Remittances: a lifeline under threat
Jul 24, 2020 | By: Colleen Kelly
International aid for communities in low income countries is something that most people are familiar with. But there’s another — bigger — source of support that gets little attention. It’s called remittances… and it’s in trouble.
Forced to leave
Economic migration in its various forms has been a feature of life around the world for centuries. Many of those who struggle to survive in their home country find that the only solution to their economic problems is to leave for foreign shores, where opportunity is more plentiful. It’s a difficult —and often dangerous — decision, causing heartbreak and misery for millions of families. But it’s also is a vital component of the global economy.
Higher income countries need workers to fill the lower paid jobs that keep their economic engines running smoothly. Fruit crops need to be picked, oil wells need to be maintained, warehouses need to be staffed, construction sites need laborers — the International Labor Organization estimates that there are 164 million migrant workers in our world today. Over 17% of the US workforce in 2019 was foreign born.
As well as sustaining themselves, these workers also send money home to their families in the form of remittances. A whole global industry has grown up around the business of transferring money, ranging from banks to money transmitters like Western Union to online services like Paypal and WorldRemit. In 2019 a whopping $554 billion was repatriated by migrants around the globe. That far exceeds all combined international aid budgets.
Remittances sustain many developing nations. Haiti, for example, receives over 30% of its annual GDP from citizens living abroad — many of them in the U.S. It’s estimated that as much as $2 billion dollars comes to Somalia each year in the form of remittances, and other countries such as South Sudan and the Philippines are also highly dependent on this income stream. In all, it’s thought that about 800 million people across 125 countries rely on money from relatives abroad.
The pandemic problem
The COVID-19 pandemic will hit remittances — hard. Shutdowns in higher income countries have resulted in massive job losses, and that has impacted migrant workers in a big way. Many work in sectors that have been severely impacted and few have access to any kind of reserves or safety net. A large percentage work in the informal labor sector. Even as businesses start to reopen, the predicted economic slump will affect migrants badly. Already, tens of thousands of Bangladeshi workers have been repatriated from Gulf states, ending up back in their old neighborhoods and villages. Not only are they not sending money home, they are placing added pressure on local resources.
Earlier this year, the World Bank published a report, estimating that international family remittances will fall by 20% in 2020. That’s over $110 billion in lost income to families who are in many cases living close to the poverty line (generally acknowledged be around $1.90 a day.) Add that together with lost revenue from prolonged lockdowns, rising commodity prices, and the slump in international trade, and this year is shaping up to be an extremely difficult one for the world’s poorest. The United Nations has predicted a severe hunger crisis, with the possibility of multiple famines.
These big numbers are the stuff of dramatic headlines — but this story seems to be getting lost among the many others now topping the news cycle. And behind the numbers are human beings, many of them women and children, left to fend for themselves against overwhelming odds. It’s a nightmare scenario that’s playing out in poor households right across the world.
Finding solutions
So, what’s the solution? Well there are a few options. In the short term, ensuring that migrants are included in any stimulus packages and social protection measures is important, as are mechanisms to ease the flow of remittances and reduce fees and taxes on money sent.
Also, it’s important to advocate with major donors and governments, urging them not to cut back on foreign aid and commitments already made to developing nations. This is part of our mandate at Concern, and we have joined with other organizations to make our voices heard on behalf of the poorest.
Organizations like ours already have extensive cash distribution programs, which provide regular funds to extremely poor and disadvantaged families, helping them through the toughest times. For example, the Concern-led Somali Cash Consortium distributed over $18 million last year through its established networks. We are looking to expand this work across various countries, where possible, as the effects of the pandemic bite.
But possibly the most effective and viable solution to over-reliance on remittances is the one that we’ve been working on for decades. Eliminating extreme poverty — family by family, community by community — in the places where it is endemic is quite possibly the only truly sustainable way to deal with forced economic migration. Working with people to understand what holds them back, and then helping them to build their assets and their access to income, nutritious food, and education is a big task.
It’s a task that the world has already committed to, as part of the Sustainable Development Goals (SDGs). Eliminating extreme poverty is not a pipe dream — it’s a hugely important next step in the development of our world. If we work hard, we can prevent millions of families being torn apart and contribute to a kinder, more stable future for generations to come.
