REMITTANCES

LEARNING OBJECTIVES
1. 2. 3. TO DEFINE REMITTANCES TO DESCRIBE THE GLOBAL PATTERN OF REMITTANCES TO UNDERSTAND THE VALUE OF REMITTANCES

WHAT ARE REMITTANCES?

remittance is a transfer of money by a foreign worker to his or her home country Estimates of remittances to developing countries vary from IFAD's US$301 billion (including informal flows) to the World Bank's US$250 billion for 2006 (excluding informal flows).

WHAT IS THE PATTERN?

WHAT IS THE PATTERN?

WHO GETS THE MOST?

WHO GETS THE MOST?

The top recipients in terms of the share of remittances in GDP included many smaller economies such as Tajikistan (45%), Moldova (38%), and Honduras (25%).

BENEFITS OF REMITTANCES
As remittance receivers often have a higher propensity to own a bank account, remittances promote access to financial services for the sender and recipient, promote economic development. Migrants sent approximately 10% of their household incomes; these remittances made up a corresponding 50-80% of the household incomes for the recipients The recipients commonly spend the funds on necessities such as health, education, food, and clothing.

BENEFITS OF REMITTANCES
Invested in businesses and infrastructure E.G a $10 million hospital in Touba, Senegal, a new international airport in Kerala, India, and a metal bridge in Jomulquillo, Mexico. Help recipient countries cope with economic crises because migrants tend to send more money back to family and friends during hard times. Remittances can also improve a receipt countres creditworthiness.

PROBLEMS
large inflows into small economies can cause the domestic exchange rate to appreciate (i.e., the domestic currency becomes more expensive relative to foreign currency), thereby making tradable items, such as cash crops and manufactured goods, less profitable Security Fears international money transfers are increasingly under scrutiny due to fears of funding terrorism. Susceptible to economic crisis - money transfers suffered an unprecedented drop in May, falling 20% to $1.9 billion (USA to Mexico)

PROBLEMS

governments may develop a dependency on large flows of remittances, thus creating a disincentive to pursue aggressive economic policies to promote sustained development Ghost towns phenomenon Central Mexico Some analysts argue that remittances in some countries contribute to a growing inequality or gap, particularly in poor rural areas, between the groups of people within a community who receive remittances and those who do not.