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A new United Nations study reveals that migrants working in industrialised countries sent home more than $300 billion to their families in 2006 – surpassing the $104 billion provided by donor nations in foreign aid to developing countries.

“This figure, which is a conservative estimate, shows that the seemingly small sums sent home by migrant workers when added together dwarf official development assistance,” said Kevin Cleaver, Assistant President of the UN International Fund for Agricultural Development (IFAD), which co-authored the study with the Inter-American Development Bank (IDB).
According to Sending money home: Worldwide remittances to developing countries, Asia received the largest share of the remittances – more than $114 billion – followed by Latin America and the Caribbean with $68 billion, Eastern Europe with $51 billion, Africa with $39 billion and the Near East with $29 billion.

India received the most of any single nation with $24.5 billion, followed by Mexico ($24.2 billion), China ($21 billion), the Philippines ($14.6 billion) and Russia ($13.7 billion).

The study also found that the remittances sent home regularly by some 150 million migrants exceeded foreign direct investment (FDI) in developing countries, which last year totalled around $167 billion.
IFAD underscored that more than one third of these remittances flow to families in rural areas, and is mostly used for basic necessities such as food, clothing and medicines. While 10 to 20 per cent is saved, too often these savings are hidden in homes rather than put to work in financial institutions, constituting a “major missed opportunity for local development.”

The study based its figures are based on official data from governments, banks and money operators, as well as estimates of informal flows, such as money carried home. It was released yesterday ahead of the International Forum on Remittances 2007, co-hosted by IFAD and IDB in Washington.

IFAD said remittances, the portion of migrant workers’ earnings sent back home to their families, have been a critical means of financial support for generations. But, for the most part, these flows have historically been “hidden in plain view”, often uncounted and even ignored. All that is now changing – as the scale of migration increases, the corresponding growth in remittances is gaining widespread attention.

Today, the impact of remittances is recognised in all developing regions of the world, constituting an important flow of foreign currency to most countries and directly reaching millions of households, totaling approximately 10 per cent of the world’s population.

The importance of remittances to poverty alleviation is obvious, but the potential multiplier effect on economic growth and investment is also significant.

IFAD said the driving force behind this phenomenon is an estimated 150 million migrants worldwide who sent more than US$300 billion to their families in developing countries during 2006, typically US$100, US$200 or US$300 at a time, through more than 1.5 billion separate financial transactions. These funds are used primarily to meet immediate family needs (consumption) but a significant portion is also available for savings, credit mobilisation and other forms of investment.

In other words, the world’s largest poverty alleviation programme could also become an effective grass roots economic development programme, particularly in the rural areas that present some of the greatest challenges to financial inclusion.

Three aspects could further enhance this development: Improvements in data collection; Reduction in transaction costs and Increased efforts to leverage remittance flows for greater development impact.

The worldwide remittance map compiles the best available information drawn from data collected on migrant populations, percentage of migrants sending remittances, average amounts remitted annually, as well as the average frequency of annual transfers. Central banks and other official government sources, money transfer companies, international organisations and academic institutions were used for reference support. The map covers 162 developing countries – many for the first time – and, together with the accompanying analysis and data tables, it provides comparative indicators to measure the relative importance of remittances among twenty subregions of the developing world.

Asia receives almost US$114 billion in remittances annually – the highest regional total in the world.

Migration
There are over 50 million migrants from Asia and the Pacific worldwide. Their main destinations are the United States, the Russian Federation and, in the case of the Pacific, New Zealand. Emerging destination countries from India – the region’s main exporter of migrants, with 22 per cent of total migrant – include Malaysia and the Arab oil exporting countries. There is also significant intraregional migration to Australia, China (Hong Kong), Japan and Singapore, while Central Asian migrants go predominantly to the Russian Federation and Kazakhstan.

RemittancesAsia receives almost US$114 billion in remittances annually – the highest regional total in the world. India and China are the top recipient countries, receiving US$24.5 billion and US$21 billion respectively. Transfers make up 23 per cent of regional per capita income. Remittances to the smaller economies (the Philippines, Indonesia, Nepal and Tajikistan) constitute between 20 per cent and 70 per cent of per capita income. On average, remittances in Asia are 2 per cent of GDP and 15 per cent of exports.

Rural remittancesThe flow of remittances into rural areas in Asia is among the highest. This is partly because half of Asian countries are 65 per cent rural. The impact of remittances among Asian developing countries is greater than in other parts of the world: in Asian countries that are 65 per cent or more rural, the ratio of remittances per capita to per capita GDP is 23 per cent and the highest in the world.

Market and financial sccessThe marketplace for money transfers is mixed, with a competitive industry sending money predominantly from China (Hong Kong), the Russian Federation and Singapore, and a less competitive and overly regulated corridor from Japan and Malaysia. Parallel to these industries are informal money transfer businesses coupled with the widespread practice of hand-carrying money when travelling. In turn, transaction costs vary significantly. Remittances to Central Asia, for example, are among the lowest (if not the lowest) in the world, at an average of 3 per cent per transaction. In some parts of Asia transfers are influenced by technological innovation, as in the case of mobile phone transfers in the Philippines.

Access to banking and other financial services varies greatly within the region. In many Asian countries migrants and their dependents do not have access to basic financial services. South-East Asians (Filipinos and Indonesians for example) have more financial opportunities than those living in countries like Tajikistan and Kyrgyzstan, where less than 10 per cent of inhabitants have bank accounts. Similarly, only 11 per cent of Indians in the state of Kerala have bank accounts.