
from below” approach, especially its one-sided
targeting of agricultural development and its isolated
approach towards the global and domestic economic

systems. Therefore, they have been more effective
in achieving development goals (Zhu, 1999: 192-3).
Township and village enterprises (TVEs) have played
important roles in implementing such strategies, and
served as important agents for the effective uses of
remittances and investments from overseas Chinese
and non-mainland Chinese.

Again the case of Jinjiang Municipality can explain
this point. Before the late 1970s when China adopted
reform and open-door policies, rural surplus labor was
a serous problem in Jinjiang. There was an urgent
need to develop non-agricultural activities to absorb
rural surplus labourers, but this was constrained by
the lack of investment and poor availability of bank
credit, as in other developing regions (Zhu, 2002).
However, as mentioned earlier, Jinjiang is one of the
major hometowns of overseas Chinese and Chinese
in Hong Kong, Macao and Taiwan, many of whose
dependants have received overseas remittances on a
regular basis. Many of them have been able to save
some money, and to build a house. At the level of the
individual family, these funds have not been significant,
and not enough for the establishment of enterprises.
But putting them together creates a different story.

In the late 1970s, a form of family workshops jointly
established by several households, most of which
had connections with overseas Chinese and non-
mainland Chinese, emerged in Jinjiang and became
the forerunners of TVEs. The remittances from
these overseas Chinese and non-mainland Chinese,
although small, constituted an important part of the
initial capital for the TVEs, and their unused houses
became the first workshops for these enterprises. One
study shows that at this early stage of development,
funds from overseas Chinese dependents accounted
for 55 per cent of the 55 million Yuan initial capital for
the establishment of private enterprises in Jinjiang, and
82 per cent of these enterprises used unused houses
of overseas Chinese dependents (Li and Pan, 1999).
Apart from their collaborative and household-based
nature, these enterprises were mostly engaged in
labour-intensive industries, such as sewing, garment,
textile, shoes, toys, electronic, metal goods and utensils,
construction materials, and food industries. In 1993,
more than 90 per cent of the newly established foreign
funded enterprises were still concentrated in these
industries (Yu, 1999). Enterprises in these industries
only required limited initial funds, infrastructure, and
labour skills. Therefore, they were able to overcome
the constraints of lacking investments, infrastructure,


and skilled labour in rural development, as commonly
encountered in developing countries.

In the following years these enterprises flourished in
Jinjiang, and benefited a large number of community
members due to the many employment opportunities
created by the labour-intensive industries, and
created a solid basis for further development of more
advanced TVEs, which have become major receivers of
investment from overseas Chinese and non-mainland
Chinese since the late 1980s, accounting for 64 per
cent of foreign funded enterprises in Jinjiang in 1988.
The establishment and development of foreign-funded
TVEs have in turn greatly improved their production
techniques and equipment, and enhanced their
competitiveness, especially their export capability. In
the above process, governments at various levels
played important roles by giving the family workshops
and TVEs the legitimate status and administrative
support, and promoting their development in more
places not only within but also outside Jinjiang. Such
stories are not restricted to Jinjiang; they can also
be found in many places in China’s southeastern
provinces, especially Fujian and Guangdong Provinces
(Zhu, 2000; 2003).

The case study from Fuqing may further compliment
the case of Jinjiang to illustrate the importance of
suitable development strategies in migrant source
areas in achieving positive and avoiding negative
effects of migration for development. As mentioned
earlier, investment in Fuqing has been dominated by
large overseas Chinese and other consortia with large
investment projects. This kind of investment was more
capital-intensive, technically more advanced, and
spatially more concentrated, and had the advantage
of bringing more and faster physical changes in the
forms of factory buildings, roads, and residential and
commercial centers in the areas concerned, compared
with the case of Jinjiang.

However, as such investments and the accompanying
development model were not based on local
resources and labour force, and as they were more
capital intensive than labour intensive, they were not
as effective in providing employment opportunities as
TVEs in Jinjiang. This is reflected in the fact that during
the period of 1990-1994, although there was massive
influx of foreign investment in Fuiqing, the percentage of
the rural labor force engaged in the agricultural sector
only decreased by 3.2 points, and nearly 50 percent of
the economically active population in Fuqing was still
engaged in agricultural activities in 1994. In contrast,

in Jinjiang only 16 per cent of the labour force were
still engaged in the agricultural sector in the middle
of 1995, according to the 1995 one per cent sample
survey of the population. The development in Fuqing
even had the negative effects of creating landless and
unemployed farmers whose land was taken for use
by foreign-funded enterprises. Such farmers were
not able to find new employment opportunities, as
the foreign-funded enterprises were not employment-
oriented and had much higher skill requirements for
the labourers (Zhu, 2000).

The contrast between the development models of
Jinjiang and Fuqing has had important impacts on the
trends of international migration from the two places.
Despite the enormous foreign investment and physical
changes in Fuqing, it has continued to be a major
source of international migration, as not everyone
can find opportunities there. However, much fewer
people have emigrated overseas from Jinjiang since
the 1980s, as most people feel that they have plenty
of opportunities to explore locally and domestically.
This difference in emigration is reflected in the fact that
in the 2000 census, 33,821 people were recorded
as “used to live here but working or studying abroad
and therefore temporarily not having local household
registration” in Fuqing, compared to only 1,070 such
individuals in Jinjiang.

Some major source villages of emigration in Fuqing
have developed a “culture of migration” mentioned
earlier, as a result of which villagers place excessive
hopes on moving abroad to earn their living, while
neglecting in situ development of their hometowns.
As observed by Thunø and Pieke (2005) in their field
study village in Fuqing, 680 persons, which was equal
to one third of the village population and most of which
were young, migrated overseas by early 2004, leaving
only old people and women with young children
at home. Although remittances from the emigrants
had improved villagers’ lives, they had been mostly
used in the construction of family houses and daily
consumption, and even the expansion and renovation
of ancestral halls and temples in the migrant source
villages, and have not been as effective in promoting
productive investment as in Jinjiang, thus producing
less developmental effects in migrant hometowns.

The comparison of the cases of Jinjiang and Fuqing
suggests the importance of suitable development
strategies for the source areas. Having said this, it has
to be emphasized that proper application of the above
experiences in the circumstances of other migrant

1) New ThiNkiNg surrouNdiNg remiTTaNces aNd developmeNT

2) maximisiNg The developmeNT impacT of remiTTaNces

source areas should be based on a more complete
understanding of the experiences of the two places.138
In fact, despite their general success, the strategies
adopted in Jinjiang had their own disadvantages at the
earlier stage of development in that its development
was too dispersed and unfavorable to achieving
economies of scale and agglomeration, and had
negative environmental consequences. In this sense,
the strategies of Jinjiang could be complemented by
some of the positive elements of the case of Fuqing,
such as its more concentrated nature in spatial
development. More general and solid development
strategies for migrant source areas could be formulated
on such a basis.

coNclusIoNs AND PolIcY Iv.

The experiences of China, particularly those of its
Fujian Province presented in this paper, support
the view that migration can have important positive
developmental effects on migrant source areas, as
evidenced by the fact that overseas Chinese and non-
mainland Chinese contribute to their hometowns with
remittances and investments, new skills and ideas,
managerial experience, technological transfer and
market connections, which they gain from the places
of destination and bring back to their hometowns.
However, migrants’ roles in their source areas are
not always positive. Evidence from this paper also
suggests that if not handled properly, migration could
drain away the most needed human resources of
migrant hometowns, and create a culture of excessive
dependence on migration and remittances, with in
situ development being neglected in migrant source
areas and the sustainability of migration-related
development not being able to be maintained. The
examination of China’s experiences in this paper
provides some important knowledge basis for
policy making to maximize the positive effects while
minimizing the negative ones, and the following policy

recommendations can be made on such a basis.

First, one valuable piece of experiences from China’s
coastal areas is related to the roles of diaspora
as the main source of foreign investment for their
hometowns, and the way in which the productive
uses of remittances from international and cross-
border migrants at the earlier stage paved the way
for investment-based development at the later stage,
both of which have greatly strengthened the roles of
migration and remittances for the development of
migrant source areas. This suggests that while efforts
should be made to attract migrant remittances, policy
measures should also be taken to transform the
remittances-based development into the investment-
based development, and to attract the inflow of
larger amount of investment from migrant-turned
entrepreneurs originated from migrant source areas.

Second, while efforts should be made to create
favorable environment for the productive uses of
remittances and productive investment, certain
development strategies emphasizing labor-intensive
and small-scale industries and the use of “appropriate”
rather than “highest” technology should be adopted
at the early stage of development to mobilize local
resources, especially local labour force, and to benefit
most local community members.

Third, policy measures should also be taken to
facilitate the establishment and successful operation
of the links between migrants’ business networks and
their source areas, and to facilitate diaspora’s roles in
linking their places of origin to the global networks in
terms of investment, production and trade.

Finally, while the experiences of China’s coastal areas
can be shared by other source areas of international
and cross-border migration, more collaborative and
comparative research among different countries and
regions should be promoted for achieving a better and
more complete understanding of the related issues,
so that the experiences of different source areas can
be properly drawn on and made better use of.



China State Statistical Bureau (1986-2009). Zhongguo Tongji Nianjian (China Statistical Yearbook). Beijing: China
Statistical Publishing House.

East Asia Analytical Unit, Department of Foreign Affairs and Trade (1995). Overseas Chinese Business Networks
In Asia. Canberra.

Global Commission on International Migration (2005). Migration in an Interconnected World: New Directions for
Action. GCIM.

Hugo, G. J (2003). Migration and Development: A Perspective from Asia. Migration Research Series, No.14.
International Organization of Migration.

Li Y. P and J. P Pan (1999). Emigration from Jinjiang and its socioeconomic development since 1978 (in Chinese),
Huaqiao Huaren Lishi Yanjiu (Overseas Chinese History Studies). No. 2 of 1999, pp. 35-42.

Lin, L. and Liu, S. Q (1998). Zhongguo Dongnan Yanhai Jingji Qifei Zhilu (The Path of Economic Take-off in
China’s Southeast Coastal Area). Beijing: Economic Science Press.

Massey, D. S., J. Arango, G. Hugo, A. Kouaouci, A. Pellegrino and J. E. Taylor (1998). World in Motion:
Understanding International Migration at the End of the Millennium. Oxford: Clarendon Press.

Newland, K. and Patrick, E (2004). Beyond Remittances: The Role of Diaspora in Poverty Reduction in their
Countries of Origin. Washington DC: Migration Policy Institute.

Stöhr, W.B. and Taylor, D.R.F (1981). Introduction, in Development from Above or Below? The Dialectics of
Regional Planning in Developing Countries. W. B. Stöhr and D. R.F. Taylor (eds.). Chichester: John Wiley and
Sons, pp. 1-14.

Thunø, M. and Pieke, F (2005). Institutionalizing recent rural emigration from China to Europe: New transnational
villages in Fujian. International Migration Review. Vol. 39, pp. 485-514.

Tracy, N. (1996). The overseas Chinese and China: the critical linkage. Unpublished manuscript.

Yu, Y. P, (1999). Economic development of overseas Chinese hometowns and foreign funded enterprises in
Jinjiang (in Chinese). Bagui Qiaoshi (Overseas Chinese Journal of Bagui). No. 1 of 1999, pp. 26-31.

Zhu, M. R (2001). An analysis on the Issues of new international migrants from Fujian Province and preliminary an
inquiry into Relative Policies (in Chinese). Renkou Yanjiu (Population Research), Vol. 25, pp. 65-69.

Zhu, Y., (1999). New Paths to Urbanization in China: Seeking More Balanced Pattern. New York: Nova Science

Zhu, Y. (2000). In situ urbanization in rural China: Case studies from Fujian Province. Development and Change.
Vol. 31, pp.413-34.

Zhu, Y. (2002). Beyond large-city-centered urbanization: in situ transformation of rural areas in Fujian Province.
Asia-Pacific View Point, Vol. 43, pp. 9-22.

Zhu, Y. (2003). The floating population’s household strategy and the migration’s role in China’s regional
development and integration. International Journal of Population Geography, Vol. 9, pp. 485-502.

1) New ThiNkiNg surrouNdiNg remiTTaNces aNd developmeNT

2) maximisiNg The developmeNT impacT of remiTTaNces


Non-mainland Chinese refers to Chinese in Taiwan, Hong Kong and Macao. Statistically China records 134
investment from these regions as foreign investment.

Here the term “foreign investment” rather than “foreign direct investment” (FDI) is used because detailed 135
statistics by source and destination areas are available only for foreign investment rather than foreign direct
investment for some years. The former includes foreign direct investment, and other foreign investment in
the forms of shares sale, international lease, compensation trade, and processing and assembly, with FDI
accounting for 94 per cent of total foreign investment in China during the period 1979-2004.

This part of the paper draws on materials from the author’s paper 136 Migration and the development of source
areas: Evidence from China in K. Tamas and J. Palme (eds.), How Migration Can Benefit Development,
pp. 167-180. Institute for Futures Studies: Sweden, 2006. The authors would like to acknowledge the editors
of the book for permitting the use of the materials.

In Chinese “Rongqiao” literally means Fuqing’s overseas Chinese.137

Zhu, Y., (1999). 138 New Paths to Urbanization in China: Seeking More Balanced Pattern. New York: Nova
Science Publishers. More details can be seen in this publication.



Migration and remittances have become structural
factors for the functioning of the economy and the
society of many countries as they provide long term
social and economic stability. This implies that any
variation in these factors will affect the economic
performance of a country but also the escape valve
of demographics over employment and other social

Data about migration flows of El Salvador is self
explicit. There are about 2.7 million Salvadorians
living and working in the United States representing
about one third of the total population of the country.
Linkages between migrants and the local population
are evidenced by the high level of demographic
dependency of the local population with respect to
their migrant relatives. Moreover, the recent economic
crisis has affected the level of employment in key
destination countries generating a decline in the number
of deported people but without totally stopping flows.
For example, the number of deported Salvadorians
from the Unites States and Mexico was 32’000 people
in 2008 and 50’000 people in 2007. During 2009 and
2010 the number of deported Salvadorian has been
estimated at about 35’000 annually.

Remittances sent by relatives still are the main source
of external finance for the El Salvadorian economy,
representing 16 per cent of the GDP and about 70
per cent of total exports. Remittance also represent
about one third of Salvadorian families’ income. Most
of this income in used for household support. This
extraordinary income has pushed the aggregated
demand and the stabilization of main macro economic
variables. In this context, it is evident that without this
external income source the economy of El Salvador
would collapse or at least will be at great risk.

Without doubt remittances are an essential income for
the economic and social sustainability for El Salvador.
The level of importance of remittances in the country
is so high today that they have transformed the nature

of the economy and the society. Without remittances
flows the development of the country will be in

RemIttANces AND tHe II.
ecoNomY oF el sAlvADoR

The World and the Central American region are
suffering from the deepest economic crisis of the last
50 years. The deterioration of certain macroeconomic
indicators has been so significant that in many cases
they have gone beyond any previous projections
made by governments and multilateral institutions. It is
foreseen that this situation could even become worse
in the short term and that it can only be effectively
reversed if fundamental reforms to multilateral
economic institutions and to the role that governments
have played so far are taken. For example, it is
expected that Latin America growth rate will only
recover by 2011, mostly driven by current increases
in commodity prices. The Gross Domestic Product
(GDP) of El Salvador is expected to grow 2.5 per cent
by 2011.

While the impacts of the economic crises have
affected all social sectors in developed countries,
the effects over migrants have been particularly
severe. For migrants, changes in the labor market
of destination countries are of summit importance
as their affect employment prospects and their level
of social insertion and stability. Also, changes in the
labor market have a direct impact over the amounts
and frequency of transfers made to families and
local communities, affecting the functioning of the
economies of countries of origin. In this regard, the
performance of labor markets during periods of crisis
is crucial for migrants in destination countries but also
for the economy of countries of origin. Thus, it is not
surprising, that increasing labor restrictions, higher
unemployment, reductions of working hours and
lower income significantly affect the most vulnerable
and especially migrants. In this context, migrants are

6. RemIttANces, DeveloPmeNt AND tHe Role oF socIAl
NetWoRks: tHe cAse oF el sAlvADoR

Juan Jose Garcia Vasquez
Vice Minister of Foreign Affairs in charge of Migration Issues, El Salvador

1) New ThiNkiNg surrouNdiNg remiTTaNces aNd developmeNT

2) maximisiNg The developmeNT impacT of remiTTaNces

usually last type of workers to be hired and the first
ones to be fired.

The recession of the economy, job losses and migratory
restrictions have generated significant remittances
decreases for El Salvador during the last ten years as
we can see in table 11.

of total consumption by the families that are higher
than the Gross Domestic Product (GDP) as shows in
the figure 10.

RemIttANces AND III.
DeveloPmeNt: socIAl
NetWoRks As A keY

Social Networks140 have been of vital importance for
the expansion of migratory flows. They have facilitated
the transfer of necessary resources that maintain
migratory flows and have supported the insertion of
migrants in the labour markets of destination countries
such as the United States. Linkages between
migrants and those who stayed at home are essential
for keeping and expanding migratory movement in
both directions and for ensuring monetary transfers
and shared ownership of property. Social networks
facilitate the circulation of resources, goods, values,
and social behavior generating more stable migratory
flows and a sustainable increase of remittances flows
and small investments.

It can be argued that the true nature of the remittances
flows comes more from key features of social
interaction that from their economic nature as they
are monetary expressions of social and emotional
relations. At the end remittances are transnational
salaries being spent in both destination and originating
countries. Probably, that is why senders tend to avoid
their use for investment for productive purposes.

Social networks expand and evolve with time,
transforming themselves in complex social systems
that capture main migratory flows. As those networks
become enrooted, migratory flows start to depend
more on them than on any other factors such as
unemployment, sub-employment, poverty and lack of
opportunities. At this stage, migration becomes a self
generated and relatively autonomous phenomenon
from the original factors that initiate the migration flow
process. In fact, in reality, without the coverage of social
networks migration becomes an almost impossible
quest. The more social networks consolidate, the more
migratory flows stabilize and remittances increase. That
is why, even thought the United States labour market
is contracting, unemployment increasing, real income
declining and migration policy is becoming increasing
stringent; migratory flows and remittances transfer
have not suffered from a significant deceleration and

Table 11. El Salvador: amount of remittances received
and growth rates

year amount of remittances Growth rate

2000 1,750.70 21.6

2001 1,910.50 8.4

2002 1,935.20 13

2003 2,105.30 8.1

2004 2,547.60 17.4

2005 3,017.20 15.6

2006 3,470.90 13.1

2007 3,695.30 6.1

2008 3,787.67 2.5

2009 3,464.9 -8.6

2010 3,539.0 2.2

Source: Prepared by the author with data from the Banco
Central de Reserva of El Salvador

According to box 1 (MISSING? NOTE fROM
paUla), remittances declined by 8.6 per cent in
2009. In 2010, remittances went back to growth at a
rate of 2.5 per cent. However, data shows that growth
rates of remittances started to decrease since 1996,
several years before the initiation of the crisis, breaking
a phase of continuous growth in remittances inflows. It
is foreseen that growth rates in the future will be even
lower. However, the remittances decline was not as
high as many predicted as many migrants were willing
to restrict consumption and saving before reducing
the amounts transferred.

Remittances are fundamental external source of
income that currently benefits more than 381,726
families in the country. Spending by recipient families
has become, in consequence, a key factor in the
constant expansion of the internal aggregated
demand in El Salvador.139 However, this constant
expansion has not been accompanied by similar
increases in national production. This phenomenon
is another symptom of the “Dutch disease” that has
been present in the El Salvadorian economy since the
beginning of the decade and which has allowed levels


have recently come back to growth.

Based on recent experiences, it can be affirmed that
during the most difficult times of the economic crisis,
social networks could change in at least two ways.
In the first place, it can be expected that relationship
between social groups evolve. They are not initiated
any more by migrants and end in relatives in home
countries (so called unidirectional relations) but on
the contrary, they become interactive on both sides
and form stable bidirectional relations. This basically
means that decisions on the amounts, use and
destination of remittances including social investments
(such as health or education) are not taken any more
by migrants alone but they are the consequence of
negotiations between migrants and their relatives in
home countries. Under this scenario, the responsibility
over the generation of resources for household
support will not be exclusively left to migrants but also
to families in home countries. This situation implies
a more active role of recipient families is seeking
alternative sources of subsistence by entering into the
local labor market or by starting financial or productive
actives. Such activities could include, depending on
the case, having a more active stand with regard to

saving and investment and assigning a higher share of
remittances to education and health with the ultimate
effect of improving the value of local human capital
within the migrant family group.

In the second place, the motivation of the senders
might change. Some authors141 consider that migrant
send remittances to their families as consequence of
two main motivations: altruistic and self interest.
Under the first type of motivation, remittances
transfers are destined to satisfy the basic needs of
families in the home country and the probability that
those remittances are invested in other type activities
is very low. Under the second motivation, remittances
transfers are sent to satisfy the needs of both the
migrants and the home country family. Due to self
interest, migrants seek to improve its own financial
situation in parallel to assist their family by allocating
higher amounts for savings or investing in business

In this regard, the altruistic motivation has a fundamental
impact over current spending of the families and the
self interest motivation has a significant effect over
savings and investments by both the recipient family
and the senders. Nevertheless, in reality, motivations

figure 10. GDp vs Total comsuption (El Salvador)

Source: Prepared by the author based on data from the Banco Central de Reserva of El Salvador.


1) New ThiNkiNg surrouNdiNg remiTTaNces aNd developmeNT

2) maximisiNg The developmeNT impacT of remiTTaNces

on these two extremes are unusual as in most cases
they are mixed nature.

When remittances are transferred during normal
times, it is expected that altruistic motivations would
prevail as the economy in the destination country is
usually under expansion, there is an attractive labour
market and senders can make transfers for household
spending without major difficulties. On the contrary,
when the economic context in the destination country
is under crisis, self motivation tend to dominate
the migrants and families thinking, generating a
preference toward a higher allocation of remittances
transfers to savings and investment. It is therefore
quite probable that as a consequence of a difficult
economic situation, a contraction of the labour market
or when the resource base of the sender is at risk;
there is a higher predisposition to also send higher
amounts of money to save and invest. Some anecdotic
evidence indicates that during times of crisis and in
countries where remittances are important source of
external income and migration flows are common,
there is usually a higher level of economic activity, a
higher need to find a job less superfluous spending
and lower levels of financing for altruistic or cultural
activities (e.g. lower contribution to El Salvadorian civil
society organizations, local festivals or infrastructure).
Similarly, migrants use existing savings not only to
assist their families but also to address their own
needs in the destination countries causing a change
in the direction of remittances flows form origin to
destination country.

In sum, social networks and motivations behind
remittances under a crisis context tend to change
their nature and transform themselves into more
complex and dynamic bidirectional relationships. In
this regard, further development of social networks
becomes highly dependent on mutual interests
between senders and recipients. During times of crisis
self motivation becomes a predominant feature. Such
a motivation shift can become a summit opportunity
to rebuild the productive fabric and to re-launch local
development, especially in areas where there is high
migration ratio among the local population. Such a
proactive stand could assist the local population in
better facing any reduction in remittances flows and
to generate higher levels of resilience vis-à-vis external
sources of income.

some PolIcY PRoPosAlsIv.

The challenges brought by continuous declines in
remittances flows in a particular country allow a
new phase in their evolution. Such a new phase can
imply a significant opportunity to redirect the country
toward self generated development and growth. So
far increases in remittances have pushed for higher
levels of local consumption without parallel increases
in saving and investment. Some policy options that
countries have at hand to seize such an opportunity
include the following:

increase the current levels of saving and •
investment. As remittances motivations shift
toward self interest and become less altruistic, the
probability to dedicate a share of income received
to increase saving and investment is higher. Such a
change in the use of remittances could contribute
to reduce the symptoms of the “Dutch disease” and
make remittances instruments of local economic

Reshape the local productive fabric.• A drop
in remittances flows can generate incentives to
improve the productive fabric and expand local
markets, especially in geographical areas with
high migration ratio and high levels of remittances
inflows. Decline in remittances flows will reduce the
share of external income and will motivate local
families to seek alternative sources of income,
usually within the local market. This change in
attitude can transform several family members from
income receivers into income earners or into small

increase investment in the development of •
human capital within local families. A share of
remittances has been traditionally directed toward
investment in education and training of the recipient
families. During times of crises and as a consequence
of remittances reduction it is important to assume
responsibility over the education and skills building
as instruments for development. In this regard, it
is proposed to create an education “insurance
scheme” where senders can directly contribute
and which would strengthen the capacities of the
local families and communities of origin.

Encourage investment transfers by migrant •
communities. Migrant communities, especially
those of long date, has shown interest in investing
amounts superior to $ 7’000 annually. These
transfers represent an important source for
potential capital accumulation and investment in


productive activities. Many of these transfers do
not necessarily fall into the concept of traditional
remittances and they can be considered as foreign
direct investment. The State should provide
technical support to migrants and recipients willing
to invest. This technical support should encompass
all necessary technical information for starting
business, developing of business plans and the
identity niche markets.

Facilitate access to financial services by •
receiving families. Up to now most policies
surrounding remittances transfers have not been
accompanied by a solid financial inclusion plan for
recipient families or by sufficient financial education
that allow them to access and use of available
financial and saving instruments. There is a wide
range of lessons from international experiences that
show a positive correlation between higher levels of

financial education by recipients and higher levels

of access and use of financial services.

incorporate the migrant community in local •

development efforts. Migrants and their resources

are underused factors to promote development. If

properly harness they can become a driver of local

development and productive capacity. They have to

be considered as key factors and external allies and

not just a source of additional income. Migrants are

also part of the Nation and as such there is a need to

open spaces for their participation in development

efforts. This means that migrant views need to be

taken seriously into consideration in the building of

new development models.

1) New ThiNkiNg surrouNdiNg remiTTaNces aNd developmeNT

2) maximisiNg The developmeNT impacT of remiTTaNces


Department of Statistics and Censuses (DIGESTYC) of el Salvador (2008). Home survey on multiple purposes.

Gregorian and Tigran (2008). Microeconomic Implications of Remittances in an Overlapping Generations Model
with Altruism and Self-Interest. IMF Working Paper, WP/08/19, International Monetary Fund.



DIGESTYC (2008). 139 Home survey on multiple purposes. Department of Statistics and Censuses.

While there are many definitions of 140 social network a working definition for this paper could be the following:
A social network is a social structure made up of individuals (or organizations), which are tied (connected)
by one or more specific types of interdependency, such as friendship, kinship, common interest, common
origin, financial exchange, dislike, sexual relationships, or relationships of beliefs, knowledge or prestige.
The definition of social network is rapidly evolving as the consequence of the use of web interfaces, mobile
telephone other technological communication means.

Gregorian and Tigran (2008). 141 AM Microeconomic Implications of Remittances in an Overlapping Generations
Model with Altruism and Self-Interest. IMF Working Paper, WP/08/19. Washington DC.

1) New ThiNkiNg surrouNdiNg remiTTaNces aNd developmeNT

2) maximisiNg The developmeNT impacT of remiTTaNces


Overseas Filipinos (OFs) play a vital role in the Philippine
economy. The stock of OFs has averaged 7.7 million
over a decade (1997-2007), with more than 50
percent of them classified as overseas Filipino workers
(OFWs).142 Inflows from OFs’ remittances increase
the foreign exchange supply available in the financial
system to fund the foreign currency requirements of
the economy and spur consumption expenditures.
This, in turn, creates demand and expands domestic
production. OFs remittances contribute significantly
to economic growth, with its ratio to gross domestic
product (GDP) at 10 percent in 2010.143

The remitted portion of OFs’ income coursed through
banks amounted to US$18.8 billion in 2010, or a year-
on-year growth of 8.2 percent.144 The sustained growth
was due to strong global demand for professional
and skilled OFWs, as well as the improved capture
of remittance flows. OFs’ increasing access to formal

channels for remitting funds to Philippine beneficiaries
can be traced to innovative products and wider
remittance network of financial institutions. By 2010,
only about four percent of total remittances, from a
high of about 25 percent in 2001, were coursed
outside the banking system.145

The Bangko Sentral ng Pilipinas (BSP) clearly
recognizes the impact of OF remittances on economic
development. The BSP faces the challenge of
improving the financial landscape through which funds
are transferred from the remitter in the first mile up to
the designated beneficiary in the last mile. Specific
initiatives are being undertaken to harness the benefits
of remittances by: (i) encouraging the continued flow
of remittances, and (ii) mobilizing funds for lending and
other productive activities.

DeveloPmeNt AND PoveRtY

7. oveRseAs FIlIPINos’ RemIttANces:
A PolIcY FRAmeWoRk toWARD moRe eFFIcIeNt FloWs,

FINANcIAl INclusIoN AND PRoDuctIve uses

Ruth C. Gonzaga
Deputy Director, Balance of Payments Statistics Group

Department of Economic Statistics
Bangko Sentral ng Pilipinas

Foreign / Host Country Philippines





First Mile Second Mile Third Mile

figure 11. Remittance flow process



Studies have indicated that an increasing proportion
of OF families have been increasingly saving and
investing. More families of overseas Filipinos are
becoming conscious of the need to invest and/or
save parts of the funds that they receive from abroad.
An ADB study in 2004 has shown that OFWs have
huge potential for savings mobilization.146 The BSP’s
quarterly Consumer Expectations Surveys (CES) have
also revealed that apart from expenditures on food,
clothing and housing, a rising percentage of Filipino
households directed their remittances to savings,
investment, education, medical care, and purchase of
real estate.147 In particular, survey results showed that
OFW households that allocated their remittances to
savings substantially increased, from only 7.2 percent
in the Q1 2007 survey to 43.7 percent in Q4 2010,
while those that used remittances for investments
mirrored the same trend, from 2.3 percent in Q1 2007
to 5.8 percent in Q4 2010.

In a study using household survey data from the
Philippines, it was observed that a 10 percent increase
in the remittance receipts of households reduces their
poverty rate by 2.8 percent.148 The decline in poverty
is attributed to increases in economic activity due
to higher remittance flows to households of migrant
workers as well as to spillover effects of these transfers
to the overall economy.

Available literature on child labor also shows that
positive income shocks allow households to reduce
child labor and increase school attendance. The
same conclusion has been observed in the case of
remittance-receiving households in the Philippines.
Higher remittances thus yield higher human capital
investment. OFWs often cite the need to provide
good education for their children as one of the primary
reasons why they seek more lucrative jobs abroad.

Many OFWs have expressed their intent to return to

the Philippines after they have saved enough to start
a small business. Yang found that a rise in remittance
income increases the household’s entrepreneurial
activities by 2 percent.149 Moreover, as the amount of
remittances increase, Filipino households are inclined
to venture into more capital-intensive businesses like
manufacturing, transportation and communication.


The Philippine government authorities strive on
improving the overall environment for OFs through
sound regulatory actions and integrated advocacy
programs that promote the efficient use of remittances.
Specific agency mandates designate the Department
of Labor and Employment and its attached agencies,
Philippine Overseas Employment Administration,
Overseas Workers Welfare Administration, and
National Reintegration Center for OFWs to address
the recruitment, deployment, training, well-being and
reintegration needs of OFWs in host countries.

For its part, the BSP has identified specific initiatives that
are anchored on four main principles of: (1) enhancing
transparency and competition in the remittance
market; (2) improving access to financial services; (3)
encouraging OFs and their families to increase savings
and investment; and (4) promoting financial learning
among OFs and their beneficiaries.150

To encourage a smooth and efficient remittance flow
process, the BSP seeks to reduce remittance fees
and facilitate fund transfers by enhancing market
competition as well as the remittance channels. The
BSP addressed the need to achieve a higher level of
transparency in the global remittance industry through
a Circular requiring financial institutions to disclose the
charges for their remittance products and services,
including the classification of costs, delivery time to
beneficiaries, description of products, and directory
of remittance network. This disclosure requirement

Table 12. Survey results on OfW households

Use of









Savings 7.2% 14.0% 40.0% 50.4% 38.0% 43.0% 43.7%

Investment 2.3% 1.8% 5.9% 5.8% 7.2% 7.0% 5.8%

Source: BSP Consumer Expectations Survey (2010).

TablE 12 WITh NO TITlE; TITlE pROpOSED by paUla plEaSE cONfIRM/MODIfy

1) New ThiNkiNg surrouNdiNg remiTTaNces aNd developmeNT

2) maximisiNg The developmeNT impacT of remiTTaNces

was further enhanced by the BSP when it launched
a country-specific OFW portal in its official website,
linking the users to the financial institution’s relevant
information on remittances.151

Philippine banks continue to devise specialized
systems that promote more efficiency in terms of
faster delivery time and lower service fees. Modern
information technology plays a major role here,
through electronic banking products or alternative
mechanisms for sending money. Several modes of
remittances include internet-based remittance, use of
mobile phones for performing financial transactions
utilizing the short messaging system (SMS) or text
feature of cellular phones for balance inquiry, fund
transfers, withdrawals (cash-out), and interconnection
of automated teller machines. Some banks also
offer card products with debit features to facilitate
remittances with financial institutions as issuers and
telecommunication companies as service providers.
These new modes generally cost less both for the
remitters and the beneficiaries. Estimated time to
remit is also faster, with the growing trend toward real
time fund transfers.

The BSP also launched a joint project with banking
associations to establish a local clearinghouse for
credit-to-other-banks mode of remittances. In the
past, local receiving banks hired the services of courier
firms to expedite the feedback of beneficiary banks in
crediting remittance transactions. The receiving banks
pay the couriers a range of Php100-Php550 for their
delivery service to other banks. The project involved
electronic settlement of overseas Filipinos remittances
through the BSP-Philippine Payments and Settlements
System (PhilPaSS), which will charge fund transfers to
beneficiaries’ accounts maintained at other domestic
banks at Php5.00 for each transaction (for total
remittances up to Php500,00.00), or 90 percent lower
than the current fee structure.

To mobilize funds for more productive activities, the
BSP seeks to promote wider access of households
to the products and services of financial institutions. A
balanced approach is clearly important, where policies
work on both ends — from the viewpoints of the
financial sector and the beneficiary households. A fine
example is the BSP’s grant of foreign currency deposit
unit (FCDU) license to qualified rural and cooperative
banks. Prior to March 2006, only universal, commercial
and thrift banks were allowed to operate FCDUs.
With the regulation authorizing rural and cooperative
banks to open FCDU accounts, overseas Filipinos’

beneficiaries in the countryside now have the option
to maintain FCDs as an alternative to immediately
exchanging the funds received into pesos.

Another initiative in improving access of Filipino
households to services offered by formal financial
institutions, including those residing in remote areas,
focused on the customer identification requirements
in line with the know-your-customer policy applied by
the covered institutions. The number of identification
cards (IDs) required from clients has been effectively
eased over a span of two years — from three IDs down
to one valid photo-bearing ID issued by an official
authority. The term official authority was also expanded
to include the government, its political subdivisions,
government-owned and- controlled corporations, and
private entities registered, supervised or regulated
by the BSP, Securities and Exchange Commission,
and Insurance Commission. Policy refinements were
subsequently added, with the BSP allowing the use of
passports issued by foreign governments as valid IDs
of OFs, who have adopted foreign citizenship and are
on vacation, to engage in local financial transactions.

The BSP has launched an integrated economic and
financial learning program (EFLP) that aims to promote
greater awareness and understanding of relevant issues
to help the public acquire the knowledge and develop
skills needed to make well-informed economic and
financial choices and decisions. It embodies the BSP’s
thrust to promote inclusive and proactive economic
and financial education among its stakeholders,
the underlying philosophy of which is that a well-
informed citizenry is a more effective partner of the
BSP in maintaining an effective monetary policy and
a stronger and secure banking and payments system.
A knowledgeable population is also able to contribute
more to economic development, maximizing benefits
from the opportunities that development brings.152

The EFLP consists of the following component
programs that have specific target audiences and
main messages: (1) Conference on Gearing up for
External Competitiveness; (2) Public Information
Campaign on the Role of the BSP in the Philippine
Economy; (3) Financial Learning Campaign (FLC) for
Overseas Filipinos and their Beneficiaries; (4) Users’
Forum on BSP-Produced Statistics; (5) Financial
Education Expo; and (6) Financial Learning Seminar for
Microfinance Clients and the Unbanked. In addition,
the BSP distributes teaching guides to more than 60
percent of the country’s elementary schools, as part
of a nationwide Financial Education Campaign for


Schoolchildren in partnerships with other government
agencies and the private sector. Regular visits and
program surveys for schoolteachers are conducted to
assess the program’s effectiveness.

As part of the EFLP, the local and international FLCs
which were launched in 2006 and 2008, respectively,
impart financial education among the OFs and their
families/beneficiaries. The FLCs aim to promote savings
and investments among OFs and their beneficiaries by
informing them of alternative uses of their remittances,
including savings, investments in financial instruments
and micro-entrepreneurial ventures. Also discussed in
the whole-day forums are issues on consumer rights,
financial products and services, and the resolution
of consumer complaints, including those pertaining
to remittances of migrants and OFWs. Methods of
instruction include audio-visual presentations, lectures,
interactive games, and testimonies. To date, the BSP
has conducted 46 local FLCs for 5,541 participants
across the country, as well as 14 international FLCs for
2,179 OFs in 8 host countries.153


The main challenge to policymakers is to provide the
proper financial infrastructure and mechanisms for
the migrant workers to efficiently remit their income to
their beneficiaries. As the remittance flow process is
continually enhanced, more funds could be channeled
to households’ foreign exchange savings, micro-
enterprise activities and other alternative financial
instruments, which could ultimately achieve the
Millennium Development Goal of alleviating poverty.

1) New ThiNkiNg surrouNdiNg remiTTaNces aNd developmeNT

2) maximisiNg The developmeNT impacT of remiTTaNces


Asian Development Bank technical assistance (2004). Final Report on Enhancing the Efficiency of Overseas
Workers Remittances.

Bangko Sentral ng Pilipinas (2010). Consumer Expectations Survey. Fourth quarter, 2010.

Bangko Sentral ng Pilipinas (2009). Data on OF Remittances coursed through banks, 2009.

BSP-Department of Economic Statistics (2011). BSP’s Initiatives to Reduce Remittance Charges and to Improve
the Overseas Filipinos’ Remittance Environment.

Executive Order (EO) No. 446 dated 12 July 2005.

National Accounts of the Philippines (2009).

National Statistics Office (2009). Survey of Overseas Filipinos.

Bangko Sentral ng Pilipinas (2010). Philippine Balance of Payments (BOP) report. Third quarter, 2010.

Commission on Filipinos Overseas (2007). Stock Estimates of Overseas Filipinos (OFs).

BSP-Department of Economic Statistics (2011). Summary of Completed Financial Learning Campaigns

BSP Economic and Financial Learning Center (2010). The BSP Economic and Financial Learning Program
(BSP-EFLP). Annex B.

Yang, Dean and Claudia Martinez (2005). Remittances and Poverty in Migrants’ Home Areas: Evidence from the
Philippines in International Migration, Remittances, and the Brain Drain. Ed. Caglar Ozden and Maurice Schiff,
World Bank.

Yang, Dean (2004). International Migration, Human Capital, and Entrepreneurship: evidence from Philippine
Migrant’s Exchange Rate Shocks. Research Program on International Migration and Development. DECRG.
Policy Research Working Paper 3578. World Bank.

Yang, Dean (2008). International Migration, Remittances, and Household Investment: Evidence from Philippine
Migrants’ Exchange Rate Shocks. Economic Journal. Vol 118, 2008b.



Data based on Stock Estimates of Overseas Filipinos (OFs) by the Commission on Filipinos Overseas. OFWs 142
refer to contract-based, including temporary and irregular, workers. Irregular workers are those working
abroad with incomplete employment documents. 2008-2009 stock estimates are already available, however,
the data series are based on a different methodology.

GDP data based on the report of the National Accounts of the Philippines (NAP) for 2009.143

Bangko Sentral ng Pilipinas, data on OF remittances coursed through banks, 2009.144

Estimates used in Philippine balance of payments (BOP) compilation, partially based on results of the annual 145
Survey of Overseas Filipinos conducted by the National Statistics Office.

Asian Development Bank. (2004). 146 Enhancing the Efficiency of Overseas Workers Remittances.

Bangko Sentral ng Pilipinas (2010). 147 Consumer Expectations Survey. Fourth quarter 2010.

Yang, Dean (2004). 148 International Migration, Human Capital, and Entrepreneurship: evidence from Philippine
Migrant’s Exchange Rate Shocks. Research Program on International Migration and Development, DECRG,
Policy Research Working Paper 3578. World Bank.

Yang, Dean (2008). 149 International Migration, Remittances, and Household Investment: Evidence from Philippine
Migrants’ Exchange Rate Shocks. Economic Journal. Vol. 118, 2008b.

Under Executive Order (EO) No. 446 dated 12 July 2005, former President Gloria Macapagal-Arroyo tasked 150
the Secretary of Labor and Employment to oversee and coordinate the implementation of various initiatives
for OFWs. EO No. 446 also designated the BSP to chair the subgroup on bank-related initiatives.

BSP’s Initiatives to Reduce Remittance Charges and to Improve the Overseas Filipinos’ Remittance 151
Environment, as of 15 February 2011. BSP-Department of Economic Statistics, 2011.

BSP Economic and Financial Learning Center (2010). 152 The BSP Economic and Financial Learning Program
(BSP-EFLP). Annex B.

BSP-Department of Economic Statistics (2011). 153 Summary of Completed Financial Learning Campaigns,

1) New ThiNkiNg surrouNdiNg remiTTaNces aNd developmeNT

2) maximisiNg The developmeNT impacT of remiTTaNces


Remittances are one of the most visible and tangible
contributions of migrants to their home countries. The
money sent by migrants to their families pays for food,
education and health care, easing day to day hardship
and poverty contributing to the achievement of the
Millennium Development Goals (MDGs).

For many economies, remittances represent a
sizeable and stable source of funds that sometimes
exceed official aid and financial inflows from foreign
direct investment. According to the Migration Policy
Institute’s (MPI) Global Remittance Guide, officially
recorded flows in 2009 totaled US$414 billion
worldwide, with more than three-quarters (US$316
billion) sent to developing countries. In 2009, total net
official development assistance (ODA) from members
of the OECD’s Development Assistance Committee
was US$119.6 billion.154

The global recession reversed a strong upward trend
in remittances sent by migrants to their countries of
origin. The 2009 officially recorded remittances were
6.7 per cent lower than that in 2008.155 The World
Bank projects that with improved economic prospects,
remittances to developing countries will increase by
6.2 per cent in 2010 and 7.1 per cent in 2011.156

tHe cAse oF gHANAII.

In Ghana, remittances are an important source of
foreign exchange, income and development financing
to the economy. Remittances go a long way to
contribute to poverty reduction. This is because quite
a number of people depend on their relatives abroad
for their feeding, school fees, medical bills and housing

This paper will focus on remittances as captured
in Ghana’s Balance of Payments (BOP) Statistics.
Remittances are mainly derived from two sources in
the BOP framework; income earned by workers in

economies where they are not resident and transfers
from residents of one economy to residents of another.
Due to difficulty in capturing data on the former,
remittances as used in this paper refers to personal
transfers and current transfers to nonprofit institutions
serving households (NPISHs) and these two items
fall under the latter category. These are mainly cash
transactions captured through formal channels such
as the banks and non bank financial institutions or
money transfer operators (MTO’s).

tReNDs IN RemIttANcesIII.

Ghana’s remittance flows have been growing despite
a decreasing trend in remittance to GDP ratio.
Notwithstanding the impact of the economic crisis,
remittance flows are generally regarded as more
stable than alternative capital flows. According the
balance of payments data, private inward remittances
accruing to individuals and NPISH increased from
US$1,287.05 million in 2004 to US$1,970.39 million in
2008 before declining to US$1,788.37 million in 2009.
Private inward remittances as a share of GDP declined
steadily from 14.5 per cent in 2004 to 11.7 per cent in
2009. It also exceeded official inflows, official FDI and
private sector inflows during the same period. It must
be noted however that in 2008, FDI inflows exceeded
remittances. Remittances accounted for 52.2 per cent
and 34.9 per cent of total external inflows in 2004 and
2009 respectively.157

Remittances in Ghana is grossly underestimated as a
result of a large chunk of it coming in through informal
channels – hand carriage, family and friends or
networks of informal transfer agents. (See figure 12).

oRIgIN oF RemIttANcesIv.

During the period 2004 - 2009, the dominant source
of remittances was the United States and Canada
which on average accounted for 62.4 per cent of

8. mAXImIZINg tHe DeveloPmeNt ImPAct
oF RemIttANces IN gHANA

Richard Ampomah – Asiedu
Research Department, Bank of Ghana


figure 12. Export, fDI and Remittances as a percentage of GDp

Source: Bank of Ghana (2010).








2004 2005 2006 2007 2008 2009


Chart 1: Export, FDI and Remittances as a percentage of

export/GDP (%) FDI/GDP (%) Inward Remittance/GDP (%)

figure. 13 Sources of Individual Remittances (%)

Source: Bank of Ghana (2010).











2004 2005 2006 2007 2008 2009


Chart 2: Sources of Individual Remittances (%)

US and Canada




Rest of Africa


1) New ThiNkiNg surrouNdiNg remiTTaNces aNd developmeNT

2) maximisiNg The developmeNT impacT of remiTTaNces

individual or personal remittances. The other sources
were the United Kingdom (16.2 %), Europe (13.4%),
Other Economies (3.8%), Ecowas (2.6%) and the Rest
of Africa (1.7%).158 (See figure 13).

On the whole, the value of total individual remittances
fell from US$1.55 billion in 2008 to US$1.33 billion in
2009, reversing the upward trend recorded from 2006
– 2008 and reflecting the effects of the global financial
crisis.159 (See figure 14).

mAXImIZINg tHe v.
DeveloPmeNt ImPAct

Remittances inflow forms an important component
of Ghana’s BOP. Given that the Ghanaian economy
depends so much on imports of goods than is
exported, the inflows of private inward remittances
help cushion our current account deficit. It is therefore
an important tool in financing the gap in the overall
Balance of Payments deficit.

Migrants’ incentives to participate in home country
development or reconstruction depend on the extent

to which they feel they have a stake in their home
nation as well as in the countries that host them.

The Government of Ghana has been proactive in
highlighting the key role that the Ghanaian diaspora
does and can play in national development. The
Ghana Poverty Reduction Strategy (GPRS), the
policy framework for supporting growth and poverty
reduction in the short term, identifies the Ghanaian
diaspora as a potential source of funds for the GPRS
(Zan 2004).160

In Ghana, the issue of diaspora’s contribution to
national development was brought into the limelight
following the Home Coming Summit launched by the
Government of Ghana in 2001 in an attempt to woo
Ghanaians living abroad to come home and invest
in the growth of the local economy (Zan 2004).161
The Summit identified the diaspora’s contribution to
national development in several key areas including
the following:

As a potential market for non- traditional exportable •
items such as foodstuff and garments.

As a source of finance capital for investment to •
develop the local private sector.

figure 14. Individual Remittances (US$ million)

Source: Bank of Ghana (2010).



As ambassadors for Ghana’s culture – food, •
clothes, social life etc.

As a source of modern knowledge and technical •
know-how for development, particularly information

As a link between Ghanaian communities and local •
foreign-based communities.

Since then there has been a number of forums to
create awareness for Ghanaians to invest home with
the most current one being the just ended UK - Ghana
Invest Forum held in July 2010 in UK which had as
one of its themes “Remittances and Raising Capital
through the Diaspora”. Having forums such as this
to acknowledge the contribution of the diaspora to
development can increase communication between
the diaspora and government, potentially leading to a
lasting partnership for development. Again it leads to
building of trust if the current generations of migrants
feel protected. This also brings to fore the enabling
role played by government in introducing legislations
such as dual citizenship and voting rights. The latter is
still under discussion.

Beyond this, a number of diaspora groups (like home
town associations, diaspora NGOs, churches etc) have
become involved in development efforts through their
own initiatives by, for example, investing in community
projects back home. Examples of the types of projects
funded include water and sanitation, schools, hospitals,
literacy progammes, training, charitable donations
and supporting ad hoc projects and government-
supported initiatives in their local communities. Some
of these basic livelihood programmes are executed
through public and private partnerships.

Diaspora bonds have been identified as a way of
tapping into the vast wealth of the diaspora and
there is indeed a huge potential to raise billions
of dollars of new funding through it. In 2008, the
Government of Ghana began the marketing of the
Golden Jubilee Savings Bond to Ghanaian diaspora
in Europe and the United States. The Golden Jubilee
Savings Bond is a 5 year Government of Ghana bond
issued in commemoration of Ghana’s Golden Jubilee
celebration. The main objective was to raise money for
development projects in all 10 regions of Ghana.

Government has also put in place several strategies
aimed at supporting institutions and the business
community as whole under the Financial Sector
Reforms to deepen the scope of financial services,

products and the payments system. The introduction
of a Remittance Grant Facility which is a component
of the Ghana – UK Remittance Partnership Project is
conceived to reduce transaction costs and barriers
to access for Ghanaian remittance senders and
recipients. The facility has an initial amount of £1
million from the UK government.162

The promulgation of Foreign Exchange Act 2006,
Act 723 allows non-residents to maintain foreign
exchange accounts with the banks. The accounts
may be credited with transfers in foreign currency from
abroad and from other foreign currency accounts and
balances in these accounts are freely transferable.
In view of this, the banks and non-bank financial
institutions in Ghana have devised several investment
packages or services that allow Ghanaians in the
Diaspora to invest in managed funds, equity trusts, unit
trusts and real estate investment trusts. For instance,
Databank Asset Management,163 a private institution,
has introduced a specially designed investment
instrument for Ghanaians living outside Ghana who
have short, medium or long-term obligations to meet
at home. It is a hybrid account which invests in various
mutual funds and financial instruments in Ghana and
other regulated markets in Africa.

In recent years, some Ghanaian Embassies and
foreign missions have tried to help Ghana’s diaspora
to direct their resources through more formal channels
for national development. Examples include the
‘A Dollar a month for Ghana’ initiative by the High
Commission in Sierra Leone, the ‘Five Pounds No
Balance Police’ initiative by the High Commission in
the United Kingdom to raise funds from the Ghanaian
diaspora to purchase basic tools for the Ghana Police


While these are innovative and commendable for
facilitating the transfer of migrant/diaspora resources
for national development, a lot more needs to be done
to fully maximize the potential impact of remittances
for development. Key challenges include enhancing
access to formal remittance channels, increasing
transparency of the process and reducing cost.

1. Given the importance of remittances in
households’ income and in light of the multiplier
effects of remittances on production, income and
employment, the Government of Ghana should

1) New ThiNkiNg surrouNdiNg remiTTaNces aNd developmeNT

2) maximisiNg The developmeNT impacT of remiTTaNces

have a remittance policy that aims at maximizing the
impact of these flows on growth and development.
A number of other migrant countries, including
India, Pakistan, and Egypt, and more recently,
Latin American countries such as El Salvador,
Nicaragua, Honduras, and Guatemala already have
remittance policies. These countries have devised
mechanisms aimed at mobilizing remittances for
investment through higher interest rates on term
deposits, foreign currency denominated banking
accounts, and tax incentives.165

2. It has also been argued that it is important to reduce
remittance fees. Fees charged by the money
transfer operators (MTO) and the banks are so high
that migrants often resort to unofficial means to
transfer money home. If the MTO’s and the banks
are able to cut down on their fees the amount of
remittances transferred and captured through official
channels would be expected to increase. Apart
from the initial transfer fee charged by the Money
Transfer Operators (MTO’s), there is a hidden cost
that is borne by the receiver of the funds in terms of
exchange rate spread. The exchange rate offered by
the banks or official channels are often lower than
what pertains in the forex bureau or black market,
as a result migrant workers are not encouraged
to transfer funds through official channels. The
government and international agencies should
therefore encourage the development of easier and
cheaper transfer systems wherever possible, so as
to lower transfer costs and leverage remittances for
maximum development.

3. There is also the need for transparency of remittance
prices. The cost of sending remittances varies
between markets and it is unclear to people using
them. It is therefore important for the government
or the central bank to undertake detailed research
into remittance and payment system models
to understand the mechanism governing the
transfer of funds and establish transparency in the
remittances market place, thereby reducing costs

for the consumer and encouraging greater flow of

4. The Central Bank needs to review and streamline
its regulatory framework to embrace more non-
bank financial institutions such as the credit unions
and micro finance institutions to play a greater role
in money transfers. These institutions have a larger
presence in rural areas and are a potential avenue
for increasing the number of payout locations across
the country and expanding access. In addition they
provide related services to meet the financial needs
of the rural communities.

5. Promoting financial literacy is known to transform
the wealth of people who receive remittances into
assets and savings. Information is therefore vital for


To fully realize the potential impact of remittances
for development requires an effective collaboration
between all stakeholders. Government has to improve
upon its own accountability and governance systems,
crucial to building the confidence and trust of citizens
at home and for the migrants to channel their resources
through Government-endorsed channels.

Migrants and Diaspora communities must also take
responsibility for evolving their initiatives towards more
stable, long-lasting and appropriate organizational
forms that meet their needs. The private sector
should take advantage of the enabling environment
and facilities created to design products that would
enhance increased use of formal channels of
remittance inflows.

Last but not the least the Central Bank should establish
the required supervisory structures that would ensure
that that market development is not inhibited without
compromising stability.



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Van Hear N, F. Peike, and S. Vertovec (2004). The Contribution of UK based diasporas to Development and
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Department of International Development.

Zan S, (2004). One Nation, One People, One Destiny - The Ghanaian Diaspora’s Contribution Towards National
Development Using Diverse Channels. SEND Foundation for West Africa.

1) New ThiNkiNg surrouNdiNg remiTTaNces aNd developmeNT

2) maximisiNg The developmeNT impacT of remiTTaNces


OECD (2010). 154 Home Aid Statistics, News and Events. Dated 14th April 2010. See http://www.oecd.org/do

MPI (2009). 155 Data Hub, Global Remittances Guide.


Bank of Ghana (2010). 157

Bank of Ghana – Balance of Payments data. (2010).158

Bank of Ghana (2010).159

Zan (2004). 160 One Nation, One People, One Destiny’ - The Ghanaian Diaspora’s Contribution Towards National
Development Using Diverse Channels. SEND Foundation for West Africa.


Kwetey F. (2010). 162 Remittances and Raising Capital through the Diaspora. Paper presented at the UK – Ghana
Investment Forum, 8th July, London, United Kingdom organized by Developing Markets Associates Ltd.



Sophism (2003). 165 A Case for Remittance Policy in Ghana. 12 of September of 2003.
See. www.ghanaweb.com.



Migration has been an important livelihood strategy for
the people of Bangladesh. It has remarkable positive
impact on social development and empowerment
through skill transfer and by fostering many community
development initiatives. Globalization, modern
communications and transportation have greatly
facilitated the migration. People move continuously
seeking better economic opportunities, family reunion
and humanitarian relief. However, Bangladesh has a
long history of international migration. During British
rule some people migrated for short-term to United
Kingdom and also United States for trade and higher
study. But after independence of Bangladesh in 1971,
the flow of migration to other countries also increased.
During mid 1970s due to oil exploration of Middle East
countries, there was tremendous demand for skilled
and unskilled workers. At the beginning of 1980s
the flow of both short-term and long-term migration
increased. International migration gives a person
an opportunity for higher income and better lives.
The higher income of the migrated person not only
changes his destiny, but has also improved the lives of
his family in the home country.

Bangladesh like other South-Asian countries is a
manpower surplus country with a combination of
professional, skilled, semi-skilled and less-skilled
labour force. Migration plays a vital role in the national
economy mainly in two major ways; firstly it reduces
unemployment and secondly migration results in
remittance flows for the country. The migration
has shown steady growth over the year that was
favourable to the development of Bangladesh; as
inflow of remittance has increased day by day. The
links between migration and remittances are self
evident. Both have a strong co-relation to poverty
reduction in home countries. Remittance has become
an important aspect for the developing countries

like Bangladesh for socio-economic advancement.
In Bangladesh, remittance plays a significant role to
maintain balance of payment and foreign currency
reserve. Remittance also has a great contribution in
Gross Domestic Product (GDP) of the country.

PReseNt tReNDs oF II.
mIgRAtIoN FRom

Bangladesh is considered as a resourceful country of a
huge labour-force. About 60 million people constitute
this vast reservoir of active manpower; fortunately
Bangladesh is steadily turning her manpower into an
asset through training and skill development with a
view to meeting the needs of overseas employment.
It is not possible for Bangladesh to absorb the full
range of available less-skilled, semi-skilled, skilled
and professional manpower within the country in an
appropriate manner and hence it is needed to find
employment opportunities abroad. There are also
a number of foreign countries who are in need of
importing manpower from other countries.

Currently two types of international migration occur
from Bangladesh. One takes place mostly to the
industrialized west and the other to Middle Eastern
and South East Asian countries. Voluntary migration to
the industrialized west includes permanent residents,
immigrants, work permit holders and professionals.
They are usually perceived as long term or permanent
migrants. Migration to Middle East and South East
Asia are usually for short term and that migrants return
home after finishing their contracts of employment in
the host countries.

However, overseas employment from Bangladesh
started officially in 1976 with a modest number (6,078)
of workers. Presently about 7 million Bangladeshi
workers are employed around 130 countries across

9. tHe socIoecoNomIc ImPAct oF RemIttANces:
tHe cAse oF bANglADesH

By Khurshed Alam Chowdhury
Director General

Bureau of Manpower Employment and Training
Ministry of Expatriate’s Welfare & Overseas Employment, Bangladesh

1) New ThiNkiNg surrouNdiNg remiTTaNces aNd developmeNT

2) maximisiNg The developmeNT impacT of remiTTaNces

the world, particularly in countries of the Middle-East
and South-Eastern countries. Saudi Arabia, United
Arab Emirates, Malaysia, Kuwait, Qatar, Oman,
Bahrain, Libya, Singapore are major destinations for
Bangladeshi worker. Today, Bangladesh is considered
as a good source of manpower. Information on the
short term labor migrants who officially go overseas for
employment is available with the Bureau of Manpower
Employment and Training (BMET). Table 13 captures
the flow of migration over different periods.

BMET has classified temporary migrant population
into four categories. These are professional, skilled,
semi-skilled, and unskilled. Doctors, engineers,
nurses and teachers are considered as professionals.
Manufacturing or garments workers are considered
as skilled; while tailor, mason, etc. as semi-skilled
workers; housemaid, cleaner, laborers are classified
as less-skilled. (See figure 15).

PReseNt tReNDs oF III.
FemAle mIgRAtIoN FRom

Poverty reduction has become the number one priority
in development agenda of Bangladesh Government
since long. One of the most important vehicles to
reduce poverty is overseas employment. In every year,
Bangladesh has been sending about half a million
migrant workers and the country is receiving a huge
amount of remittance that contributes to our national

economy. Along with the male overseas jobseekers,
recent trend observes that the number of women
overseas jobseekers has been increased remarkably.
About 1’500’000 overseas women workers have
been sent to different countries from 1991 to 2010. It
is noticeable that the overseas women workers were
2.4 per cent in 2008 which has been increased to 5
per cent in 2010. However, this percentage could be
increased if the existing workers were given need-
based training and orientation about host country, its
culture, language and life-style before their departure
which could help them to be more skilled and effective.
(See table 14).

RemIttANce FloWs to Iv.

Bangladesh is considered as one of the major labour
exporting countries of the world. Since independence
over 7 million Bangladeshis went abroad. The
cumulative receives from Bangladeshi migrants during
1976-2010 stood at around $78.67 billion. Bangladesh
maintained a healthy growth in remittances through
the formal channel. The trend of remittance has
accelerated in recent years from $2.07 billion in 2001
to $11 billion in 2010, an average growth of 43 percent
per annum, even in the global financial meltdown. The
oil-rich Middle Eastern countries with more than 80
percent of the total stock of Bangladesh migrants
accounts for a lion’s share of remittances.

Table 13. flow of Migration from bangladesh during last ten years

Worker’s category

professional Skilled Semi-skilled less-skilled

2001 5,940 42,742 30,702 109,581 188,965

2002 14,450 56,265 36,025 118,516 225,256

2003 15,862 74,530 29,236 134,562 254,190

2004 12,202 110,177 28,327 122,252 272,958

2005 1,945 113,655 24,546 112,556 252,702

2006 925 115,468 33,965 231,158 381,516

2007 676 165,338 183,673 482,922 832,609

2008 1,864 292,364 132,825 448,002 875,055

2009 1,426 134,265 84,517 255,070 475,278

2010 387 90,621 20,016 279,678 390,702

Source: BMET (2010).


Table 14. Overseas employment of female workers during last ten years


Name of the country

























2001 335 162 15 27 - 22 - 95 - 1 - 2 659

2002 827 217 18 14 - 30 - 104 - 2 - 4 1,216

2003 808 108 333 - - 37 1 1,053 - - - 13 2,353

2004 3,133 3,241 1,773 60 - 1,058 - 1,883 - - 25 86 11,259

2005 6,319 3,786 930 132 6 553 12 1,745 - - 25 62 13,570

2006 7,358 7,355 589 629 3 232 743 518 - 1 468 149 18,045

2007 7,341 5,181 49 1,380 4 244 3,498 12 250 354 610 171 19,094

2008 4,144 5,902 - 276 3 173 7,948 201 25 1,091 801 278 20,842

2009 386 6,095 - 11 4 29 13,062 439 7 87 1,825 279 22,224

2010 44 7,111 1 18 3 57 15,116 2,136 185 16 2,695 324 27,706

Source: BMET (2010).

figure 15. category-wise overseas employment

Source: BMET (2010).


Category-wise overseas employment









1) New ThiNkiNg surrouNdiNg remiTTaNces aNd developmeNT

2) maximisiNg The developmeNT impacT of remiTTaNces

The principal features of the remittance flows are as

follows: [SOMEThING MISSING hERE? - paUla]

The Kingdom of Saudi Arabia is the most important

source of remittances. Its share is about 29 per cent

of the aggregate remittances received in Bangladesh.

The US, which saw a large inflow of migrants in recent

years, accounts for the second largest source nearly

15 per cent of the total.

National Registration Bureau (NRB) cards and
Privilege cards for the expatriates’ Bangladeshis have
introduced to encourage more flow of remittance.

RemIttANce AND vI.
ecoNomIc DeveloPmeNt IN

The remittance and economic development in
Bangladesh can be broadly explained in two ways;
overall Macroeconomic benefits of remittance and
Microeconomic benefits at household level.

macroeconomic benefits of A.

The major benefit arising from migration of workers
has been the worker’s remittances. They have not only
made a significant contribution towards the GDP (13.56
per cent), but also to meet the balance of payment’s
deficit. The remittance of migrant workers stands at
$10.99b in 2010. Amount of remittance constitutes 6
times of ODA and 11 times of FDI. It occupies the
highest level of net foreign exchange earning sector
of the country. Remittances play a crucial role in the
Bangladesh economy today.

It has helped to ease our foreign exchange constraint,
stabilizing the exchange rate and allowing Bangladesh
to import much needed raw materials, intermediate
goods and capital equipment. Comfortable reserves
of foreign exchange have also contributed to overall
macro stability and have reduced aid dependency,
along with rapid growth of our export sector.
Remittance increases with the expanding migration
process and accelerating movement of people for
overseas employment market. Some study predicts
an ambitious achievement for the flow of $ 30 billion
remittance by 2015 in Bangladesh. To attain this level
of remittance, skill development training and more
women participation in the migration process are two
essential factors among others. (See table 16).

microeconomic benefit at b.
Household level

The remittance has significant microeconomic impact
at household level. The macroeconomic impact of
remittances at household level partially depends on
the characteristics of the migrants and hence the

Table 15. year-wise remittance statistics


in billion US$ in crore Tk.

2001 2.07 11,590.79

2002 2.85 16,484.53

2003 3.18 18,485.12

2004 3.56 21,286.52

2005 4.25 27,304.33

2006 5.48 38,366.56

2007 6.57 45,724.44

2008 9.01 61,587.83

2009 10.72 73,981.46

2010 10.99 76,505.93

Source: Bangladesh Bank (2010).

INItIAtIves AND INceNtIves v.
FoR smootH tRANsFeR oF

Government and Bangladesh Bank have continued
their efforts to encourage expatriate Bangladeshi
nationals to send their hard earned foreign currency
through official channels. Nowadays nationalized and
commercial bank have established strong network
abroad for easy transfer of remittance to Bangladesh.
As a result the flow of transferring remittance in
Bangladesh through official channels is increasing
day by day. To boost the remittance flow government
has undertaken various initiatives. Different types of
savings products like US Dollar Premium Bond, Wage
Earners Development Bond are offered for expatriate
Bangladeshis. Moreover, tax holiday and tax exemption
are also provided to encourage remittance flow and
utilize it for economic development. Additionally
Commercially Important Persons cards from (CIP)


recipients i.e. whether they constitute the rural poor, or
the more educated sectors of the population generally
residing in urban areas. The majority of Bangladeshi
migrants abroad is unskilled, and originates from rural
areas (de Bruyn 2005). Unskilled workers take jobs in
Saudi Arabia, the United Arab Emirates, Malaysia, and
to a lesser extent US and UK as domestic staff and
labourers. Saudi Arabia alone accounts for around 43
per cent of migrants out of Bangladesh. According to
official statistics, from 1976 to 2004, 46 per cent of
migrants were unskilled, lacked access to land and

The poverty profile of migrants is looked at more closely
in the social appraisal. However the evidence clearly
shows that most short-term migrants abroad are poor
and from rural areas. The poorer the household, the
more impact or benefits remittance income can have
on alleviating poverty. In the short-term remittances
help loosen the budget constraints of their recipients,
allowing them to increase expenditures on both
durables and non-durables products, and provides
them with protection against negative income shocks.
Remittances are cited as making up around 60 to 70
per cent of recipient poor households’ total income
(Bruyn 2005). Investment in health and education is
valuable for long-term economic growth and poverty
reduction. Studies conclusively found that migrant
families invested more in these areas (Murshid et al
2002). The most comprehensive review of the literature
on remittances in Bangladesh (Bruyn 2005) lays out a

number of benefits that are listed in table 17.166

PoveRtY ReDuctIoN PolIcIes vII.

Adams and Page (2003) empirically demonstrated
that international migration can be positively linked
to a decline in the number of people living in poverty.
A World Bank report (2007) recently linked 6 percent
poverty cut in Bangladesh in 2006 to migration. During
the year 2004, 11 percent poverty reduction in Nepal
was attributed to migration (Gurung and Adhikari,
2005). All these lead us to argue that in order to reduce
poverty migration should be linked to global strategic
development planning such as Poverty Reduction
Strategy Papers of various countries, development
agenda of donor organizations and more importantly
national development planning of different countries.
Following are some of the areas where poverty
reduction strategy can take the help of migration.

INItIAtIves bY tHe vIII.
goveRNmeNt oF

The Government of Bangladesh with 160 million
people is faced with a challenge to use the human
resource effectively. The Government of Bangladesh

Table 16. Socioeconomic impact of remittance at community & household levels in bangladesh

Major Indicators positive Impact of Remittances

Nutrition Allow families of migrants to meet basic nutritional needs

Living condition and Housing Living condition and housing improved

Education Invest for education of children

Healthcare Increased investment for healthcare

Social security Social security for elderly people increased

Investment Increased investment in business or income generating activities

Source: Modified from De Bruyn (2005).

1) New ThiNkiNg surrouNdiNg remiTTaNces aNd developmeNT

2) maximisiNg The developmeNT impacT of remiTTaNces

Table 17. Utilization patterns of Remittances in

purposes Remittances used (%)

Food and Clothes 20.45

Medical Treatment 3.22

Child Education 2.75

Agricultural land purchase 11.24

Homestead land purchase 0.96

Home construction / repair 15.02

Release of mortgage land 2.24

Taking mortgage of land 1.99

Repayment of loan(for migration) 10.55

Repayment of loan (other purpose) 3.47

Investment in Business 4.76

Savings/Fixed deposit 3.07

Insurance 0.33

Social ceremonies 9.07

Gift/donation to relatives 0.94

Send relatives for pilgrimage 0.92

Community development activities 0.09

Sending family members abroad 7.19

Furniture 0.69

Others 1.05

Total 100

Source: Siddiqui, Tanseem (2003). Migrant worker
remittances and Microfinance in Bangladesh.

has recognized labour migration as a potential tool
for the socio-economic development of the country.
Efforts to manage migration have been strengthened
and introduced digitized migration management
system in order to maximize benefits from migration
and minimize the harmful effects.

To emphasize more on migration sector, the
Bangladesh Government has established the Ministry
of Expatriates’ Welfare & Overseas Employment to
ensure welfare of the expatriate workers and increase
of the overseas employment. The Ministry has been
rendering ceaseless efforts in enhancing the flow
of remittance and to provide equal opportunity of
the people of all areas of the country for overseas

employment and ensuring overall welfare of the migrant
workers. BMET works under the close guidance and
supervision of the Ministry with a view to expediting
employment opportunity and to ensure the rights of
migrants. BMET is also responsible to regulate the
entire migration process and is engaged for overall
planning and implementation of the strategies for
proper utilization of manpower of the country.

Government has taken a massive program to enhance
and strengthen the training program for producing more
technical and skilled manpower as per the demand of
the overseas labour market. BMET has been playing
an ever-growing role in human resource development
by providing vocational skill training through its
institutional capacities. 37 Technical Training Centers
(TTCs) located in different districts of the Country and
one Bangladesh Institute of Marine Technology (BIMT)
are now in operation under the BMET. Two years
regular course in 45 different basic engineering trades
including 4 years Diploma in Marine Engineering and
Shipbuilding Engineering are now being offered in
these centers. Beside regular courses, many other
modular short-term skill development courses are
also conducted in these TTCs. Total output of these
existing TTCs (both regular & special courses) stands
at about 50,000 skilled persons per year. More 35
training centers are going to be established within next
5 years.

With a view to reducing the cost of migration, the
ministry is planning to establish “Migrant Welfare
Bank” for giving loan with simple interest to the
aspirant workers going abroad and providing financial
assistance to the returnee migrants to invest in
productive activities.

Government has also arranged signing bi-lateral
agreement and Memorandum of Understanding (MoU)
with some destination countries to facilitate remittance
flow along with other issues on the protection of rights
of the migrants.


Remittances from migrants have positive impacts
on poverty reduction and development in originating
countries, mostly developing ones, substantially
contributing to the achievement of the Millennium
Development Goals. These positive impacts become
greater when remittances can be saved and invested
in infrastructures and productive capacity. Government


policy measures could induce such use. Significant
barriers to migration and remittance transfers need
to be addressed in order to harness opportunities
for development and poverty reduction, including
through easing financial transfers, setting appropriate
incentives, improving policy coherence in migration
and remittance polices, and facilitating the temporary
movement of people.

Poverty reduction has become an immediate agenda

of the government of Bangladesh that it has take
up the national strategy for Accelerating of Poverty
Reduction (NSAPR-II) in order to combat it urgently.
One of the most important vehicles for reduction of
poverty is migrant workers’ remittances. It is to be
noted that remittances are one of the major sources
of foreign currency earning of Bangladesh and play a
significant role for the balance of payment as well as
economic development of the country.

1) New ThiNkiNg surrouNdiNg remiTTaNces aNd developmeNT

2) maximisiNg The developmeNT impacT of remiTTaNces


Adams, Page (2003). International Migration, Remittances and Poverty in Developing Countries. World Bank
Policy Research Working Paper 3179. World Bank.

De Bruyn & Kuddus (2005). Dynamics of Remittance Utilization in Bangladesh, International Organisation for
Migration. IOM Migration Series, Number 18, Geneva, Switzerland.

Gurung and Adhikari (2005). Migration from Nepal to India: Non traditional Security in Migration Discourse. UPL

Siddiqui, Tanseem and Abrar, R. Chowdhury (2003). Migrant worker remittances and Microfinance in Bangladesh.
ILO, Working paper no.38, Dhaka, September 2003.

Murshid, K. A. S., Iqbal, K. & Ahmed, M (2002). A Study on Remittance Inflows and Utilization. International
Organization for Migration (IOM).

Rashed Al Hasan (2006). Harnessing Remittances for Economic Development of Bangladesh. INAFI

Siddiqui, Tanseem (2003). Migrant worker remittances and Microfinance in Bangladesh.

World Bank (2007). Global Economic Perspective Report 2006: Economic Implications of Remittance and



Rashed Al Hasan (2006). 166 Harnessing Remittances for Economic Development of Bangladesh.
INAFI Bangladesh.

1) New ThiNkiNg surrouNdiNg remiTTaNces aNd developmeNT

2) maximisiNg The developmeNT impacT of remiTTaNces


Compared to its ASEAN neighbors, the Philippines
has more extensive experience of sending manpower
abroad. Numerous policies and programs, crafted
by the government, reflect this reality. Realizing
the potentials of migration for work, the Philippine
government pursued its overseas employment
program with the general objective of achieving
economic and social benefits for Filipino migrants, their
families, communities and the country as a whole.

Being one of the major labor-sending countries in
the world, the Philippines ranks high in the list of top
receivers of remittances from overseas. From a macro
angle, foreign remittances have significantly contributed
in maintaining the country’s foreign exchange reserves
afloat and have become a constant source of income,
which even supersedes direct foreign investments
and overseas development assistance funds received
by the Philippines.167 On the micro angle, the flow of
remittances enabled overseas Filipino workers (OFWs)
and their families an increased access to information,
goods and services.

However, the full developmental potentials of these
remittances for the country have yet to be tapped.
Studies have shown that much of these remittances
have gone to consumption expenditures with small
percentage going to more developmental channels
like investments and business operations. Previous
government efforts have been attuned mainly on
increasing the volume of remittances and promoting
the use of formal channels (i.e., banks, remittance
agencies) for sending remittances. Consequently,
there have been limited initiatives to encourage the
use of remittance for sustainable, productive and
developmental undertakings for wealth creation and
to maximize remittance inflows for developmental

This paper presents: (a) some facts and figures on
Philippine migration and remittances; (b) impact
of remittances to Philippine society; (c) various
government initiatives, including that of the financial
regulator, taken to channel remittances into
developmental undertakings; and (d) some issues and
recommendations on maximizing the gains of overseas
employment and ensuring the productive mobilization
of remittances, which optimistically shall incite social
and economic developments and, subsequently,
reduce poverty incidence in the Philippines.

RemIttANce FActs AND

Filipinos are in more than 200 countries. Filipinos are
scattered worldwide, establishing their presence in at
least 215 countries either as permanent migrants or
OFWs (overseas Filipino workers). OFWs are those
engaged in remunerative activity in foreign country.
They include both the documented or temporary
workers and the undocumented or irregular workers.
Permanent migrants are mostly in developed countries
like United States, Canada and Australia. OFWs,
meanwhile, are in the Middle East, Asia and Europe.

According to stock estimates released by the Philippine
Commission on Filipinos Overseas (CFO), there are an
estimated 8.5 million overseas Filipinos worldwide as
of December 2009.168 Of this number, 4 million were
permanent migrants, 3.8 million were temporary
workers while 0.6 million were irregular workers.

More than one million OFWs a year. In 2009, over
1.42 million Filipinos found employment outside
the Philippines through overseas employment
agencies and government-sponsored employment
programs. Such figure dwarfs the few thousand
annual deployment of the 1970s when the country’s

10. mobIlIZINg tHe use oF RemIttANces toWARDs PoveRtY
ReDuctIoN AND ecoNomIc AND socIAl DeveloPmeNt tHRougH

goveRNmeNt INItIAtIves: tHe PHIlIPPINe eXPeRIeNce

Saul T. De Vries
Deputy Center Director

National Reintegration Center for OFWs
Department of Labor and Employment

Manila, Philippines


overseas employment program was just starting. The
record high deployment of overseas Filipino workers
makes the Philippines among the largest migrant-
sending countries that include Mexico, India, Pakistan
and China. It also certainly reflects the continuing high
demand for Filipino labor in the global labor market.

Land-based workers dominate departing OFWs. Of
the 1.42 million who left for employment in 2009, land-
based workers took the lion share with 1.09 million
deployment figure or 76.8 percent of total deployment.
On the other hand, 0.33 million sea-based workers
left the country during the same year posting a 23.2
percent share in the deployment pie. This number of
deployed seafarers is the largest in the world affirming
the top one position of the Philippines in the supply of

Middle East and Asia are top OFW destinations. OFWs
continued to flock to their traditional destinations.
These include Saudi Arabia, United Arab Emirates,
Hong Kong, Qatar, Singapore, Kuwait, Taiwan, Italy,
Canada and Bahrain. These top ten destinations
accounted for 79.40 percent (0.87 million) of total
land-based deployed workers.

OFWs came from all walks of occupations and skills.
Deployed OFWs came from practically all walks of life.
Official statistics on newly-hired land based workers
reveal four major skills classifications of OFWs169:

1. Production and related workers, which include
laborers, plumbers, sewers, welders, wiremen,
foremen, carpenters and construction workers,
among others (35.5 percent of total new hires for

2. Service workers such as household workers,
caretakers, cooks, waiters and bartenders, among
others (41.7 percent of total new hires for 2009);

3. Professional, technical and related workers, which
include nurses, engineers, doctors, teachers,
scientists, and pilots (14.4 percent of total new
hires for 2009); and

4. Others, which include administrative, managerial,
clerical, sales and agricultural workers, among
others (8.5 percent of total new hires for 2009).

Over US$17 billion remittances in one year. Despite
the global financial crisis (GFC), remittances from
overseas Filipinos have remained robust in 2009.
Around US$17.3 billion170 have flowed into the country
during the said year, which greatly improved the
country’s fiscal position. Some experts point to this as

the lead reason why the country did not experience the
full brunt of the GFC because these remittances kept
Philippine financial institutions afloat, which stabilized
the local economy as the peso was screened from
foreign currency fluctuations.

The bulk of these remittances came from United
States (41.8%), Canada (10.7%), Saudi Arabia (8.7%),
United Kingdom (4.9%), Japan (4.5%), Singapore
(4.0%), United Arab Emirates (3.7%), Italy (3.2%), and
Germany (2.6%).171

While there are no official figures yet on the amount
of remittance sent to the Philippines from abroad last
year, it is projected that the figures will reach more
than US$18 billion. From 1975-2007, total remittances
to the Philippines have been estimated to be over
US$120 billion.172

ImPAct oF RemIttANces to III.
tHe PHIlIPPINe socIetY

Remittances from overseas Filipinos comprise about
12% of the Philippines’ Gross Domestic Product. While
there is much to be desired in terms of harnessing
the full development potentials of these remittances,
it is still worth noting the positive contributions they
have given to the Philippine society. Among such
contributions are as follows:

Reducing poverty.• Remittances are a great social
equalizer in the Philippines. They bring purchasing
power to families of overseas Filipinos, which,
subsequently, fuel domestic consumption and
stir economic activities. These remittances also
send children to schools, build decent houses,
sustain health, and even create small and medium
businesses. All these lead to the improvement of
the socio-economic status of overseas Filipinos’
families and help produce economic growth and

Spurring community growth• . The reduction in
poverty rates of remittance recipient families is also
found to have positive effects on communities.173
Remittances that were used as capital for small and
medium businesses generate employment within
the communities of migrant workers.

Improving the country’s fiscal position.• Remittances
of overseas Filipinos are the biggest and more
stable source of foreign exchange for the country.
Inflows from this source is said to be bigger than

1) New ThiNkiNg surrouNdiNg remiTTaNces aNd developmeNT

2) maximisiNg The developmeNT impacT of remiTTaNces

foreign aid and investment and other private
sources.174 They, thus, according to Espiritu175
“serve to fill what otherwise would be large external
payments gaps. They are even countercyclical in
nature, meaning they increase when the economy
is bad (as the overseas workers send more money
to help their hard-up families). Lastly, they help the
country in servicing its large foreign debt and gain
more financial flexibility”.

Generating savings and investments.• Although
savings and investments rank low in the list of
destinations of remittances, they remain among the
positive contributions of migration. The challenge,
therefore, is to harness remittances for these
developmental goals.

Stimulating sectoral growth.• Growth figures in
certain sectors have also been directly linked to
Filipino migration. Such sectors as banks, real
estate, communication and retail trade have all
benefited from remittances sent in from abroad.
Bankers, property developers, telecom companies,
retail giants have seen the potentials of remittances
and adopted a host of marketing strategies to
capture the remittance market.

INItIAtIves to cHANel Iv.
RemIttANces FoR

Remittances have a great socio-economic development
potential. The Philippines as a developing nation can
harness these remittances to create programs, projects
and schemes geared towards productive investments,
which, consequently, could help expand the country’s
micro, small and medium enterprises (MSMEs), and
create employment-generating opportunities for the
unemployed and the vulnerably employed.

In the past, various initiatives have been undertaken
in order to direct remittances into investment
opportunities; however, such actions have been
rendered ineffective due to a fragmented socio-
economic development vision, lack of harmonization
among agencies implementing OFW support programs
and the overlapping mandates of these agencies,
Thus, individual entrepreneurs, local and international
aid giving organizations and the private sector have
mostly labored and went into developmental areas
which the government has failed to penetrate.

At any rate, it may be useful to cite some deliberate
efforts of the Philippine government to channel the
use of remittances towards economic and social
development. These include the following:

National Reintegration Program. One of these
initiatives is the implementation of a National
Reintegration Program for OFWs by the Department
of Labor and Employment (DOLE) through the National
Reintegration Center for OFWs (NRCO), the Overseas
Workers Welfare Administration (OWWA) the Philippine
Overseas Labor Offices (POLOs) in cooperation with
DOLE institutional partners (e.g., Bangko Sentral ng
Pilipinas, Department of Trade and Industry, etc.).

Efforts to implement a reintegration program for OFWs
actually started in the early 1980’s following the exodus
of temporary Filipino migrant workers to Middle East
and other labor-deficit countries. Such efforts were
anchored on the recognition that labor migration is not
a “one-way road”. The temporary nature of overseas
employment points to the inevitability of return
migration, which needs to be confronted as it poses
adjustment problems for both migrant returnees and
their families at the personal and economic levels. Such
problems could only be managed by implementing an
effective reintegration program directed to address
the personal and economic reintegration issues of
returning migrants.

The government’s reintegration program provides
interventions in each of the three phases of overseas
employment: pre-departure, on-site, and upon return.
The program’s coverage of all phases of overseas
employment is premised on the belief that planning
for eventual reintegration should not commence upon
completion of the OFW’s employment contract but
even before the OFW departs from the Philippines.
This approach enables the OFW and his/her family to
realize the importance of properly managing the fruits
of overseas employment.

During the pre-departure phase, the reintegration
program is directed towards leading the OFW and his/
her family in setting a common goal to be achieved
while the former is working abroad. They are guided
to define the role of each member in optimizing the
migrants’ earnings, among other things. This is done
through the conduct of mandatory Pre-Departure
Orientation Seminar (PDOS) for departing OFWs
where guidance on savings mobilization, investments
and other aspects of financial literacy are provided
to OFWs and their families. Development of proper


business attitude and appreciation for hard-earned
income is also aimed for PDOS participants.

While on-site, migrants are given access to programs
that would not only assist them with adjustment to
their new environment but also to those that would
help them prepare for their eventual return. These
include information that will guide them for engaging in
investments and livelihood opportunities upon return,
and for accumulating savings, and acquiring new or
enhancing skills while working abroad. At the home
front, the families left behind are given opportunities to
acquire information and skills on livelihood and business
development as well as on financial management.

The return of migrants to the country should trigger
realization of family goals and help contribute in the
national development agenda. Thus, the government’s
reintegration program is anchored on encouraging
migrants and their families to venture into productive
and sustainable economic undertakings that
emphasize on wealth creation and make the migrants
stay home and keep the family integrated and, at the
same time, help stimulate economic activities in local

Filipinos may not be entrepreneurial. Making
entrepreneurs out of OFWs, therefore, entails a lot of
efforts and structural support. Specifically, this requires
the services of experts in the field of entrepreneurship
and business development; and more windows for
credit access. Thus, the DOLE through the NRCO
and OWWA, aside from being direct reintegration
service providers, also provides mechanisms that link
OFWs and their families to professional organizations
and institutions that can empower them to achieve
economic independence and sustenance by providing
advisory and technical assistance on proper utilization
of remittances and migrant earnings. Both the
NRCO and OWWA also conduct social preparation
for OFWs and their families intending to venture into
business. This is done through business counseling
and continuous mentoring as well as production and
entrepreneurship training.

Savings mobilization through social security and
housing programs.176 Apart from encouraging
overseas Filipinos to invest their remittances in financial
instruments and entrepreneurial undertakings, the
Philippine government also makes use of its social
security institutions to mobilize savings out of migrants’
earnings. OFWs are encouraged to enroll in the Social
Security System where its members can take part in

Flexifund, a savings program that pays 8% interest
per annum and that supplements a member’s regular
sickness, retirement, and death benefits offered by the

Another institution, the Pag-IBIG Fund (Home
Development Mutual Fund), also provides pay returns
of 3% for dollar contributions and 7.5% for peso
payments. Both Pag-IBIG and SSS, as noted by ADB,
were “restructured to serve as savings mechanisms
and to respond to two of the main uses for migrant
remittances – retirement/health and housing”.

Diaspora philanthropy program for social development.
The Philippine government also strives to link
remittances to community/country side development.
One concrete program in relation to this is the CFO’s
LINKAPIL (Lingkod sa Kapwa Pilipino or Link for
Philippine Development). The program has been
instrumental in facilitating the flow of assistance or
donations from Filipinos abroad to specific beneficiaries
in the Philippines. The program covers the following

1. Education – connects overseas donors to
impoverished Filipino children wanting to pursue
education. It has established scholarship fund and
a mechanism for donation of books and educational
materials (e.g., computers, laboratory equipments,

2. Micro-enterprises/livelihood – connects overseas
donors to local communities, barangays, non-
government organizations and cooperatives
to establish small-scale or alternative income-
generating activities. Assistance provided to
beneficiaries includes grant of capital fund and

3. Small-scale infrastructure – connects overseas
donors to schools, barangays and other institutional
populations with minimal or no access to national
and local funding. This involves provision of funds
for construction of water facilities, health centers,
and classrooms, among others.

4. Health and welfare – connects overseas donors
to indigent Filipino groups (e.g., orphans, street
children, elderly, disabled) to provide them greater
access to health services and social benefits.
Assistance provided takes the form of conduct of
medical or surgical missions, donation of medical
supplies and equipment to government and primary
and secondary hospitals, and the provision of relief

1) New ThiNkiNg surrouNdiNg remiTTaNces aNd developmeNT

2) maximisiNg The developmeNT impacT of remiTTaNces

assistance to calamity areas.

Since the creation of LINKAPIL in 1990, a total of P2.3
billion (US$52.3 million) worth of material and monetary
donations have been coursed through the CFO.

Another government-initiated diaspora philanthropy
program supportive of impoverished communities
is the DOLE Classroom Donation Project. This
project aims to help reduce classroom shortages in
elementary and secondary public schools, which
hopefully will democratize access to education among
children of school age. It appeals to the sense of
social responsibility of Filipinos and organizations
abroad to encourage them to donate funds to finance
the construction of additional classrooms to areas
in the Philippines identified to have critical shortages
of classrooms. Since its inception in 2003, a total
of P114.4 million had been generated with 586
classrooms built.

The relative success of the above undertakings
manifested increasing willingness of overseas
Filipinos to channel part of their earnings towards
government-sponsored programs that promote social

Harnessing the Potentials of
Remittances through Financial
Regulation and International

The Philippine government has taken the two-pronged
approach in facilitating the flow of remittances from
overseas to the country. Within the local scene,
through the Bangko Sentral ng Pilipinas or the Central
Bank of the Philippines, acting as financial regulator,
administrative and policy initiatives have been taken
to ensure greater access to the financial institutions’
products and services. On the other hand, bilateral
agreements have also been forged to ensure that
Filipino workers shall have continued access to
the labor markets of receiving countries, which
consequently ensure the continued flow of remittance
into the Philippine financial system.

Role of the Bangko Sentral ng Pilipinas (BSP) in
facilitating remittance flow. The enactment of the New
Central Bank Act or Republic Act No. 7653, dated
10 June 1993, set the tempo of BSP’s administrative
framework on the subject of remittance flow.178 The law
authorized the BSP to implement financial regulations
regarding fund transfers made through formal channel

such as banks, private remittance companies and
other remittance agents. Related to this is the passage
of various regulations concerning the operations of
non-bank financial institutions (NBFIs). BSP issued
Circular no. 471, dated 24 January 2005, which
required all foreign exchange dealers, money changers
and remittance agents to register their operations with
the BSP. Aside from professionalizing and regulating
the remittance industry and providing an equal playing
ground for its players, OFWs and their families are
likewise, under this law, protected from fraudulent
dealings like the charging of exorbitant remittance fees
and inaccurate exchange rates.

Still working within BSP’s administrative mandate,
and as part of government efforts in recognizing
the valuable contribution of OFWs in stabilizing the
economy, the Tax Reform Act of 1997, or Republic Act
no. 8424, was promulgated to provide tax breaks to
OFWs. One interesting provision of this law is Section
23, which states that non-resident citizen shall be
taxed only on income derived from the Philippines;
thus, OFWs are exempted from paying taxes on their
earnings from overseas sources.179 Likewise, OFWs
are exempted from paying taxes from the earnings
of their Foreign Currency Deposit (FCD) accounts in
Philippine financial institution (FIs), such as banks.

Moreover, as part of the BSP’s strategy of improving the
overall financial and business environment for OFWs,
which could be achieved via the implementation of
sound policies that promote the efficient utilization of
remittances, the BSP has instigated two (2) projects
aimed at promoting faster delivery of remittance-
related services and lowering the cost of sending
money to the OFWs’ families. The BSP has recently
forged a joint project with local clearinghouse for
credit-to-other banks mode of remittance. Previously,
local receiving banks used the services of courier
firms to expedite the feedback of beneficiary banks
in crediting remittance transactions. Through this
system, local receiving banks paid the couriers an
amount ranging from PhP100-PhP550 ((US$2.2-
US$12.5) per transaction.180 By utilizing the electronic
settlement of the OFW remittances through the
BSP-Philippine Payments and Settlements System
(PhilPASS), the OFWs are only charged PhP5 per
transaction (US$0.11), which is 90% lower compared
to the previous fee structure. And as banks migrate to
the new system, it is expected that the bank’s back-
end processing will be reduced to PhP50 (US$1.13)
for each OFW remittance transaction.181


In addition to improving the system capabilities of
the financial sector, the BSP also leads initiatives in
providing households greater access to the products
and services of FIs. BSP has indeed taken the first
steps of democratizing access to FIs’ products and
services by granting FCDU licenses to qualified rural
and cooperative banks, a function used to be handed
by universal, commercial and thrift banks.182 This
move, if properly advocated, might entice the families/
dependents of OFWs to save and subsequently
invest remittances received into productive economic

Bilateral Agreements entered into by the Philippine
Government in relation to managing migration/
remittance flows. The Philippines as a labor sending
countries has entered into numerous bilateral labor
agreements. These agreements mainly cover issues
on: (a) employment and mobilization of Filipino
workers or exchange of trainees; (b) terms and
conditions regulating the recruitment of specific
professions such as health/medical professionals; (c)
terms and conditions for the employment of Filipino
workers under non-citizen employment contract; (d)
direct hiring of Filipino workers and (e) protection of
Filipino workers in accordance to the labor laws of
the receiving countries.183 Primarily, these agreements
seek to ensure that Filipino workers will have access
into the labor pool of labor receiving countries.

In recent years, the Philippine government, recognizing
work-related violations experienced by Filipino
workers abroad, has initiated bilateral agreements that
focus on promoting the welfare of migrant workers
and protection of their rights. A good example to
this initiative is the bilateral agreement signed with
Indonesia in 2003, wherein both parties agreed that
they shall take a consolidated effort in ensuring the
welfare of migrant workers and the protection of their
rights.184 This, if fully realized, may be used as one
of the model mechanisms in overseas employment
administration in the ASEAN region.

Furthermore, the Philippines has forged bilateral
agreements with some countries with regards to the
area of social security. Pertinent to this is the issuance
of mutual assistance between the Philippines and the
other country in the field of social security and the
prorated payment of benefits, wherein a fraction of
which shall be paid from respective system.

These agreements, though not directly linked with
remittance flow, nonetheless, provide social protection

mechanisms for Filipino workers, if properly enforced,
in concept, it will guarantee that Filipino workers will
receive the remuneration and benefits indicated in
their employment contracts. Likewise, the enactment
of Republic Act No. 10022 has also reinforced the
Philippine government’s efforts of ensuring the safety
and wellbeing of Filipino workers while working

One specific case of bilateral agreement entered into
by the Philippine government that directly touched on
the flow of remittance was the one signed with the
US government. In May 2003, the two governments
signed a Memorandum of Intent (MOI) on improving
the flow of OFW remittances. The said MOI expressed
the assistance to be extended by the US government
in realizing the said task. Interesting to this note are the
inclusions pertaining to linkaging the Philippines to the
US Federal Reserve via direct system of automated
payments and clearing house to facilitate electronic
transfers.185 The US government has also expressed
that it shall help credit unions and cooperatives in
the Philippines to interconnect with the international
remittance network system of the World Council
of Credit Unions (WOCCU).186 Furthermore, the US
government indicated that it shall establish a system
that will tap the US and Philippine postal system in
providing low-cost front-end remittance channels in
cooperation with the Rural Bankers Association of the
Philippines.187 This act shall significantly reduce fees
and other charges paid by Filipinos in sending their

coNclusIoNs AND v.

There have, indeed, been various efforts to exploit the full
potentials of remittances. All the Philippine government
needs to do is to build on, and solidify these efforts
to further facilitate inflow of remittances from Filipino
migrants to reduce poverty and spur economic and
social development for the Philippines. Some issues
and gaps, however, need to be addressed to harness
the full potentials of Filipino migrants’ remittances and
the following are some recommendations that may be
considered in addressing the same:

Pursuing an integrated approach to promote •
remittances for productive undertakings. As shown
above, there are government initiatives to channel
remittances to economic and social development

1) New ThiNkiNg surrouNdiNg remiTTaNces aNd developmeNT

2) maximisiNg The developmeNT impacT of remiTTaNces

undertakings. These, however, appear wanting in
scope and impact. It is, thus, necessary, to have
these initiatives integrated into other efforts of local
governments, private sector and non-government
organizations to achieve greater impact. At
present, various sectors are interested in capturing
the remittance market not so much to harness its
national development potentials but rather to derive
income from these remittances (e.g., remittance
transaction cost). The convergence of all sectors
under a common framework for harnessing
development potentials of remittances will be

Changing traditional mindsets and behaviors. •
Filipinos are not entrepreneurial and have low
consciousness on the importance of savings and
investments. While behavior and thinking cannot
change overnight, a sustained stronger advocacy
on financial management may just achieve a grand
breakthrough in harnessing the full potentials of
migrant workers’ earnings and in making the same
a real driver of development for the Philippines.

Breaking structural barriers.• Many Filipino migrants
could not participate in national development
activities because of certain structural barriers. For
instance, access to additional capital for investment
and business establishment has remained relatively
difficult barring, to a large extent, entrepreneurial
development in migrants’ communities.

Facilities providing financial support to departing
migrants have, likewise, remained limited making
many migrants vulnerable to highly exploitative
financial transactions. Saddled with financial
obligations, a lot of these migrants are compelled
to settle their commitment with creditors during
their overseas employment. This considerably
decimates their remittances thereby leaving little
or nothing for development-based undertakings.

These structural difficulties and limitations require a
more aggressive advocacy for policy development
that would make it easier for migrants to use their
remittances to more productive endeavors through
support structures from facilitative concerned
government and private institutions. By providing
easy access to productive resources and pre-
departure financial support facilities, chances
would be high in bringing migrants towards savings,
investments, and entrepreneurship consciousness

and thereby converting remittances to an added
source of capital for development.

Create an enabling environment for Filipino •
migrants’ investments. Given the special nature of
the Philippine economy, wherein OFW remittances
supersede foreign investments, an enabling policy
environment must be put in place to promote
the productive utilization of migrants’ earnings.
Incentives to foreign direct investors provided by
government can be extended to overseas Filipinos
to entice them to invest in their home country.
Tax incentives and less tedious or streamlined
bureaucratic processes for putting up businesses
could help facilitate the flow of remittances from
Filipino migrants to enterprises that create jobs and
spur economic growth. The financial sector may
also strive to lower the cost of cash transfers and
set up less rigid remittance procedures.

Strengthening bilateral and multilateral relations •
to promote welfare and protection of OFWs.
Contract substitution, human trafficking and other
forms of abuses are the growing concerns of the
Philippine government. These do not only affect
the amount of remittances received by the country
but also pose a threat to the personal wellbeing
of OFWs and exacerbate tendencies for family
dislocation. It is worth noting though that there
are moves among ASEAN member states to
create an ASEAN-wide labor migration standards
to improve overseas employment administration,
which shall cover recruitment and placement and
welfare and protection mechanism for overseas
workers, aimed at mitigating the said concerns.188 If
realized, this could serve as a model mechanism for
the Philippines in forging bilateral and multilateral
agreements with other labor receiving countries.

Likewise, with regards to facilitating the remittance
flow, the ASEAN may possibly consider adopting the
Singapore initiative, wherein the Monetary Authority
of Singapore has, now, allowed banks, subject to
certain restrictions, to open new branches specifically
to provide money-changing services.189 This measure
will provide more foreign workers with more remittance
options and convenience. The APEC Alternative
Remittance Systems (ARS) initiative and related
global efforts190 may also be spearheaded by ASEAN
member state, which hopefully will promote financial
integration for the region and promote a more effective
and cohesive flow of OFW remittances.



Abenoja, Zeno Ronald (2004). Promoting the Greater Use of Formal Remittance System by Overseas Filipinos.
Paper presented at the 9th National Convention on Statistics (NCS), EDSA Shangri-la Hotel, Manila Philippines,
4-5 October 2004.

Asian Development Bank of the Philippines (2004). Enhancing the Efficiency of Overseas Filipino Workers

Bangko Sentral ng Pilipinas. www.bsp.gov.ph/statistics.

Commission on Filipinos Overseas. www.cfo.gov.ph/pdf/statistics.

Calzado, Rebecca J. (2007). Labour Migration and Development Goals: The Philippine Experience. Paper
presented at the International Dialogue on Migration, WMC Conference Center, Geneva, 8 October 2007.

Domingo, Marianne (2009). Deployment Profile and Remittance Patterns of Overseas Filipinos. Bangko Sentral
ng Pilipinas Economic Newsletter (June 2009): www.bsp.gov.ph.

Espiritu, Edgardo B (2006). The Benefits and Costs of OFW Remittances. January 2006.

Go, Stella (2007). Asian Labor Migration: The Role of Bilateral Labor and Similar Agreements. Paper presented
at the Regional Informal Workshop on Labor Migration in Southeast Asia: What Role for Parliaments, Manila
Philippines, 21-23 September 2007: page 3.

Gonzaga, Ruth (2009). Overseas Filipinos’ Remittances: Regulatory Framework and Policy Directions. Bangko
Sentral ng Pilipinas: Economic Newsletter. December 2009.

Institute for Migration and Development Issues (2008). Philippine Migration and Development Statistical

1) New ThiNkiNg surrouNdiNg remiTTaNces aNd developmeNT

2) maximisiNg The developmeNT impacT of remiTTaNces



In 2009, foreign direct investment was US$1.948 Billion and Overseas Development Assistance Total 167
Net Commitment was US$ 9.637 Billion. (Bangko Sentral ng Pilipinas, http://www.bsp.gov.ph/statistics/

Commission on Filipinos Overseas, www.cfo.gov.ph.168

Domingo, Marianne (2004). 169 Deployment Profile and Remittance Patterns of Overseas Filipino. Bangko Sentral
ng Pilipinas Economic Newsletter (June 2009), page 4.

Bangko Sentral ng Pilipinas, www.bsp.gov.ph.170


Institute for Migration and Development Issues (2008). Philippine Migration and Development Statistical 172

Calzado, Rebecca J (2007). 173 Labour Migration and Development Goals: The Philippine Experience. Paper
presented at the International Dialogue on Migration, WMC Conference Center, Geneva, 8 October 2007),
page 7.

Asian Development Bank of the Philippines (2004). Enhancing the Efficiency of Overseas Filipino Workers 174

Espiritu, Edgardo B (2006). 175 The Benefits and Costs of OFW Remittance. See www.manilatimes.net.

Asian Development Bank (2004). 176 Enhancing the Efficiency of Overseas Filipino Workers’ Remittances.

Commission on Filipinos Overseas. See www.cfo.gov.ph.177

Gonzaga, Ruth (2009). 178 Overseas Filipinos’ Remittances: Regulatory Framework and Policy Directions.
Bangko Sentral ng Pilipinas: Economic Newsletter (December 2009).





Go, Stella (2007). 183 Asian Labor Migration: The Role of Bilateral Labor and Similar Agreements. Paper presented
at the Regional Informal Workshop on Labor Migration in Southeast Asia: What Role for Parliaments, Manila
Philippines,21-23 September 2007.

Ibidis. The agreement identifies the following priorities for joint cooperation and initiatives: (a) promotion and 184
protection of the welfare and rights of migrant workers of both countries; (b) training and certification of
migrant workers; and (c) provision of legal aid for the protection of the rights or migrant workers.

Abenoja, Zeno Ronald (2004). 185 Promoting the Greater Use of Formal Remittance System by Overseas
Filipinos. Paper presented at the 9th National Convention on Statistics (NCS), EDSA Shangri-la Hotel, Manila
Philippines, 4-5 October 2004.



Output objective of the ASEAN Forum on Improving Overseas Employment Administration, Hyatt Hotel, 188
Manila Philippines,16- 17 December 2010.



1) New ThiNkiNg surrouNdiNg remiTTaNces aNd developmeNT

2) maximisiNg The developmeNT impacT of remiTTaNces


Following the objectives and principles contained in
Senegal’s Poverty Reduction Strategy Papers (PRSP),
Senegal has issued a Sectoral Policy Letter with the
aim of maximizing the positive developmental effects of
migration and establishing a fruitful policy partnership
based on a higher level of engagement by expatriated
people in national development efforts.

This implies promoting a migration process that
strengthens human resource development and capital
accumulation with the purpose of facilitating investment
in productive activities and enterprises creation and
development. This type of policy intervention can be
particularly relevant in migrant originating regions or

Of a total Senegalese population of twelve million, about
two million are disseminated worldwide, especially
in Africa, Europe and America. In term of countries,
most Senegalese migrants are located in West Africa
(Gambia, Ivory Coast, Mali, and Mauritania), Central
Africa (both in Republic of Congo and Gabon), Europe
(France, Italy and Spain) and in the United States (New
York and Atlanta).

The Senegalese migrants actively contribute to the
Senegalese economy by sending remittances. The
actual amount of remittances transferred is difficult
to evaluate, as they are received and measured by
different local institutions with different methodological
tools. In this regard, we can observe many differences
between local and international data in the case of

The resources sent by Senegalese migrants have
become increasingly important over time. According
to local data, formal remittances transfers were
estimated to be about 544 billion CFA Franc191 (832
million Euro) in 2007192 (Central Bank of West African
States - BCEAO, 2008), and more than 600 billion CFA
in 2008. During the period 2005-2009, remittances
transfers averaged 500 billion CFA Francs annually
(763 million Euro).193 In 2005, remittances represented

9.1 per cent of the gross domestic product (GDP) of
Senegal, 10.3 per cent in 2006 and 12 per cent in
2007. These amounts do not take into consideration
informal financial transfers.194

RemIttANces ImPAct PlAYeD II.
IN PoveRtY ReDuctIoN AND
IN ecoNomIc AND socIAl
DeveloPmeNt IN seNegAl

One of the most visible links between migration
and poverty reduction can be established through
remittances transfers. The remittances help to reduce
poverty by giving an additional income to migrants’
family located in the country of origin. Remittances are
a social security and welfare net in Senegal as formal
social security is absent, with the exception of one
program available to formally hired workers. In this
regard, a study has showed that a 10 per cent average
increase in international remittances in the gross GDP
of a country would lead to a 1.6 per cent decline in
people living in poverty (Adams and Page, 2005).

According to Daum (1996), 80 per cent of financial
resources of households located in the Senegal River
valley are constituted by international remittances
transfers. A share of these money transfers is
directed toward the creation of social infrastructure,
undertaking of real state investment, and consumption
of private services such as health. However, most of
the resources received are used to support household
spending, representing the main source of income for
many families.

Regardless of the approach taken, one of the positive
effects of remittances transfers, as evidenced by
multiple studies, is its impact upon the struggle against
poverty in Senegal.

In 2008, a study of Directorate of Forecast Studies
of Senegalese Ministry of Economy and Finance
(DPEE) used general survey data form the “Periodical
Study Selected Sectors the Senegalese Economy”

11. cHANNelINg DIAsPoRA FuNDs INto PRoDuctIve sectoRs:
eXPeRIeNce oF seNegAl (INcluDINg tHRougH cooPeRAtIoN WItH

AND AssIstANce FRom eu)

Samba Yomb THIAM
Technical Adviser

Ministry of Senegalese Abroad


to measure the effect of migrant remittances upon

In light of this study we can deduce the following

Remittances are generating an increase of about •
60 per cent in the average per capita spending
among the recipient households. Such an increase
in spending reduces by one third (30.7 per cent) the
incidence of poverty at the national level.

Increases in per capita spending among the •
recipient households are about 95 per cent in Dakar
and only about a 6 per cent in rural areas.

A paradox occurs when comparing the effects of •
remittances over the average per capita spending
with the percentage of poverty incidence in certain
geographical areas. As shown in table 18, the
effect of remittances on per capita spending is
much higher in Dakar than in rural areas. The
contrary happens when looking at their effect
over percentage of poverty incidence in rural and
urban areas. While in rural areas the impact is very
positive (with a reduction of 60 per cent in poverty
incidence), in Dakar the effects are negative (with
an increase of 10 per cent in poverty incidence) as
families become remittance dependent and are less
inclined to engage in other economic activities.

Ndione and Lalou’s study (2005) regarding international
migrations trends done in Senegal showed that
remittances are highly relevant for assisting migrant’s
households in the cities of Dakar and Touba. The
study indicates that remittances provide for a large
share of households’ vital needs (between 1/3 and 3/4

of household expenses). In Touba, remittances have
also enriched recipient households as they allocate
significant shares of remittances received, between
24.9 to 48.2 per cent, into building houses and other
economic investments.

The Gupta, Patillo and Wagh study (2007), based on
76 developed countries (including Senegal), shows
that a 10 per cent increase in ratio Remittances/GDP
ration generates a one percent reduction in the rate
of people living with less than one dollar a day. Such
an increase can also increase the average income of
the poor and the number of people above the poverty

Lastly, according G. Daffé (2008), the impact of
remittances over poverty reduction passes through a
double channel of household spending and investment
in human and physical capital.

coNcRete meAsuRes tAkeN III.
bY seNegAl IN oRDeR
to cHANNel tHe use oF
RemIttANces (INcluDINg
ecoNomIc AND socIAl

In order to channel the use of remittances, Senegal
has taken the following measures:

To introduce tax benefits for the importation of •
equipment needed to create enterprises by returning

Table 18. Impact of remittances upon average per capita spending and level of poverty incidence (in cfa franc)

Without Remittances With Remittances %

per capita

National scale 197,643 315,936 +59.9

Dakar 269,580 525,687 +95.0

Others towns 187,182 305,453 +63.2

Rural area 145,724 154,340 +5.9

level of poverty
incidence (%)

National scale 52.4 36.3 -30.7

Dakar 20.5 22.6 +10.0

Others towns 64.0 25.6 -60.0

Rural area 71.8 52.7 -26.7

Source: DPEE 2008.

1) New ThiNkiNg surrouNdiNg remiTTaNces aNd developmeNT

2) maximisiNg The developmeNT impacT of remiTTaNces

migrants coupled with attractive investment

To simplify the customs process;•

To create a project investment bank to assist in •
investment decisions within the framework of the
Precedential Council for investment;

To organize a real state and investment fair in order •
to facilitate the acquisition by migrants of land
property and business investments;

To set an agency and organize events for creating •
micro, small and medium enterprises;

To set a universal office for the creation of enterprises •
within 48 hours;

To organize diaspora information, identify and visit •
most significant diaspora organizations;

To set investment incentives for entrepreneurial •

To assist migrants home country reinsertion and •
reinforce their capacities to undertake projects with
the support of a development and solidarity project
funded by France;

To start the “Plasepri” project funded by Italy for •
20 Million Euros (project for the support of the
private sector and revalorization of the Senegalese
diaspora in Italy);

To initiate the “REVA” project (Return to Agriculture) •
for returning migrants (Spain);

To hold a workshop to support investments by •
Senegalese migrants;

To carry on a study on the potential participation •
of Senegalese migrants in the economical
development of Senegal;

To create the Investment Fund for Senegalese •
Abroad (FAISE).

As mentioned above, Senegal is implementing a series
of specific instruments to channel the positive impact of
migration over social and economic development. The
more important instruments include the following:

the Programme for Development A.
and solidarity Initiatives (PAIsD)

The project aims to support social and economical
development initiatives by Senegalese expatriates
established in France. Support for the project, provided

by France, totals about 9 Million Euros.

The main areas of intervention of the PAISD are as

To follow the private economic investment of •
Senegalese migrants;

To gather high qualified Diaspora experience; •

To finance local development initiatives to supports •
areas of origin;

To mobilize the youth supported by Diaspora in •
order to engage them in volunteer initiatives to
benefit of areas of origin;

To contribute to the reduction of the digital divide •
between Senegalese in urban and rural areas.

migration for Development in b.
Africa Project (mIDA)

Based on its long experience with the Return of
Qualified African Nationals Programme (RQAN), IOM
has launched MIDA to strengthen its capacity building
efforts in assisting African countries to benefit from
the investment they have made in their nationals. The
MIDA is a capacity-building program managed by the
IOM, which seeks to mobilize knowledge and skills
acquired by African nationals abroad for the benefit
of Africa’s development. Many African nationals in the
Diaspora are applying their qualifications and skills in
developed countries in Europe and North America.
Such qualifications and skills should be brought
back and mainstreamed for developing the African
continent. The Project will be implemented through
a mobility approach that will allow Africans to apply
their acquired knowledge and skills in development
activities in their country of origin and come back to
host countries if they so desire.

Partnership between Italy and c.
senegal for supporting the Private
sector and the Revalorization of
the senegalese Diaspora in Italy

Senegal is among the countries that receives Italian
public development aid. Migration management has
recently arisen as a key issue in bilateral relations.
Development cooperation is regarded as a mean to
encourage Senegalese migrants to set up reintegration
projects in country of origin. PLASEPRI is a three year
partnership project funded with a 20 million Euro


grant from Italy. The project aims to contribute to the
sustainable development of Senegal by increasing the
productive investments launched by Senegalese living
in Italy. Such investments should create employment
and development opportunities in the areas of origin.

eu-senegal Relationship: the D.
Role of mobility Partnership

Migration issues have become major themes in
Senegal-EU relations. Senegal’s (PRSP) (2008-2013)
lays out the framework for cooperation in migration
issues, including relations between the European
Commission and Senegal. The migration agenda
between Senegal and the EU covers several migration-
related issues that range from economic growth
to poverty reduction and specific issues related to
employment creation among the youth and the link
between migration and development.

The EU and Senegal are currently negotiating a Mobility
Partnership Agreement (MPA) under this framework.
The MPA was a result of the November 2006 EU-
Africa Declaration on Migration and Development and
it is intended to facilitate circular migration, and to
some extent improved labour market access to the
EU for the citizens of selected third countries. This
type of partnership belongs to a larger framework
of agreements between the EU and third countries
that also includes cooperation on related issues as
development aid, visa facilitation, temporary migration
and irregular migration.

the Investment Fund for e.
senegalese Abroad (FAIse)

Created in 2008 by the Senegalese Government,
FAISE supports development, poverty reduction and
investments. More specifically, FAISE seeks to channel
migrant remittances into productive investments (e.g.
real state) and allow the participation of Diasporas in
the creation of employment through the creation of
small business. FAISE currently has several lines of
interventions. The most important are as follows:

Promoting productive capacity and business •
opportunities for development-oriented investment
by migrants;

Encouraging a higher engagement from Senegalese •
abroad in the social and economical development
process of the country;

Financing productive investment projects carried •
out by Senegalese abroad through subsidies,
credit and collateral provision and insurance with
private financial partners (e.g. banks, microfinance
institutions and insurance companies);

Encouraging the development of the localities and •
territories of origin of migrant;

Contributing to the struggle against illegal •
immigration by creating and developing enterprises,
especially in areas of origin of migrants;

The Ministry of Senegalese abroad has created a
Directorate for the support of Investment and Projects
(DAIP). DIAP is in charge of gathering and evaluating
all project proposals for the purposes of providing
support. Since its creation, 134 projects have been
considered eligible, creating more than 1300 jobs,
with an average of 9 employees per project. Sixty five
Senegalese migrants have been directly financed with
around 330 million CFA Franc in the last two years.195
Projects have been implemented in areas such as
agriculture, fishing activities, handicraft production,
textiles, information and communication technologies,
construction, public works and diverse services.

the Development cooperation in F.
support of local governance

Decentralized cooperation seeks to promote local
governance and democracy and to strengthen
relations among regions and territories. In Senegal, it
has played an important role in the decentralization
process, the development of local strategies designed
to reduce poverty and in making certain regions and
territories more competitive. Today, Senegal has more
than hundred partnership agreements between local
development cooperation programmes and organized
Senegalese diaspora organizations. While this type of
cooperation is relatively unknown, it can be of great
assistance for advancing local development objectives
when linked to the contribution of migrants.

tHe FActoRs ImPeDINg tHe Iv.
FloW oF RemIttANces AND
tHeIR use FoR ecoNomIc
AND socIAl DeveloPmeNt

Despite of their importance, remittances seem to be

1) New ThiNkiNg surrouNdiNg remiTTaNces aNd developmeNT

2) maximisiNg The developmeNT impacT of remiTTaNces

ill-valued because of the following impediments:

Lack of knowledge about the migrants profiles •
(geographical, social, professional and economic);

Lack of sufficient organization by authorities in order •
to better support and represent migrants;

Lack of reliable data and lack of information for •
Senegalese abroad on how to do business or
potential opportunities in the home country,

lack of knowledge about existing incentives and •
other enabling measures for migrants Aboard;

Weak understanding of Diaspora’s knowledge and •

Scarcity of financial means;•

One of the greatest challenges of authorities is
facilitating reliable remittance transfers and ensuring
lower tranfer fees. The average cost of transfers from
developed countries to Senegal ranges between 13
to 20 per cent of the total amounts transferred.196 This
high cost plus low accessability to formal channels
incentivizes the use of informal channels.

In relation to financial intermediation, the main
impediments in the formal banking system include the

A weak diversification of financial assets;•

Inappropriate banking system to address saving •

High interest rates for credit;•

Weak savings mobilization; and•

A weak credit offer.•

meAsuRes to be v.
tAkeN At NAtIoNAl,
bIlAteRAl, RegIoNAl oR
INteRNAtIoNAl levels to
Remove ImPeDImeNts to
RemIttANces FloWs

The existence of important impediments in the
Senegalese remittances services market (i.e., high
transfer fees, high levels of informal channels and a
weak and relatively homogenous financial services
offer) calls for a vigorous set of actions including the

Reducing remittances transfer costs.• According
to the World Bank, if transaction fees were reduced
by 5 per cent, remittance flows would increase
by $3.5 billion per year. In some countries, tax
exemptions to transfers by formal channels have
encouraged reductions in the transactions cost
of remittances and an increased use of formal

Putting migrant remittances to work.• This
basically means creating incentives to channel
money transfers through formal financial networks
(Banks, Microfinance and productive sectors) or
into productive activities.

Improving financial regulation and expanding •
competition. It has been estimated than about 46
per cent of remittance transfers to Senegal arrive by
informal channels.197 In this regard, it is important to
facilitate the use of formal channels by opening the
sector to wider competition and by modernizing the
national system of payments. These are particularly
difficult challenges for countries as they touch on
areas of regulatory sovereignty. Competition can be
brought by opening the money transfer market and
by increasing the number of licenses for authorized
financial institutions without relaxing existing
prudential regulations. For example, allowing micro
finance institutions to undertake money transfer
services will provide services to a wider share of the
population, including in rural areas. Formal transfers
could also facilitate an increase in savings and to
reduce risks related to the capture of transfers by
money-laundering networks.

Encouraging migrants’ financial education• . The
reorientation of remittances usage is usually quite
difficult due to the particular purposes and individual
needs of senders and recipients. Remittances are
private transfers and savings built on remittances
belong to migrants and their families. So when
designing and undertaking financial education
programmes to achieve financial optimization
of the remittances, taking into consideration the
motivations and behavior patterns of senders and
recipients is recommended.

Channeling Senegalese migrants’ remittances •
towards productive sectors. This implies
creating innovating financial products in the
banking and insurance sector and setting adequate
administrative and institutional support processes in
order to respond to migrant choices. Revalorization


of investment decisions made by migrants, gaining
migrant trust and building support programmes
on existing diaspora networks and families at
home can help effectively channel remittances for
productive uses.

Encouraging Microfinance institutions to •
channel remittances for financing micro and
small enterprises. Micro finance institutions could
play a greater role in channeling remittances for
entrepreneurial activities if they link transfer services
to the use of other financial products such as
micro credit, micro insurance and special savings

Creating investment funds in order to channel •
remittances towards public and private
partnerships. This can be done by allowing small
investment and participation in public enterprises
privatization or by issuing bonds for financing public
works of public enterprises.

Strengthening institutional support for •
creation of migrant enterprises by informing
migrants of home country investment opportunities
and reinforcing the migrants’ skills in business

Creating a Warranty Fund in order• to facilitate
access to bank credit and to create a safe and
reliable environment.

Promoting the negotiation of balanced •
agreements seeking regulate migration flows
between States. Well-negotiated agreements
can facilitate remittances flows, open opportunities
for labor mobility and ensure for social security
protection for migrants.

Expanding financial and physical •
infrastructures in rural areas in order to
enhance the positive effect of the transfers
tools suggested. This is can be a key factor in
formalizing remittances flows.

INstRumeNts useD bY vI.
tHe FINANcIAl sectoR to
cHANNel RemIttANces INto
PRoDuctIve sectoRs

According to Tall S. M. (2008), Senegalese financial
institutions are interested in attracting the broad
resource base that remittances flows represent. Banks

and insurance companies are increasingly offering
new products and services that match migrants’
needs. The offer and marketing of these products and
services is being made by offices and agencies that
have knowledge and experience about migrant needs.
Moreover, some banks are also opening agencies
and branch offices in countries hosting Senegalese
migrants. For example, the “Banque de l’Habitat du
Sénégal” has opened new agencies in New York
and Paris and the “Société Générale de Banques au
Sénégal” recently opened branch offices in Paris in
partnership with Société Générale Group.

The tools created by financial sector target migrants’
needs and are being clustered in financial products
and services packages linked to these needs. Table 19
illustrates the type of banking products and services
packages that have been offered by some Senegalese

In fact, there is a trend toward softening some of
existing access conditions to credit in many home
countries. The existence of international banks
like the Ecobank and Bank of Africa as well as the
reinforcement of partnership between host and home
countries banks also constitute positive factors for
channeling remittances into productive sectors.

seNegAlese INstItutIoNs vII.
to PRomote coHeReNcY
vARIous stAkeHolDeRs

Under a multi-stakeholder approach, the following
institutions have been collaborating for the purpose of
facilitating the flow of migration and remittances.

1. Senegalese Government: Presidency of the
Republic, Ministry of Foreign Affairs, Ministry of
Economy and Finance, Ministry for Senegalese
Abroad, Ministry in charge of Employment, Ministry
in charge of Work, Ministry of Interior, Ministry of
Microfinance, Ministry of Family, and Senegalese
agency for the promotion of Investment and the
Agency for Development and Small and Medium

2. International agencies: International Organization
for Migration (IOM), International Labor Organization
(ILO), African Development Bank (ADB).

1) New ThiNkiNg surrouNdiNg remiTTaNces aNd developmeNT

2) maximisiNg The developmeNT impacT of remiTTaNces

3. Private sector: Banks, Microfinance Institutions,
Insurance Companies.

4. Non-Government Organizations: Union pour la
Solidarité et l’Entraide (USE-Congad) and various
Senegalese diaspora organisations.

coNclusIoNs AND PolIcY vIII.

Remittances are a notable source of foreign currency
and contribute to improvement of the living conditions
and survival of Senegalese migrants’ families. They
contribute greatly to the reduction of poverty in rural
areas and to the transformation of cities through
investments. In Senegal, where remittances provide
more than thirty five per cent of household budgets,
formal financial transfers recorded from 2005 to
2009 totaled around 3.8 billion Euros.198 Countries of
origin, which receive substantial transfers, show lower
incidence rates of poverty than the countries not
affected by migration issues. While funds transferred
to Senegal contribute to preventing poverty, there
remain challenges to channeling remittances and
invests towards productive sectors in Senegal.

In fact, it is necessary to improve the positive impact
of migration on development in the following areas:

Reinforcing the role of migrants as development •
actors by consolidating their capacities and ability

to contribute to development policies;

Taking into account migration and remittances •
issues when developing regulations and policies
at national, bilateral and multilateral levels or when
signing or ratifying international conventions on the
free movements of persons or the protection of
migrants and members of their families.

Harmonizing national, regional and international •
policies to enhance coherence in migration

Making better use of remittances by setting policies •
to facilitate job creation in migrants’ countries of

Addressing irregular migration and prioritizing •
promotion of legal movement of labour.

Table 19. banking package to develop for Senegalese migrants

account Savings account credit account Investment account Insurance products

Payment cards

Standing order


Electronic banking

Savings deposits

Term deposit

Education savings

Home savings plan

Saving and
passbook accounts

Wage savings

Project savings

savings deposits

Consumer credit

Home loan

Personal loan

Car loan

Loan on personal

Healthy credit

Overdraft account



Mutual fund


Reserve fund

Life insurance

Whole life

Death repatriation

Sickness insurance

Home insurance

Car insurance

Old age insurance


Source: IOM (2007). Workshop on “Financial optimization of remittances – Case of Senegalese leaving in Italy”, Dakar, 18
September 2007.



Adams Jr R. and Page J. (2003). International Migration, Remittances, and Poverty in Developing Countries.
World Bank Policy Research Working Paper 3179.

Adams Jr R. and Page J. (2005). Do International Migration and Remittances Reduce Poverty in Developing
Countries? World Development. Vol. 33 (10): 1645-69.

Daffé G. (2008). Les transferts d’argent des migrants sénégalais. In “Le Sénégal des migrations: mobilités,
identités et sociétés”. Diop et al (2008).

Daum C. (1992). L’immigration ouest-africaine en France : une dynamique nouvelle dans la vallée du fleuve
Sénégal ? Paris, Panos.

Daum C. (1996). Making Room versus Creating Space. The Construction of Spatial Categories by Itinerant
Mourides Traders. In B. M. Metclaf (ed) (2006), Making Muslin Space in North America and Europe, Berkley,
Los Angeles University of California Press.

Direction de la Prévision et des Etudes Economiques (Ministère de l’Economie et des Finances du Sénégal)
(2008). Impact des Transferts des migrants sur la pauvreté au Sénégal. Document d’Etude n° 7, Dakar,

Gupta P., Patillo C. and Wagh S. (2007). Impact of Remittances on Poverty and Financial Development in Sub-
Saharian Africa. IMF working paper, WP/07/38.

Ndione B. et Lalou R. (2005). Tendances récentes des migrations internationales dans le Sénégal urbain: Existe-
t-il une dynamique de quartier ? Les exemples de Dakar, Touba et Kaolack. Union Internationale pour l’Etude
Scientifique de la Population XXVe Congrès International de la Population, Tours, France, 18-23 juillet 2005.

Tall S. M. (2008). Les émigrés sénégalais en Italie – Transferts financiers et potentiel de développement de
l’habitat au Sénégal, in Le Sénégal des migrations: mobilités, identités et sociétés. Diop et al, 2008.

1) New ThiNkiNg surrouNdiNg remiTTaNces aNd developmeNT

2) maximisiNg The developmeNT impacT of remiTTaNces


Franc from the African Financial Community (Communauté Financière Africaine).191

Central Bank of West African States – BCEAO (2008 - 2010).192


Ministry of Senegalese Abroad (2011).194

Ministry of Senegalese Aboard (2011).195

Alioune Diop (2007). 196 Financial optimization of remittances – Case of Senegalese leaving in Italy. Workshop
organized by the IOM in Dakar, 18 September 2007.

African Development Bank (2007). 197 Les transferts de fonds des migrants, un enjeu de développement: Les
Comores, Mali, Maroc, Sénégal. Rapport provisoire, ADB, Abidjan, Côte d’Ivoire. http://www.afdb.org.

Central Bank of West African States - BCEAO, 2008 and 2010.198



Remittances play a crucial role in the migration debate
both at microeconomic and macroeconomic level.
Remittances are today a key source of international
financing for many developing economies. They
provide a significant contribution to the macro-
economic stability of countries and State finances,
especially in terms of income inflows and sources of
hard currency.

In general terms, migrants’ remittances to home
countries have increased considerably during recent
years and have emerged as a key external financing
source for most developing countries. Migrants’
remittances represent higher capital inflows than those
of investment portfolios and are three times higher
than total international development assistance.199

Because of their volume (about $316 billion for
developing countries)200 and their role in developing
economies, particularly in the poverty reduction,
financing small businesses, education and health
expenditures; these transfers have been subject to
special attention by policymakers in both developing
and developed countries. For Morocco, the main
objective of its current remittances policy is to enhance
their positive impact, particularly through the optimal
use by shareholders who should be able to genuinely
leverage them in light of their own interests.


Remittances from Moroccans living abroad (MLA) are
difficult to quantify. Actual levels of remittances flows
are difficult to assess due to a wide diversity in transfer
practices and difficulties in controlling and regulating
transfer circuits. Such flows are mainly categorized
in formal and informal transfers. Formal transfers
are those that use official channels such as banks,
post offices and money transfer companies (MTCs).
Formal transfers are usually listed in national balance
of payments as “unrequited transfers.” In contrast,

informal remittances tend to use “person to person”
channels for transfers and are not recorded by official

Some formal transfers are made through social
agencies or employers on behalf of a migrant or his
family. This latter type of “social transfers” includes
pensions, retirement and social security contributions,
family allowances, and medical expenses. “Social
transfers” accounted for up to 10.7% of MLA total
remittances transfers to Morocco.201

Two other forms of transfers that are gaining importance
in countries of origin are “know how” transfers,
which are composed of intellectual and knowledge
contributions by MLA, and “collective remittances,”
which target the economic, social, human and political
development of the migrant’s country or region of origin.
Collective remittances can constitute a lever for local
development. Indeed, migrants can actively participate
in regional development through their contribution to
local development projects. This type of contribution
jointly with other forms of Diaspora action is being
considered as a new form of development policy
known as “joint development or co-development”.
This new form of development policy has also been
considered as a form of development aid.202

“Know how” transfers are mainly provided by MLA with
high skills, academic knowledge or advanced technical
training. MLA occupying positions in transnational
companies, universities and research centers in
host countries can offer significant opportunities for
expertise exchange, knowledge transfer and network
building. In many cases, these expatriates can also be
relevant channels for improving international relations
or active diplomacy as some may work in international
organizations or are already playing important roles in
their country of residence. This type of transfers can
offer important opportunities to channel expertise into
to the national economy and create deeper ties for
parallel diplomacy abroad.


12. tHe Role oF tRANsFeR oF FuNDs FRom moRoccANs lIvINg
AbRoAD IN tHe socIo-ecoNomIc DeveloPmeNt oF moRocco

Anas Alami-Hamedane

Permanent Mission of the Kingdom of Morocco to the United National and
Other international organizations in Geneva

1) New ThiNkiNg surrouNdiNg remiTTaNces aNd developmeNT

2) maximisiNg The developmeNT impacT of remiTTaNces

Factors that affect remittances flows have been
subject to a great deal of debate in the specialized
literature. However, three main factors are likely to play
a significant role.

Institutional FactorsA.

This factor is related to the existence or the
establishment of institutional structures that reinforce
the links between migrants and their country of origin.
In this regard, the availability of facilities to encourage
MLA to save, invest and initiate entrepreneurial
activities are fundamental instruments for channeling
remittances flows. Developing programmes for the
mobilization of skills from MLA as well as Diaspora
organizations for improving good governance,
democracy and human rights. Quality of the judicial
system and the tax system can also be institutional
determinants that have a positive effect on transfers.

microeconomic Factorsb.

Migration is in many cases an economic project for
which the main purpose is transferring resources to
families in the home country and building savings.
However, migrant saving capacities and their propensity
to transfer funds to Morocco differ according to the
migrant’s profile. Several parameters are involved at
this level:

Intergenerational migrant behavior. The first •
generation of migrants are more inclined to send
remittances as they have stronger and closer ties
with relatives left behind and with the country of

Employment status, type of job and the level of •
income. Remittances flows are affected by the real
wage rate, employment of the spouses, availability
of unemployment benefits, family allowances, and
housing benefits among others.

Dependants. Their presence or absence in the •
migrant’s family, and their number, ages and
migrants’ children affect transfer decisions.

The general living conditions. Living conditions •
in host country and the degree of the migrants’
integration affect spending decisions and the
amounts to be transferred.

Expectations about returning home. If the migrant •
plans to return home, a relatively substantial income
is sent to the country of origin. In this regard, funding

for housing is a major concern for such migrants.

The degree of altruism and solidarity and •
attachment to family and the home country. A key
determinant of the amounts to be transferred is the
nature of the relationship between the donor and
the recipient. Donors often feel a moral obligation
to ensure the survival of recipients, who are often
their relatives. Moreover, recipients are sometimes
older and receive transfers as compensation for the
investment they have made in providing the migrant
education or helping him to migrate. This altruism
can be tempered and could be related to a pattern
of services exchange, such as caring for children
and providing for the family left behind. Sometimes,
these transfers can also be used to improve prestige
of the migrant (e.g. sponsoring a sport club).

Ultimately, the propensity to transfer and save
depends on the objectives assigned by migrants to
their migration project. Overall, the migration project is
an economic project based on the intention to collect
a maximum amount of savings which usually is the
residual income after consumption and other primary
expenses. The effects of these residual amounts are
what countries are trying to maximize.

socioeconomic Factorsc.

Socioeconomic factors affecting remittances primarily
consist of the availability of banking development
infrastructure, the quality and coverage of the service,
and the transaction costs. In the particular case of
Morocco, banks offer competitive services compared
to many other migrant originating countries in Africa.
Moroccan banks have a quite diversified platform
of products, investment assistance abroad and low
levels of transaction cost.

ecoNomIc DeveloPmeNt

The Moroccan diaspora takes an active part in
economic development of Morocco. With a migrant
community of over 3 million persons, Morocco
receives annual remittances transfers of about €4
billion.203 These transfers inject dynamism into several
industries including handicrafts. In this regard, migrants
not only participate in the development of Morocco,
but contribute to its economic survival. Remittances
continue to play an ever greater role in the life of


Moroccan people. They assist in the fight against
poverty and in the education of good citizens who will
play a role in Morocco’s future. Thus, when a migrant
funds the education and heath of a Moroccan citizen,
he also contributes to Morocco’s development.

Remittances from MLA represent the highest type of
international capital inflow into Morocco. The country
is aware of this and is making efforts to identify
diaspora needs, study migration and remittances
patterns, and promote investment. MLA priorities have
evolved and remittances trends have followed. In the
past, migrants invested in real state in the anticipation
of their retirement, favored small businesses in their
regions of origin, assisted in job creation and even
participated in development projects in their regions
of origin. Today the country has evolved, and the
profile of young Moroccans abroad has also changed.
New MLA are well educated and trained to better
face globalization challenges. Their investment now
focuses more on sectors and activities neglected
by the first wave of migrants, such as investment in
tourism, transport, services and new technologies.
These investments could have significant effects on
economic expansion. Also, some have contributed to
development of agricultural activities and public works
or in the generation of sustainable energy.

Figures on remittances are continuously evolving.
During the period 2001-2005, banks transfers grew
9.2 per cent; bank notes grew by 10.8 per cent and
total income by 8.8 per cent.204 This basket represents
about 9 per cent of GDP and related bank deposits
reached 87 billion of dirham, corresponding to 25 per
cent of total deposits.205

This data shows the importance of remittances
transfers to Morocco, but also for financial institutions
and other stakeholders. But it seems that despite these
volumes the developmental impact of these transfers
is still small. Experts tend to agree that to about 80 per
cent of remittances are used to cover survival needs.
Despite these limitations, the microeconomic value
of remittances is undeniable as they can increase
domestic consumption and promote investment in
the production of local goods and services. About 72
percent of non consumed remittances are invested
in real state and construction promoting direct job
creation in the construction sector and indirectly in
other sectors such as carpentry, furniture, decoration
or industrial products such as textiles or appliances.
Remaining amounts (about one third) are saved or
invested in small and medium enterprises such as

laundry or telephone services or small mechanical

Numerous studies206 have highlighted the potential
offered by remittances flows, if they are effectively
channeled and directed towards dynamic sectors
that are capable of contributing to the creation of
local wealth. Remittances can increase family income,
improve living conditions and occasionally play a social
protection role in case of sickness and unemployment,
especially in poor regions. Remittances can also have
a positive impact during difficult times. For example,
they can be address problems that arise during years of
poor harvests. For States, remittances are a welcome
income that strengthens their balance of payments,
especially during times of crises and can improve
the country credit worthiness facilitating access to
international capital markets. Effective mobilization
of the investments of Moroccan Diaspora represents
a lever for promoting more sustainable economic
growth, strong for regional expansion, and greater
opportunities for enhancing human development, in
order to build the Morocco of tomorrow.

The interfaces mentioned above can create synergies
between the needs of the State and host country
population and desires of MLA. They can also generate
complementary relationships between upcoming
investment projects and Government action. There
is no doubt that the active participation of MLA will
help Morocco promote the development of a viable
and competitive economy vis-à-vis globalization

mlA PARtIcIPAtIoN IN socIAl v.
DeveloPmeNt oF moRocco

For many years, research on remittances has mainly
focused on its economic impacts. Nevertheless,
remittances can have impacts in other dimensions,
including in social areas. Analyzing the social impact
of remittances as well as its effects, positive and
negative, is not an easy task. Looking at those impacts
as options for maximizing positive effect needs to be
further analyzed.

The social impact of remittances on local populations,
especially women and children remaining in the country,
has received attention, both from researchers and
governments. In the case of Morocco, understanding
of social impacts only began after the creation of a

1) New ThiNkiNg surrouNdiNg remiTTaNces aNd developmeNT

2) maximisiNg The developmeNT impacT of remiTTaNces

Migration policy. So far the levels of impact of such a
policy over human development remain low, especially
in education and health.

Social dimensions of remittances include poverty
reduction, education, access to water and sanitation
services, nutrition and health, access to information
and media, and gender equality.

Regarding poverty reduction, remittances contribute
to increased household income. The National Survey
on Living Standards of Households shows that
remittances reduce poverty rates by 3.4 per cent.207
This means that almost one million people are spared
from poverty through funding received. Other surveys
of more qualitative nature lead to similar results.208

Regarding education, a share of remittances received
by migrant households is used for the education of
children. Allocation amounts vary depending on the
methodologies used by the study in question. The
education of children is in some cases the primary
motivation for migration among parents and for transfer
of remittances, at least during a migrant’s initial years
abroad. Differences in levels of school enrollment
tend to decline as a consequence of remittances.
However this trend tends to be limited, according
to several studies on primary education.209 Some
studies address remittances’ impact on education
through more indirect means, including urbanization,
creation of communication infrastructure for poor
rural areas, investment in income generating activities
through financing education, and changing housing
to locate near schools. Similarly, other studies focus
on the impact of migration on children. These studies
indicate that migration may have a negative impact on
children’s education. In many cases the absence of
one or both parents deeply affects children’s behavior
and school performance.

Remittances by MLA can have a positive impact on
access to drinking water and sanitation. Households
seek to improve direct access to drinking water, for
example, by digging wells or by moving to locations
with better access to water and sanitation. Collective
action, either through money transfers made through
migrant NGOs or via the collection of remittances
by local associations, can aid development of local
sources of drinking water. The accessibility of these
services can have structuring effects on children and
women’s lives by limiting certain childhood diseases
and by saving the girls from fetching water, therefore
giving them the opportunity to study.

As for health and nutrition, consumption accounts for
the bulk of remittances spending. Increasing income
through remittances transfers or by the generation
of income from economic activities financed by
remittances can allow greater access to health care.
Moreover, access to safe water and sanitation, better
housing conditions and proximity to health services
can improve the health status of children and women.
The construction of rural clinics and the improvement
of existing health infrastructure through NGOs or
Diaspora associations can have an important local
impact on access to health services. Some authors
have also mentioned the positive impact of literacy and
informal school activities, built through remittances, to
knowledge about women’s reproductive health and

Regarding the impact of remittances on access to
information and media, it should be noted that migrants’
families, including women and children, benefit more
than families of non-migrants. In general, migrant
families have wider access to information, tools and
media formats, including the Internet. The impact of
access to information and media can be significant on
education and health. However, there is little evidence
regarding how significant this impact may be. It should
be noted that information campaigns conducted by
NGOs for migrant women on reproductive health,
contraceptive practices and hygiene also have
generated a positive impact on women awareness on
health risks. Improved access to information can also
result from the informal dissemination of knowledge
and exchange between migrants and non-migrants,
particularly during migrants’ visits to their countries
of origin, playing an important role in adopting new
models of marriage and family structures. Finally,
the use of new information and communication
technologies introduced through remittances may
contribute to the opening of new local businesses
and marketing channels for traditional products in the
international market.

The progressive feminization of Moroccan migration
in recent years has greatly changed the amount of
remittances received and the way in which remittances
are used as female migrants have a propensity to
send more remittances and direct them to priority
needs such as education and child health. Moreover,
migration can improve the status of women back
home, encourages empowerment and makes them
more independent.


mlA moNeY tRANsFeRvI.

Remittances from MLA reached 49.66 billion of
dirham in November 2010, against 46.5 billion during
the same period in 2009, representing an increase of
about 7.8 per cent.210 The resumption of growth in
these transfers in 2010, after a decline of 3.6 per cent
in 2008 and of 5 per cent in 2009, can be attributed
to the importance of migration flows, the emergence
of new destinations, the attachment of MLA their
the country of origin and the positive perspectives
of economic recovery in some host countries. In
Morocco, remittances from MLA play an essential
role in boosting the national economy, especially in
deprived regions of the Kingdom. These funds are also
an important source of hard currency. The World Bank
recently announced that money transfers reported to
developing countries, including Morocco, will continue
to grow in 2011 and 2012, reaching to about $370
billion dollars in two years, against the $307 billion of

the lucrative market for money A.

Competition is intensifying in the market for money
transfers. However, the challenge for many of money
transfer companies seems to be volumes and means
use for transfers. According to the Regional Director of
North Africa of Western Union, remittances transfers
from MLA to Morocco amounted to 50 billion dirhams
and Western Union’s market share reached about 20
per cent at the end of 2009.212

Between 1982 and 2009, MLA have transferred some
666 billion dirham. 70 per cent of this amount came
from MLA living in Europe.213 Transfers from European
countries totaled 593 billion dirham since 1982. From
a statistical point of view, about 80 per cent of the 3.2
million MLA are located in Western Europe, 9 per cent
live in Gulf countries and 6 per cent in North America.
Demographic structure of MLA has faced a substantial
changes and growth during these years. Nearly 50 per
cent of MLA are women.214 This explains why there is
today a stronger tendency to save and invest.

Most remittances transferred to Morocco are
“monopolized” by banking networks. The “Popular
Bank” receives around 53 per cent of MLA savings,
followed closely by the “Attijariwafa bank” which market
share has reached about 20 per cent. Both banks are
waging a fierce battle on the European continent, where

70 per cent of the transfers originate.215 By opening
their own offices in Europe, Morocco banks hope to
gradually capture direct transfers from MLA, without
relying on Western Union or Money Gram networks.
The Moroccan banking sector is increasingly investing
in new operators. Services points are multiplying
and service is becoming more democratic. However,
transfer fees remain high. The absence of financial
supervision and controls has translated in each
operator setting its own price range.

moroccan Policy of Financial b.

Volumes of remittances inflows to Morocco are some
of the highest in the world, amounting to about 45
billion of dirham per year (nearly €4 billion). Morocco
has a long-term policy of financial inclusion that has
been used as a reference point for other developing
countries. Morocco has distinguished itself for having
a solid and powerful banking system and has an
established fund and remittances transfer policy.
Morocco has a mature and competitive banking
system including in the money transfer segment. The
main reason for the Morocco’s success has been the
implementation of a strategy of direct representation
in host countries or in countries that have important
commercial relations with Morocco. This is an
advantage that many other African countries do not
have. Moroccan banks also offer a variety of services
to migrants, which go beyond remittances transfers
and include a range of additional services such as
saving, insurance, real estate, investments portfolios.

Remittances transferred through the banking system
also contribute up to 4 per cent in reducing vulnerability.
These funds also contribute to social development of
Morocco, including access to education, medical care
and basic services.

coNclusIoNs AND vII.

The future strategy being developed by the Ministry of
MLA, as well as relevant sectoral public policies, must
take into account all the factors affecting remittances
transfers if they want to ensure the continuity and
regularity of remittance flows. Such continuity and
regularity can be further promoted by the following

1) New ThiNkiNg surrouNdiNg remiTTaNces aNd developmeNT

2) maximisiNg The developmeNT impacT of remiTTaNces

Establishing and improving social, educational, •
cultural, religious and recreational activities, to
strengthen links between MLA and Morocco;

Developing existing banking infrastructure, quality •
of service and coverage in Morocco and in the host

Supporting competitiveness and diversification •
services by Moroccan banks in host countries;

Developing programs for the mobilization of •
Moroccan skills overseas and the diaspora

Factors that can have an effect on remittances and

investment by MLA include the following:

The existence of mechanisms that encourage MLA •
investment and entrepreneurship;

The quality of the justice system and the tax •

The degree of assistance to MLA investors;•

The level of transaction costs;•

Democracy and human rights protections;•

Good public governance, in particular the •
commitment of the State against increased
bureaucratic barriers and corruption.



Besin (2008). Les migrants acteurs de développement solidaire.

El Yafi (2010). MRE: Le marché juteux des transferts d’argent.

Le soir (2010). Tendances: Les Marocaines d’Europe et du Maroc à la loupe. 16 December 2010.

Ministère chargé de la Communauté Marocaine Résident à l’étranger (2010). Rapport intégral sur la mobilisation
de l’épargne et de l’investissement de MRE au profit de l’ économie nationale.

Ministère de l’Économie et des Finances du Maroc (1999). Rapport National du niveau de vie (1998-1999).

World Bank (2011). Migration and Remittances Fact book 2011.

World Bank (2010). Migration and remittances Brief, Number 13.

1) New ThiNkiNg surrouNdiNg remiTTaNces aNd developmeNT

2) maximisiNg The developmeNT impacT of remiTTaNces


World Bank (2011). 199 Migration and Remittances, Fact book 2011.


Ministère chargé de la Communauté Marocaine Résident à l’Étranger (MRE) (2010). 201 Rapport intégral sur la
mobilisation de l’épargne et de l’investissement de la MRE au profit de l’Économie Nationale.

Eric Besin (2008). 202 Les migrants acteurs de développement solidaire.

Ministère chargé de la Communauté Marocaine Résident à l’Étranger (2010).203



Rapport et études du Haut Commissariat au Plan du Maroc et Ministère chargé de la Communauté Marocaine 206
Résident à l’Étranger (2010).

Ministère de l’Économie et des Finances du Maroc (1999). 207 Rapport National du niveau de vie (1998-1999).

Enquête du Haut Commissariat au Plan du Maroc (2005).208

Ministère de l’Éducation Nationale (2010). See http://www.men.gov.ma/sites/fr/default.aspx.209

Ministère de l’Économie et des Finances du Maroc (2010).210

World Bank (2010). 211 Migration and remittances Brief, Number 13.

Bouchaib El Yafi (2010). MRE : Le marché juteux des transferts d’argent.212

Le soir (2010). T213 endances: Les Marocaines d’Europe et du Maroc à la loupe. 16 December 2010.



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1) New ThiNkiNg surrouNdiNg remiTTaNces aNd developmeNT

2) maximisiNg The developmeNT impacT of remiTTaNces

annex 1. programme of the expert meeting on maximizing the development impact of remttances
14-15 february 2011 - Room XXVI, palais des Nations Geneva

14 february 2011

10:00-11:30 Opening session: High level Panel

Mr. Supachai Panitchpakdi, Secretary General, UNCTAD•

Mr. Juan Jose Garcia Vasquez, Vice Minister of Foreign Affairs in charge of Migration •
Issues, El Salvador

Mr. Juan José Gomez Camacho, Ambassador and Permanent Representative of •
Mexico, Geneva

Mr. William Lacy Swing, Director-General, International Organization for Migration •

Mr. Assane Diop, Executive Director for Social Protection, International Labour •
Organization (ILO)

Ms. Kyung-wha Kang, Deputy High Commissioner, United Nations High Commissioner •
for Human Rights (UNHCHR)

Ms. Purnima Mane, Deputy Executive Director, United Nations Population Fund •

interactive Debate

11:30-13:00 session 1: migration and Remittances Trends: Opportunities and challenges

This session will provide an overview of trends in migration and remittance flows including
in terms of heterogeneous characteristics of migrants (age, gender and skills), volume
of remittances, changes over time, contribution to GDP, directions of remittance flows,
including South-South. It will consider specifically the impact of the financial crisis and
lessons learned. Two issues to be considered in light of the financial crisis will be rising
unemployment and protectionism and its implications for migration and remittance flows.
Contribution of migrants to home and host countries will also be examined.

issues for discussion:

What are the global trends in migration and remittance flows? Do differences in skill •
levels, country of origin and gender impact remittance flows?

What are the prospects for migration and remittances in the aftermath of the financial •
crisis, especially in light of falling employment, rising protectionism and migrants in an
irregular situation?

How can data and research be channeled into policy making?•

How could remittance flows for investment and productive purposes be better •
monitored and used?

How will environmental factors such as climate change impact on migration and hence •

Introduction by Ms. Mina Mashayekhi, Officer-in Charge,
Division on International Trade in Goods and Services, and Commodities, UNCTAD



Mr. Abebe Shimeles, Principal Research Economist, Policy Research Department, •
African Development Bank

Ms. Constance Motte, Policy Officer, Migration and Development, DG •
Development, EU

Ms. Jean D’Cunha, Global Migration Adviser, UN Women•

interactive Debate

15:00-18:00 session 2: The Development impact of Remittance Flows

Remittances constitute an important source of external financing for developing
countries and are directly received at the individual level, thus augmenting income and
alleviating poverty. The way in which remittances are used can produce wide multiplier
effects in national development. Consumption remittances play an important economic
and social role. Remittances can be also channelled for a more sustainable impact to
productive sectors of the economy. These include savings, small business investments,
infrastructure financing, microfinance, debt instruments and promoting business activities
and knowledge/skills transfer. This session will consider the impact of remittances on
poverty reduction, economic growth and development at both the micro-economic and
macro-economic levels. It will focus on policies and measures and strategic partnership
that can channel saved remittances and other diaspora funds to serve the needs of home
countries. Country experiences and lessons learned will be exchanged at the session.

issues for discussion:

What are the development and social impacts of remittances at the micro level e.g. •
education, housing, health and thereby its impacts on the achievement of the MDGs
and poverty reduction and at the macro level (including their counter cyclical and pro-
cyclical impact) in terms of foreign currency reserves, exchange rate, potential over-
dependence on remittances, external borrowing credibility and its role as a potentially
steady source of income and external financing during periods of crisis?

How do remittances to developing countries impact on their economic growth? What •
measures are supportive to foster an enabling environment for channeling remittances
for productive and innovative purposes?

How can remittances be invested in entrepreneurial undertakings, financial products •
and micro enterprise development in migrant’s countries of origin?

How can the financial sector be leveraged to channel remittances to productive sectors •
of the economy, including through micro-finance, insurance, savings, investment, debt
instruments (e.g. mutual funds and private capital funds) and infrastructure bonds?

What role can migrant associations and communities play in facilitating remittances, •
capital investment, financial education, bilateral relationships, building trade, business
and social networks and skills and knowledge transfers to both countries of origin and

Address by Mr. Otaviano Canuto, Vice President and Head of Poverty Reduction and
Economic Development, World Bank (Video Conference)

1) New ThiNkiNg surrouNdiNg remiTTaNces aNd developmeNT

2) maximisiNg The developmeNT impacT of remiTTaNces


Mr. Dilip Ratha, Senior Economist, Development Prospects Group Manager, World •
Bank (Video Conference)

Mr. Ralf Chami, Director of Regional Studies Division, Middle East and Central Asia •
Department, IMF

Mr. Saul T. De Vries, Deputy Director, National Reintegration Center for Overseas Filipino •
Workers, Department of Labour and Employment, the Philippines

Mr. Manuel Orozco, Director of Remittances and Development, Inter-American Dialogue •
(Video Conference)

Ms. Awa Ndiaye, Présidente Espace Afrique International & Vice-Présidente du Fond •
Mondial de la Diaspora

Mr. Yu Zhu, Professor, Fujian Normal University and Chair of Asia-Pacific Migration •
Research Network, China

Mr. Pedro De Vasconcelos, Coordinator, Financing Facility for Remittances, International •
Fund for Agricultural Development (IFAD)

interactive debate

18:15 Cocktail

15 february 2011

10:00-13:00 session 3: Facilitating flow of remittances

Significant constraints exist to harnessing the opportunities brought by remittances relating
to costs of remittances transactions and distribution. These include affordability and
accessibility for remittance senders to use safer and more secure formal transfer channels
and new technologies, information asymmetries, restricted market competition, arbitrary
exchange rate and taxation on remittances that all increase the risk or cost of sending
remittances. This session will consider how to increase the affordability and accessibility
of remittance transfer and distribution systems as well as the regulatory frameworks which
would allow for competition and innovation to maximize the benefits of remittances.

issues for discussion:

What are the factors that make transaction costs of remittances high? Who are the •
remittance transfer operators and is there sufficient competition in the remittance
transfer market?

How can constraints on the transfer of money be removed? How can remittance •
transferred through informal channels be regularized?

How can accessibility for recipients of remittances particularly in rural areas be •
increased? e.g. through widespread retail payment networks, better use of government
or state owned distribution networks including postal offices and banks?

What is the role of technology and new channels of remittance transfer such as smart •
phone-based products and services in reducing the cost of remittance transfers?

Could bilateral, regional or multilateral cooperation contribute to the reduction of •
remittances costs?



Mr. Raul Hernández Coss, Director General for Access to Finance, National Banking •
and Securities Commission, Mexico

Mr. Pedro de Lima, Economic Advisor, Head of the Economics Development Unit, •
DEAS/OPSB, European Investment Bank

Mr. Serguei Nanba, Coordinator, Postal Financial Services, Universal Postal Union •

Mr. Duran • Şimşek, Expert, Undersecretariat of Treasury, Turkey

Mr. Leon Isaacs, Managing Director, International Association of Money Transfer •

Mr. Dave Grace, Senior Vice President, World Council of Credit Unions•

interactive Debate

15:00-17:30 session 4: Addressing barriers to remittance flows through facilitating temporary

Various measures are in place that impede migration flows and thus could become
barriers to remittances flows. They include numerical migrant quotas, burdensome visa
requirements and procedures, high recruitment and related fees, lack of access to income
protection and other forms of social security as well as policy and institutional coherence
in countries of origin and destination. This session will examine these measures, consider
the reasons why they exist and means by which they can be addressed at national,
bilateral, regional and multilateral levels in a manner that will bring benefits to origin and
destination countries.

issues for discussion:

What could be the successful elements of temporary and circular migration? How can •
trade and cooperation agreements facilitate movement of people?

Is there a link between access to social benefits and remittances? What are the •
implications of non-portability of social benefits and how can this be overcome?

How can fees and other migration related costs such as recruitment and travel related •
fees be minimized, including through loans, monitoring, and technical assistance?

What are the ways and means of facilitating holistic and in-depth inter-governmental •
co-operation in areas such as circular migration, sharing of tax revenue, pension
portability, monitoring of recruitment agencies, addressing protectionist backlash and
facilitating remittance transfers?

How can migrant awareness, transparency and credibility in measures related to •
products for investment in home countries be generated and sustained?

At national level, what governmental policy and institutional approaches, including •
coherence related measures, have proven to be effective in both countries of origin,
transit and destination? How can co-ordination between the ministries of labour, finance,
trade and human resources be enhanced? Which institutional and policy mechanisms
have worked in practice?

1) New ThiNkiNg surrouNdiNg remiTTaNces aNd developmeNT

2) maximisiNg The developmeNT impacT of remiTTaNces


Mr. Gonzalo Lima Galarza, Director, Migrants’ Bank, Ecuador•

Mr. Samba Yomb Thiam, Technical Advisor to the Minister, Ministry of Senegalese •
Abroad, Senegal

Mr. Ravi Bangar, Deputy Permanent Representative, Permanent Mission of India to the •

Mr. Khurshed Alam Chowdhury, Director General, Bureau of Manpower Employment •
and Training, Ministry of Expatriate’s Welfare & Overseas Employment, Bangladesh

Ms. Andrea Riester, Deputy Head, Migration and Development, German International •
Cooperation (GIZ), Germany

interactive Debate

17:30-18:00 concluding session: way forward

This session will discuss the next steps and actions to be taken in order to support
countries’ efforts to enhance the development impact of remittances through appropriate
policy measures.