The Transfer of Money by Migrants to Family or Community Members in Their Country of Origin Is

Remittances, usually understood as the money or appurtenances that migrants ship back to families and friends in origin countries, are oftentimes the most direct and well-known link between migration and development. Remittances exceed official development aid but are private funds. Global estimates of fiscal transfers by migrants include transactions beyond what are commonly assumed to be remittances, every bit the statistical definition used for the collection of data on remittances is broader (see Imf, 2009). Also, such estimates practise not comprehend informal transfers. Remittances tin also be of a social nature, such as the ideas, behaviour, identities, social majuscule and knowledge that migrants acquire during their residence in another part of the country or abroad, that can be transferred to communities of origin (Levitt, 1998: 927).

Key trends

See our thematic page on COVID-xix and migration information for more information on the impact of COVID-19 on remittances.

In April 2020, Ratha et al. projected a decline in remittance flows to low and middle-income countries (LMICs) past most 20 per cent because of the economic crisis caused by the COVID-xix pandemic which negatively afflicted wages and employment for migrant workers. By Oct 2020, Ratha et al. adjusted their projections to a decline in remittance flows of 7.2 per cent to USD 508 billion. Latest data bear witness that instead, remittance flows brutal past only i.6 per cent to USD 540 billion, defying projected declines that would have been the sharpest in recent history (World Bank, 2021). According to the World Bank, the decline in recorded remittance flows in 2020 was smaller than the one during the 2009 global financial crisis (4.8%) (ibid.). Remittances flows also surpassed the sum of Strange Directly Investments (USD 259 billion) and overseas development assist (USD 179 billion) in 2020 (ibid.).

Among the key drivers for the steady menses of remittances in 2020 were migrants' desire to help their families by sending money home and drawing on savings (ibid.). Other factors include a fiscal stimulus that resulted in better-than-expected economic conditions in host countries, a shift in flows from greenbacks to digital and from informal to formal channels, and cyclical movements in oil prices and currency exchange rates. (ibid.).

In 2020, the top five recipient countries for remittances inflows in current USD were India (83 billion), China (threescore billion), Mexico (43 billion), the Philippines (35 billion), and Egypt (30 billion) (ibid.). India has been the largest recipient of remittances since 2008. In terms of remittances equally a share of gross domestic production, by contrast, the top 5 recipients in 2020 were smaller economies: Tonga (38%), Lebanon (33%), Kyrgyz Commonwealth (29%), Tajikistan (27%) and El Savador (24%) (ibid.).

In 2020, the top three source countries for remittance outflows in current USD were the United States (68 billion), the United Arab Emirates (43 billion) and Saudi Arabia (35 billion) (ibid.).

In terms of remittance inflows per region, flows rose in Latin America and the Caribbean (six.v%), South Asia (5.ii%) and the Middle East and Northward Africa (2.three%); Merely remittance flows fell for East Asia and the Pacific (7.nine%), Europe and Cardinal Asia (ix.7%), and Sub-Saharan Africa (12.5%) (ibid.). According to the Globe Bank, the decline in flows to Sub-Saharan Africa was generally due to a 28 per cent decline in remittance flows to Nigeria1
. Excluding flows to Nigeria, remittances to Sub-Saharan Africa increased by ii.3 per cent, demonstrating resilience (ibid.).

In the 4th quarter of 2020, the boilerplate costs of sending USD 200 to LMICs remained high at 6.58 per cent, well above the target of 3 per cent of the Sustainable Development Goal 10.c.1 (ibid.). Sub-Saharan Africa continued to have the highest average remittance costs, at nearly 8.ii per cent; South asia had the everyman average remittance costs at 4.9 per cent. The average remittance costs for the remaining regions were: Europe and Central Asia (6.4%); Eastern asia and Pacific (half dozen.nine%); Center Due east and North Africa (6.6%); and Latin America and the Caribbean (5.6%) (ibid.).

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Definition

Remittances are usually understood as financial or in-kind transfers fabricated by migrants to friends and relatives back in communities of origin. Yet, the statistical definition of international remittances only partially reflects this mutual understanding.

The Imf, the main provider of international remittances statistics based on Primal Bank information, defines remittances as the sum of two principal components in their Rest of Payments Statistics manual:

(1) "Compensation of employees": This refers to income earned past temporary migrant workers in the host country, and the income of workers who are employed by embassies, international organizations and strange companies (or "the income of border, seasonal, and other curt-term workers who are employed in an economy where they are not resident and of residents employed past nonresident entities" (International monetary fund, 2009: 272). It is of import to highlight that the entire income of temporary migrant workers  is included in this definition, although the income may never really be transferred (at to the lowest degree not entirely) to the origin country as migrants still accept to cover their own living costs. Furthermore, the salaries of staff employed by foreign employers (such equally embassies or transnational companies) too count equally remittances, every bit these civil servants, diplomats, military machine personnel and others are considered residents of the origin land (IMF, 2009), although most of these employees may actually not be migrants nor transfer this money anywhere else.

(2) "Personal transfers": These are all electric current transfers in cash or in kind made or received by residents (be it migrants or non-migrants) from or to individuals in other countries ("all current transfers betwixt resident and non-resident individuals" (International monetary fund, 2009: 273).

Remittances tin besides be sent within countries and not just across borders. These are called internal remittances. Furthermore, non all remittances are of financial or in-kind nature. Social remittances are defined every bit "the ideas, behaviours, identities and social capital that flow from receiving- to sending-country communities" (Levitt, 1998: 927). Social remittances include innovative ideas, valuable transnational networks, knowledge, political values, policy reforms and new technological skills.

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Data sources

The World Banking concern provides annual estimates of remittances flows globally (and bilaterally), based on national balance of payment statistics produced past fundamental Banks and compiled by the Imf. (Come across definitions of the ii principal remittances components above that give examples of what is included and what is not [Plaza and Ratha, 2017: 65-78]). Data embrace remittances inflows into and outflows from countries. The latter are less prominent in the migration and evolution debates merely can exist an indication of significant immigrant populations in a land, especially if they exceed remittances inflows.

The basis for bilateral remittances estimates are weighted migrant stock information, the weighted income of migrants based on the per capita income in the country of destination, and the weighted income in the origin country of the migrant (Ratha and Shaw, 2007: 43).

The World Bank also produces estimates of remittances' transaction costs on a quarterly basis. These are "boilerplate transaction costs of sending remittances to a specific state" and are computed as "the simple boilerplate of the full transaction price in per centum for sending USD 200, charged past each single remittance service provider (RSP) included in the Remittance Prices Worldwide (RPW) database to a specific country". World Banking concern researchers derive these estimates through either undertaking bodily transactions themselves to obtain prices, or by inquiring on the transfer costs to a number of banks and money transfer operators (Alvarez et al., 2015: 45).

Since 2007, the Financing Facility for Remittances (FFR) of the International Fund for Agricultural Development (IFAD) has published data and statistics on remittances through its series of Sending Coin Home reports based on information from Central Banks, the IMF, and the Globe Bank RPW database, amidst others. The reports cover central issues affecting remittances from both a global and regional perspective and provide comparative indicators to measure the importance of remittances amongst regions and subregions. The latest report (2017) includes data and assay of remittances and migration trends for developing countries over the past decade as well equally the potential contributions of remittances to the Sustainable Development Goals.

In 2018, IFAD's FFR launched RemitSCOPE, an online tool providing regional, subregional and country-level data and remittance market analyses. It aims to address the fast-changing market realities in the remittance industry in lodge to help bring together the goals of remittance families, every bit clients, and the strategies of the private-sector service providers. RemitSCOPE provides market profiles for 50 countries or areas in the Asia and the Pacific region but additional regions of the world volition be included gradually.

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Information strengths & limitations

The Globe Bank estimates are used to provide a large dataset roofing about countries around the world. This allows the user to understand trends and the magnitude of transfers, comparing them to other flows such every bit Official Development Assistance (ODA). However, theestimates are far from accurate, due to the methodological challengesoutlined beneath (Alvarez et al., 2015; World Bank, 2016; Plaza and Ratha, 2017).

The balance of payments category of "bounty of employees", as defined by the International monetary fund, can potentially significantlyoverestimate migrant remittances if a country has a large UN and/or diplomatic mission presence, and hosts factories of transnational corporations employing large numbers of workers. These employees are counted every bit "not-residents" or migrants in the country, and all their salaries are recorded every bit remittances. It is thus non possible to define whether the official IMF and Globe Bank figures are accurate for these countries or considerable overestimates due to diplomatic mission, UN and foreign companies' staff salaries being counted likewise (Alvarez et al., 2015).

Statistically, migrants who reside in a country for at least 12 months cannot be distinguished from other residents who are not migrants every bit these statistics are based on residence and not migratory status (Alvarez et al., 2015: 43). In the 2nd component of remittances – "personal transfers" – the International monetary fund considers if a transfer is made across borders, regardless of the residency condition, nationality or country of birth of a person, every bit this information is ofttimes not bachelor. The receiver or sender of the coin transfer may thus not only be a migrant but also a citizen with links to some other country, for instance. Thus, remittances can be conflated with larger sums of coin sent by private investors and diaspora members for concern investments, property purchase and other financial transactions. This leads to the probable overestimation of transfers.

When comparing remittances estimates over time, information technology is of import to notation that the documented growth in remittances globally in recent years may have actually derived fromchanges in how remittances are measured, rather than bodily increases in such financial flows (Ratha, 2003; World Depository financial institution, 2006; Clemens and McKenzie, 2014). Almost lxxx per cent of the increase in recorded remittances during the period 1990—2010 may be deemed for by changes in measurement, and only a fifth may reflect changes due to college numbers of international migrants and the incomes they are likely to be earning in destination countries. In add-on, both reporting of remittance transactions has been improved and migrants have increasingly used more formal payment methods as informal channels decreased as function of anti-money laundering measures (Ibid.).

It is too important to keep in heed that IMF and Globe Depository financial institution estimates focus on remittances transferred through official channels, such as banks. Non all minor transactions by migrants conducted via money transfer operators (such as Western Marriage), post offices, mobile transfer companies (like Grand-Pesa in Kenya) are included in all the countries, neither are informal transfers (such every bit via friends, relatives or ship companies returning to the origin community), depending on the sources of data used past different central banks. As these transfers that are non systematically included in remainder of payments can be significant in volume, in particular in the context of South-Due south corridors, theofficial figures are probable to  underreport the miracle by equally much as fifty per cent(Irving et al., 2010; Globe Bank, 2011). Due to the largely unknown scope of informal transfers, some countries, in particular in sub-Saharan Africa, practice non report remittances figures to the International monetary fund in their balance of payments. Data on remittances also vary from land to state due to differences in the availability of data, national legislative and policy frameworks, using citizenship instead of residency status in the definition, and for the simplification of processing the data (Irving et al., 2010; Earth Depository financial institution, 2011; Plaza and Ratha, 2017).

The extent of the over and underestimates are, yet, unknown and hard to calculate ( IOM, 2018 ). Specific, representative migration and remittances surveys can provide more detailed, and reliable information at the national or local level (World Depository financial institution, 2011). This also includes commodity transfers, such as consumer items, that are not part of the official recordings but that can be significant, especially in Southward-South contexts (Melde and Schicklinski, 2011).

Bilateral remittance estimates are prone to the limitations of information on migrant stocks described here. The calculation is based on the gross national income (GNI) per capita in the origin land of the migrant and thus cannot account for GNI being higher in that location every bit the assumption is that migrants move to countries with college incomes. The Earth Bank further acknowledges issues around not being able to attribute a transfer to a specific country, especially when passed through an international banking concern (Ratha and Shaw, 2007). Information technology is thus important to underline that these are calculated estimates anddo not represent accurate figures (Alvarez et al., 2015).

The testing ofremittance channels through fictitious transfers of money by World Banking company analysts entails significant limitations as well. Only afew corridors are monitored. Differences in transaction costs based on the amount sent, with the higher amounts likely to cost less to transport, distorts the  representativeness of relevant information. Costs may too modify speedily, meaning the reported transaction costs apace become outdated (Alvarez et al., 2015). Yet, estimates of transaction costs can assist to monitor progress towards the Sustainable Development Goal (SDG) target of reducing sending costs to 3 per cent of the corporeality remitted.

Further reading

International Monetary Fund (International monetary fund)
2009	Residuum of Payments and International Investment Position Manual, 6th edition (BPM6), IMF, Washington, D.C.
2009	International Transactions in Remittances: Guide for Compilers and Users, International monetary fund, Washington, D.C.
Alvarez, P.S. et al.
2015	'Remittances: How reliable are the information?', Migration Policy Practice V(2): 42-46.
Plaza, S. and D. Ratha
2017	'Remittances', in Global Migration Group (eds.) Handbook for Improving the Product and Employ of Migration Data for Development. Global Knowledge Partnership for Migration and Development (KNOMAD), Globe Bank, Washington, D.C.: 65-78.
Globe Bank
2021	Migration and Development Brief 34. Resilience: COVID-19 Crisis Through a Migration Lens, October 2020. Earth Bank, Washington, DC.
2020a	Migration and Development Cursory 33: COVID-nineteen Crunch Through a Migration Lens, October 2020. Globe Depository financial institution, Washington, DC.
2020b	Migration and Development Brief 32: COVID-19 Crunch Through a Migration Lens, April 2020. Globe Bank, Washington, DC.
2019	Migration and Remittances: Recent Developments and Outlook. Migration and Development Brief, No. 31, April 2019. World Bank, Washington, DC.
2019	Information release: Remittances to low- and middle-income countries on track to reach $551 billion in 2019 and $597 billion past 2021. People on the Move web log.
2019	Leveraging Economic Migration for Development : A Briefing for the World Bank Lath (English language). Washington, D.C. : World Bank Grouping.
2018a	Migration and Remittances: Recent Developments and Outlook. Migration and Development Brief, No. xxx, December 2018. World Banking concern, Washington, DC.
2018b	Migration and Remittances: Recent Developments and Outlook. Migration and Development Cursory, No. 29, April 2018. Earth Banking concern, Washington, DC.
2016	Migration and Remittances Factbook 2016. World Depository financial institution, Washington, D.C.
2011	'Data Notes', The Migration and Remittances Factbook 2011, Migration and Remittances Unit of measurement, World Bank, Washington, D.C.
2006	Global Economic Prospects 2006: Economical Implications of Remittances and Migration. Washington, DC.
Irving, J., S. Mohapatra and D. Ratha
2010	'Migrant Remittance Flows. Findings from a Global Survey of Primal Banks', World Bank Working Paper No. 194, World Bank, Washington, D.C.
Clemens, Yard. A. and D. McKenzie
2014	Why Don't Remittances Appear to Affect Growth? CGD Working Paper 366, Center for Global Development, Washington, DC.
Ratha, D.
2007	"Leveraging Remittances for Development." Policy Brief, Migration Policy Plant, Washington, DC.
2003	"Workers Remittances: An Important and Stable Source of External Evolution Finance." Global Evolution Finance, World Bank, Washington DC.
Ratha, D. et al
2011	"Workers Remittances: An Important and Stable Source of External Development Finance."  Global Development Finance, World Banking concern, Washington DC
International Fund for Agronomical Development (IFAD)
2017	Sending Coin Home: Contributing to the SDGS, one family at a time.
2015	Sending Money Dwelling house: European flows and markets.
2013	Sending Money Dwelling house to Asia: Trends and opportunities in the world'south largest remittance marketplace.
Funkhauser, Due east.
2012	'Using longitudinal information to study migration and remittances', in: Vargas-Silva, C. (ed.) Handbook of Research Methods in Migration. Edward Elgar: Cheltenham, UK and Northampton, MA, United states: 186-206.
Melde, Due south. and J. Schicklinski
2011	'Remittances in the African, Caribbean and Pacific countries', Groundwork annotation ACPOBS/2011/BN02.
Levitt, P.
1998	'Social Remittances: Migration Driven Local-Level Forms of Cultural Diffusion', International Migration Review, Vol. 32(four): 926-948.

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Source: https://www.migrationdataportal.org/themes/remittances

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