Migrant Remittances: A Vital GNP Factor

▪ 2007

      By 2006 the effects of globalization on migration were becoming increasingly evident. The linking of labour markets by improved information technology and communications, the widening disparities in employment opportunities and living standards, and loss of jobs in traditional sectors were increasing pressures to migrate from less-developed to developed countries. As a result, the flow of workers' remittances was rising strongly, and not just to established recipient countries such as Mexico, India, and the Philippines. In many less-developed countries the flow of funds from migrant workers to their families was a major source of income, accounting for up to a third of GDP. In Serbia and Montenegro remittances reached $2.4 billion, or 12% of national income, while in Kyrgyzstan and Tajikistan they topped 20% of GDP.

      The United Nations, the Organisation for Economic Co-operation and Development, the Bank for International Settlements, the Asian Development Bank, and the International Labour Organization were among the agencies trying to ascertain the changing trends in remittances and find ways to maximize the development potential and the efficacy of transmission of the funds. On June 12 the Group of Eight finance ministers reiterated their call for efforts at the country level to remove obstacles preventing access to financial services, including lowering the costs of remittances. The World Bank estimated that in 2005 remittances globally, including informal flows, were $250 billion, a rise of 73% over 2001. Of the 191 million migrants in 2005, 115 million were in developed countries, compared with 48 million in 1980. Nearly three-quarters of the remittances were destined for less-developed countries, and of this 70% was going to Latin America and Southeast Asia.

      Fundamental changes in migration were also affecting remittances. Traditionally men were most likely to be international migrants, but by 2006 women constituted nearly half of migrants worldwide. Women were more likely than men to migrate to developed countries and outnumbered them there. Like their male counterparts, they tended to work in lower-paid jobs, but they were paid less than men. Correspondingly, women's remittances were lower but tended to represent a larger proportion of their earnings, and the money was often distributed to a wider range of relatives. Female recipients were inclined to spend on family needs, including health and education, while male recipients tended to invest directly in local income generation. In some cases women migrants were the main breadwinners and were making financial decisions, once the preserve of men.

      One problem associated with remittances was the high cost of transferring the often small amounts from migrants to less-developed countries, where the financial infrastructure might be inadequate or lacking in competition. Access to the various remittance channels in both the country where the migrant was employed and the home country might be hampered by a lack of language skills or required documentation. Informal channels were often being used to transfer funds, and they were estimated to account for one-third of all remittances from migrants in Asia and the Pacific. While financial remittances were difficult to measure, it was even harder to quantify the financial and social capital, skills, technology, and education that the return migrants were contributing to their home countries.

Janet H. Clark

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