A couple of weeks back at the International Forum on Remittances, pills a study was released which reported that global foreign remittances in 2006 totaled three times all aid provided by donor nations to developing countries (as reported by OECD). Global remittances totaled more than $300B while donor aid was $104B. Remittances even topped foreign direct investment in developing countries which totaled $167B (reported by the Institute of International Finance).
Remittances are the money transfers that foreign workers in developing countries send home to their family and relatives. Most of the transfers are between $100 and $300 at a time.
Remittances to India topped the list at $24.5B, advice followed by Mexico at $24.2B; China, online $21B and the Philippines and Russia, $13.7B each.
And, guess what is growing the fastest? Your right, remittances!
This tells me that even if foreign does rise, it is likely to become an increasingly smaller contributor to capital transfer to developing countries and can never match the growing impact that migrant workers are having on the shifts in global capital.
How about we encourage easier, more secure and better priced options for people to send money back to their home countries? For many people, an ATM or Paypal or a mobile money transfer option would be a welcome solution.
I first read about this in the Philippine Daily Inquirer. Yes, I was in the Philippines last week 😉
8 thoughts on “Remittances top foreign aid”
I have likewise had my eye on remittances. The wire transfer business is just begging for a disruptive innovation. I look for a combination of cell phones and the internet. I think Paypal is ideally positioned to lead out.One question I would be curious to research: would those who are sending money home feel more comfortable if their money was directed in some way? Perhaps using the idea of a gift card, people sending money home could buy a gift card to say KickStart in Kenya or earmarked for mosquito nets or solar panels, etc. I suspect that some people sending money to their relatives overseas could be frustrated that the money creates problems within the family or it creates dependency or is not being applied where they hoped it would, going to alcohol and smokes instead of food or capital. Provide a slick way of connecting individuals and different ‘gift certificate’ requests and/or options (Kiva-like?) and you could have a real winner.
I’m based in Singapore where there is a large population of foreign workers both in the labor and domestic help industry. I’ve been observing and thinking about a similar trend in remittance technology progression in the recent year. From what I can tell, there is still a relatively large grey market in terms of remittances here. For example, there are Indian money changers locally who also serve as “remittance agents”. They have an informal network in India so workers trust them to send money over to their home towns and villages. Western Union has also a large presence in this space, especially amongst the Phillipine remittances. The challenge in my opinion lies not so much in developing the technology (I believe we already have all the pieces we need), but the adoption strategies. I think there’s a great opportunity here for an established MFI in India/Phillipines to start something leveraging their MFI infrastructure on the ground in the workers home countries – and win adoption and trust via longer term benefits like investing in financial education for the foreign workers.
Could an MFI set up PayPal accounts for all their clients’ savings accounts?
The sad truth is that 75% of this money is used purely for consumption rather than investment. So I think the true challenge is ot translate this enourmous money flows into some level of economic growth.
Paypal has a number of issues internationally including …”PayPal requires a bank account to transfer funds internationally. To confirm the bank account, PayPal makes a micro-deposit (a few cents) into the account, and then has the payee report back the exact amount, thereby “proving” account ownership. The problem is that for this process to even take place, the banking institutions in the country where the payee resides must support EFT (Electronic Funds Transfer). Not all countries do. For example, India, China the USSR countries, and some Latin American countries don’t.”referenced from Techcrunch article.
I’ve been told by a friend that Clickbank makes it extremely tough to get compensated through forcing you to supply masses of very different things via assorted charge cards not to mention Paypal. I would really like to try Clickbank but I’m worried about it. Do you know if it is the truth?