Dar es Salaam, Tanzania (PANA) – Last year, migrant workers living in Europe sent home US$109.4 billion in remittances, providing a lifeline to more than 150 million people around the world, according to the report ‘Sending Money Home: European flows and markets’ released Monday by the International Fund for Agricultural Development (IFAD).
“While this amount represents a quarter of remittances flows worldwide, one of the key findings of the report is that benefits for families back home could be much higher if they had access to more competitive money transfer markets and targeted financial services to help them save and/or invest their funds,” said the UN specialized agency.
IFAD is due to present the report at the fifth Global Forum on Remittances and Development in Milan, Italy, on June 16-19, 2015 .
The forum will open with the first observance of the International Day of Family Remittances, according to a statement.
The forum brings together heads of state, policymakers, private sector stakeholders and civil society leaders to map out the road ahead for enhanced remittances.
“We need to make sure that this hard-earned money is sent home cheaply but more importantly that it helps families build a better future for themselves, particularly in the poorest rural communities where it counts the most,” said IFAD President Kanayo F. Nwanze said about the report’s findings.
On the sending end, Western Europe and the Russian Federation were the main source of remittances.
The top-six sending countries in 2014 were: the Russian Federation (US$20.6 billion), the United Kingdom (US$17.1 billion), Germany (US$14 billion), France (US$10.5 billion), Italy (US$10.4 billion) and Spain (US$9.6 billion). Together, they accounted for about 75 per cent of all flows from Europe.
Despite these numbers, remittances did not represent a significant outflow of wealth from these host countries. According to the report, remittances amounted to less than 0.7 per cent of individual country GDP.
On the receiving side, in 2014, about one third or US$36.5 billion of European remittances went to 19 countries in the Balkans, the Baltics and Eastern Europe, including 10 EU member states. The remaining two thirds or US$72.9 billion went to over 50 developing countries outside Europe.
Of the 19 remittance-receiving countries within Europe, the report showed that nine countries whose economies are agriculture-based relied the most on flows from Europe, representing 22 percent of GDP in Moldova and 17 percent in Kosovo.
Beyond Europe, Northern Africa and Central Asia were the regions that were most reliant on European flows, largely from France and Russia respectively.
At a time when unprecedented numbers of refugees are entering Europe as they flee from conflict, the report also noted that Europe was a source of considerable remittances to fragile states, including Iraq, Mali, Somalia, Sudan, Syria and Yemen, and that more could be done to leverage the impact of remittances to help stabilize and rebuild countries.
The majority of remittances received were used for basic goods such as food, clothing, shelter, medicine and education. However, studies indicated that up to 20 percent of remittances could be available for savings, investments or to repay loans for small businesses.
With 40 percent of remittances going to rural areas, the report also suggested that remittances played a critical role in the transformation of vulnerable communities.
In fact, remittances were estimated to equal at least three times official development assistance to developing countries.
“The immense potential of remittances for development is still largely underutilized but it is within our capacity to make every hard-earned euro, ruble, pound, krona, or Swiss franc sent home count even more,” said Nwanze.
IFAD estimates that globally, US$80 billion could be available for investment if migrant workers and receiving families in rural areas were given more options to use their funds. Of that amount, about US$34 billion would be available in rural areas.
The report has recommended improving access to basic financial services such as savings and credit, but also to provide families with non-financial services adapted to their needs such as technical assistance for business development or financial education programmes.
“Remittances offer a unique opportunity to bring millions into the formal financial sector,” said Pedro De Vasconcelos, co-author of the report and Coordinator of the Financing Facility for Remittances at IFAD. “Given the frequent interaction between remittance senders, receivers and the financial system, remittances could spark a long-term and life-changing relationship.”
While significant progress has been made over the last few years to lower transfer costs, De Vasconcelos added that more could be done through increased competition.
By reducing transfer costs to 5 percent, as per the G20 objective set in 2009, an additional US$2.5 billion would be saved for migrant workers and their families back home.
Photo: AP
