Starting today, we will be sharing experiences and opinions on the theme Remittance Flows and their contribution to rural development.
The current global economic crisis highlighted the impact of remittances in developing countries. The data shows that in some countries remittances continue to perform better. The governments of Bangladesh and the Philippines acknowledged that without migrants’ contributions the country could have suffered more during the crisis. The Ugandan government plans to scrap visa fees it charges Ugandans in the Diaspora when coming back home. The government plans to create a fully-developed diaspora department to guide Diasporas on how to invest and succeed back home. These are latest initiatives in remittance-receiving countries to harness the potentials.
Hereafter you will find a brief background information and some guide questions. We encourage you to actively participate in the discussion which will run until January 20. We hope to get deeper insights on the contribution of remittance flows to rural development.
Please note that your contributions will be included in the summary which we will prepare at the end of the consultation.
We wish you all a HAPPY NEW YEAR and let us hope and work for a safer, greener, and better world.
Best regards,
On behalf of the organizersLeila Rispens-Noel
Remittance Flows and their contribution to rural development
Remittances have become the second largest capital flow behind Foreign Direct Investment (FDI) and ahead of Overseas Development Assistance (ODA). In 2001, remittances represented 42% of total FDI flows and 260% of ODA; remittance flows have surpassed ODA since 1995. Today remittances constitute the fastest growing and most stable capital flow to developing countries. Remittances have more than doubled in value in the past decade and also grown faster than migration - a trend which is likely to continue. Thus, while FDI and ODA have occupied the limelight of development finance to date, remittances have made a quiet yet substantial contribution to international capital flows as well as to national balance of payments, forex reserves, and, especially, to the welfare of receiving households in developing countries (DFID, Migrant Remittances to Developing Countries – A scoping study: overview and introduction to issues for pro-poor financial services, Prepared for the UK Department of International Development (DFID) by Cerstin Sander, Bannock Consulting, June 2003).
A good proportion of remittance flows also originate in developing countries. The World Bank notes that these so-called South-South remittance flows make up between 30 and 45 percent of total remittances received by developing countries. In fact, remittance flows to poor countries actually originate largely in the middle-income developing countries. China, Malaysia, and the Russian Federation, for example, are among the top 20 sources of remittances (World Bank, Global Economic Prospects 2006. Economic Implications of Remittances and Migration, Washington, 2006).
Remittances and their investment are significantly hampered by inefficiencies and access barriers in financial systems and services, both in sending and receiving countries. It is estimated that on average one third of remittances flow through informal channels; for countries with weak financial sectors or tight forex controls, sending money via informal channels is more common (DFID, cit., 2003).
Donors have begun to recognize the role of remittances and have become interested primarily in how to facilitate an increase of the flow and use of remittances for developmental benefits. This includes how to facilitate a reduction in transaction cost and better access to formal sector transfer services; as well as how to better integrate and improve access to a broader range of financial services through remittances as an ‘entry point’.
QUESTIONS:
- Are remittances a relatively large and stable source of funding for ACP countries? What do remittances generate at both micro and macro-economic levels?
- What are the households’ uses of remittances?
- Do remittances contribute to rural development? What concrete examples, best practices do we have in terms of contribution of remittances to productive resources and wealth creation in rural areas?
- What examples can be shared as successes in investment in human and social capital (e.g., health care, nutrition, education) and in building assets (e.g., real estate, business, and savings)?
- Has the financial crisis affected this source of income?
