Harnessing the remittance boomFor more than a decade, Asia’s economies have been on the move - and so have its people. The scale of migration from rural to urban areas and across international borders is historically unprecedented, and 21st-century Asia is its focal point.
In Asia’s developing countries, the power and potential of remittances - the money that migrant workers send home to their families (many of whom live in poor and remote areas) - is immense. Currently, over 60 million migrant workers from the Asia-Pacific region account for more than half of all remittance flows to developing countries, sending home about $260 billion in 2012.
China, India and the Philippines are the three largest recipients of remittances, while Bangladesh, Indonesia, Pakistan and Vietnam are also in the top 10. The money is often a lifeline: it is estimated that 10 percent of Asian families depend on payments from abroad to obtain their food, clothing and shelter.
But, while remittances to developing countries are five times higher than official development assistance, the enormous potential returns for society have not been realized - and can be secured only if the flow of money can be channeled into effective rural and agricultural development, particularly in fragile states and post-conflict countries. Doing so would contribute significantly to creating jobs, enhancing food security, and fostering stability in countries emerging from strife.
In order to establish such channels, we must scale up key initiatives, identify new opportunities, and map out the road ahead. The fourth Global Forum on Remittances, which runs until Thursday in Bangkok, will do just that. Convened by the International Fund for Agricultural Development (IFAD) and the World Bank, the forum will bring together policymakers, private-sector players and civil-society leaders to chart a course for leveraging the development impact of remittances sent home each year in Asia and around the world.
At IFAD, our starting point is always the 3 billion people who live in the rural areas of developing countries. We work to create conditions in which poor rural women and men can grow and sell more food, increase their incomes and determine the direction of their own lives. We believe that diasporas and the global donor community can leverage the flow of migrant investment if they form partnerships with national governments for long-term development of the rural communities that are so often the beginning of the migration chain.
More than 215 million people around the world live outside of the countries they call home. But most families that rely on remittances operate outside of the world’s financial system as well. Despite the global prevalence of electronic money transfers, most migrant workers are excluded from the convenience of modern banking services, dependent on costly cash transfers that often require rural recipients to travel significant distances.
As a result, migrant workers are forced to initiate more than one billion separate transactions worldwide each year. That means more than one billion trips for rural women and men to collect their money. Adding up the cost of the transfer, travel, and time, remittances are far too expensive for people living in poverty.
IFAD has been working in more than 40 countries to ensure that rural families can have easy access to remittances, and are better able to use them as savings or investments that go back into their communities. The amount of money at stake is staggering: It is estimated that over the next five years, more than $2.5 trillion will be sent in remittances to developing countries, with almost 40 percent - coming in the form of payments of $50, $100, or $500 at a time - destined for rural areas. While the majority of family remittances will always be used to meet immediate needs, IFAD’s experience shows that rural families would seize opportunities to save and invest, even small amounts, if they had better options.
While remittances should and can be leveraged to bring about impressive results in poverty reduction, let us not forget that there is an underlying issue that needs to be addressed. Young people, the leaders and farmers of tomorrow, are leaving their rural communities behind in search of better opportunities. We need to turn rural areas into vibrant and economically stable communities that provide opportunities for young people to earn a living, build their capacities, and start a family.
We should not ignore the enormous development potential of remittances to rural areas. Let us empower families to use their hard-earned money in ways that will help to make migration a matter of choice, not a necessity for the generations to come. Copyright: Project Syndicate, 2013.
*The author is president of the International Fund for Agricultural Development (IFAD), an international financial institution and a specialized United Nations agency based in Rome, Italy.
by Kanayo F. Nwanze