A recent Oxfam article dives deep into the impact of remittances on national economies and migrant communities. The report also examines high transaction costs, where a significant percentage of the remittances are siphoned off as fees.
Using World Bank data, the report concludes that remittances have a ‘poverty mitigating effect’. In the 25 countries studied, there is a 0.4% fall in poverty headcount ratio against a 10% increase in per capita remittance of the country.
“Besides aiding in poverty alleviation, remittances also help to sustain a population above poverty. Most often in the face of economic adversities, such as an economic recession or destruction due to climate-related disasters, the people who live on the margins of the poverty line slip under poverty. In these situations, migrants remit more to their families and friends to aid in the process of recovery and reconstruction, while also providing a cushioning effect on consumption for their families. In other words, remittances increase when the private capital flow decreases in the home country…”
The report offers the example of the devastating floods in southern Indian coastal state of Kerala, during and following which the remittances to India grew by more than 14%.
Citing World Bank data, the report says: “...remittances have increased five-fold in the past two decades and are likely to emerge as the largest source of external financing for many low- and middle-income countries in the coming years [...] The total remittance sent to developing countries in 2018 totalled to $528 Billion, which is nearly four times the OECD- estimated total official donor assistance of $153 Billion for the same year.”
Yet, despite the critical role remittances play, origin countries shy away from rights-based negotiations with destination countries, including the Gulf-states. MR's research and reports show time and again, there is a race to the bottom between origin countries competing for jobs in the region. The strong and growing dependence on remittances amongst developing countries seems to drive countries to commodify their citizens rather than recognise the value of their contributions.
The article is based on the thesis available here.