Remittances and Financial Inclusion in Development

Abstract

Each year, millions of migrants send money earned abroad back to their country of origin. They participate in globalization by engaging in arbitrage in international labour markets, creating family bonds and obligations across countries. The development impact of migration and the ensuing international remittance flow have become increasingly the subject of research and policy discussions, once the vast scale of international ‘people and money flows’ became apparent. It is no longer uncommon for remittance inflows to constitute 5–10 per cent of total GDP in (small) developing countries (World Bank 2005b). Remittance inflows surpass official development flows in middle-income countries, and foreign direct investment in low-income countries. For 2005, the World Bank estimates the total flows to equal US$250 billion (including informal flows). This trend is unlikely to reverse in the medium to long term. Migration is expected to continue, and costs of remitting are falling, providing a lower threshold for migration. The World Bank (2005c: 92–3) expects that remittance flows will continue to grow at an annual rate of 7–8 per cent, similar to the growth rates of the 1990s (ibid.).