The coronavirus crisis, a challenge and an opportunity to fix the remittance system

3 June 2020
Economic Affairs

The coronavirus pandemic can cause a drop in remittances sent by migrants equivalent to three-quarters of official development aid. A drop of $ 110 billion is estimated. These remittances are no longer reaching the 800 million people who depend on them.

Until a few months ago, when migrant workers sent remittances to their families home, they contributed to achieving the Sustainable Development Goals, including lifting tens of millions of people out of extreme poverty.

But then came the COVID-19 pandemic and, ironically, the opportunity to improve a specific segment of the global financial system that accounts for more than 5% of the gross domestic product of at least 60 low- and middle-income countries, a a figure that represents more than the total foreign direct investment or official development assistance granted by governments.

Vulnerabilities exposed

“Regardless of whether or not the post-virus recovery is faster than anticipated, the global pandemic has exposed the vulnerabilities of the global remittance system“Said Gilbert F. Houngbo, president of the International Fund for Agricultural Development, a specialized agency of the United Nations in Rome.

“That is why it is time to fix these vulnerabilities no matter what the economic scenario is,” he told UN News before the next International Day of Family Remittances that is celebrated on June 16.

According to the World Bank, remittances to low- and middle-income countries reached a record $ 554 billion last year. These figures were achieved thanks to 200 million migrant workers in 40 rich countries sending funds home that supported 800 million people in more than 125 developing countries.

Houngbo said that half of the families who received the shipments live in rural areas where remittances are most important.

[Descarga nuestra aplicación Noticias ONU para IOS o Android. O subscríbete a nuestro boletín.]

AU / UN IST / Stuart Price
The money that the world’s 200 million migrant workers send home more than triples the funds that go to official development assistance and exceeds foreign direct investment

$ 110 billion drop

However, with the emergence of the coronavirus pandemic, the World Bank projects that international remittances will decline by 20%, or $ 110 billion, to $ 445 billion. This situation could drag tens of millions below the poverty line and, at the same time, hinder progress towards achieving the 2030 Sustainable Development Agenda.

The Fund’s expert explained that remittances are not expected to return to pre-pandemic levels for some time and that he does not expect a V-shaped recovery to take place during 2021, so savings will shrink and worsen local conditions.

“Although the reduction in remittances will not occur in a uniform way in all families, nor in all continents, the repercussions on society will be considerable and lasting,” he told UN News by email.

In response, Switzerland and the United Kingdom – joined by several other member states, the World Bank, the United Nations Development Program and other United Nations agencies and industry groups – issued a “ global call to action ”to ensure that migrant workers and diaspora communities continue to send money while improving the remittance system.

An essential public service

The call not only urges policymakers to declare the provision of remittances an essential public service, but also to support the development of more efficient digital remittance channels.

It also asks regulatory bodies to provide guidance on customer orientation requirements, which are of utmost importance to expanding digital financial services, particularly for undocumented people who do not have access to a bank account.

Likewise, it encourages remittance service providers to study how to alleviate the financial burden of their clients by reducing transaction fees by more than half, whose current global average is 6.8%, according to the set goal. in the Sustainable Development Goals, as indicated in the latest World Bank Report on Migration and Development.

An instrument for the developing world

“Remittances are a lifeline for the developing world, especially at this time,” said UN Secretary General António Guterres on March 19. “The countries have already committed to reducing the rates of remittances to 3%. The crisis forces us to go further and get as close as possible to zero ”.

For its part, the International Fund for Agricultural Development partnered with financial technology companies, mobile phone operators, commercial banks and postal companies, to integrate digital strategies that serve to improve remittance transfers to rural areas.

In addition, and through planning programs and financial knowledge, among others, it increases the skills of rural families to overcome these difficult times.

The ability of rural families to overcome difficult times through financial literacy and planning programs, among other capacity-building activities.

Houngbo, who has led the Fund since 2017, said that over the past 15 years, international attention to remittances has focused on the “sender side,” in particular the high transaction costs.

“However, it is necessary to underline that the benefits of remittances in development really focus on the receiving end, where, right now, families are struggling with the sudden interruption of their economic survival, ”he said.

3 June 2020
Economic Affairs

The coronavirus pandemic can cause a drop in remittances sent by migrants equivalent to three-quarters of official development aid. A drop of $ 110 billion is estimated. These remittances are no longer reaching the 800 million people who depend on them.

Until a few months ago, when migrant workers sent remittances to their families home, they contributed to achieving the Sustainable Development Goals, including lifting tens of millions of people out of extreme poverty.

But then came the COVID-19 pandemic and, ironically, the opportunity to improve a specific segment of the global financial system that accounts for more than 5% of the gross domestic product of at least 60 low- and middle-income countries, a a figure that represents more than the total foreign direct investment or official development assistance granted by governments.

Vulnerabilities exposed

“Regardless of whether or not the post-virus recovery is faster than anticipated, the global pandemic has exposed the vulnerabilities of the global remittance system“Said Gilbert F. Houngbo, president of the International Fund for Agricultural Development, a specialized agency of the United Nations in Rome.

“That is why it is time to fix these vulnerabilities no matter what the economic scenario is,” he told UN News before the next International Day of Family Remittances that is celebrated on June 16.

According to the World Bank, remittances to low- and middle-income countries reached a record $ 554 billion last year. These figures were achieved thanks to 200 million migrant workers in 40 rich countries sending funds home that supported 800 million people in more than 125 developing countries.

Houngbo said that half of the families who received the shipments live in rural areas where remittances are most important.

[Descarga nuestra aplicación Noticias ONU para IOS o Android. O subscríbete a nuestro boletín.]

AU / UN IST / Stuart Price
The money that the world’s 200 million migrant workers send home more than triples the funds that go to official development assistance and exceeds foreign direct investment

$ 110 billion drop

However, with the emergence of the coronavirus pandemic, the World Bank projects that international remittances will decline by 20%, or $ 110 billion, to $ 445 billion. This situation could drag tens of millions below the poverty line and, at the same time, hinder progress towards achieving the 2030 Sustainable Development Agenda.

The Fund’s expert explained that remittances are not expected to return to pre-pandemic levels for some time and that he does not expect a V-shaped recovery to take place during 2021, so savings will shrink and worsen local conditions.

“Although the reduction in remittances will not occur in a uniform way in all families, nor in all continents, the repercussions on society will be considerable and lasting,” he told UN News by email.

In response, Switzerland and the United Kingdom – joined by several other member states, the World Bank, the United Nations Development Program and other United Nations agencies and industry groups – issued a “ global call to action ”to ensure that migrant workers and diaspora communities continue to send money while improving the remittance system.

An essential public service

The call not only urges policymakers to declare the provision of remittances an essential public service, but also to support the development of more efficient digital remittance channels.

It also asks regulatory bodies to provide guidance on customer orientation requirements, which are of utmost importance to expanding digital financial services, particularly for undocumented people who do not have access to a bank account.

Likewise, it encourages remittance service providers to study how to alleviate the financial burden of their clients by reducing transaction fees by more than half, whose current global average is 6.8%, according to the set goal. in the Sustainable Development Goals, as indicated in the latest World Bank Report on Migration and Development.

An instrument for the developing world

“Remittances are a lifeline for the developing world, especially at this time,” said UN Secretary General António Guterres on March 19. “The countries have already committed to reducing the rates of remittances to 3%. The crisis forces us to go further and get as close as possible to zero ”.

For its part, the International Fund for Agricultural Development partnered with financial technology companies, mobile phone operators, commercial banks and postal companies, to integrate digital strategies that serve to improve remittance transfers to rural areas.

In addition, and through planning programs and financial knowledge, among others, it increases the skills of rural families to overcome these difficult times.

The ability of rural families to overcome difficult times through financial literacy and planning programs, among other capacity-building activities.

Houngbo, who has led the Fund since 2017, said that over the past 15 years, international attention to remittances has focused on the “sender side,” in particular the high transaction costs.

“However, it is necessary to underline that the benefits of remittances in development really focus on the receiving end, where, right now, families are struggling with the sudden interruption of their economic survival, ”he said.