Why remittance matters?
Remittances are really important for millions of families worldwide because it helps them with their expenses. According to the World Bank in 2020, these online remittances added up to more than $540 billion globally. Most of this money went to developing countries.
When migrants send money or goods back to their families to help them, it's called workers' or migrant remittances. These transfers have been increasing rapidly recently and are now the main way that many developing countries get money from abroad.
Why is remittance so important?
1. As a main source of income
Remittances are like a crucial lifeline for families struggling with poverty. In places where income is low, these cash transfers from relatives abroad are what keep the lights on, put food on the table, and ensure kids can go to school. Many families would struggle to obtain their basic needs without these vital funds.
Remittances stand out as a dependable income source for families mainly because they arrive regularly. Migrants usually wire money back to their loved ones every month, ensuring a steady stream of financial support. What's more, these funds often bypass intermediaries like governments or charities, going straight into the hands of the families in need. This direct flow ensures that the money arrives on time for their receivers.
Remittances are crucial because they reach families living in far-off countryside places where making money can be tough. Especially in areas where farming is the main job, these cash transfers can be a game-changer. They give families a chance to earn money in other ways, making them less reliant on just farming. So, when crop prices go up and down, they have other income to rely on.
2. Economic Development
Remittances aren't just helpful for families. It also give developing countries' economies a big boost. When migrants send money back home, it's often used to kickstart new businesses or make existing ones bigger. This creates more jobs and helps the economy grow. Some people even think that remittances are better at fighting poverty and making economies stronger than the help countries get from other countries.
Remittances give families more money to spend on important things like food, housing, and schooling. This boosts the local economy because when people spend more, businesses sell more, and they often need to hire more workers to keep up with the demand. So, it's like a cycle where everyone benefits.
Remittances help countries keep a good amount of foreign money in their pockets. This helps them keep the value of their currency steady, attract investments from other countries, and make sure they're doing well in trade with other nations.
3. Poverty Alleviating
Remittances play a crucial role in alleviating poverty by providing families with additional income to meet basic needs and invest in long-term improvements. Firstly, remittances serve as a reliable source of income, often sent regularly by migrants to their families. This steady flow of funds helps families afford essential expenses such as food, housing, healthcare, and education, lifting them out of immediate poverty.
Additionally, remittances can be used to invest in income-generating activities, such as starting or expanding small businesses. By fostering entrepreneurship and creating employment opportunities, remittances contribute to economic growth and poverty reduction.
Also, remittances enable families to invest in human capital development, particularly in education and skills training. Educated individuals are better equipped to secure higher-paying jobs, break the cycle of poverty, and contribute to their communities' socio-economic development.
4. Improve Education
Remittances help families pay for their kids' schooling. When kids get a good education, they have more chances to find good jobs when they grow up. It's like giving them keys to unlock better opportunities ahead.
5. Improve Healthcare Facilities
Remittances significantly improve healthcare accessibility and affordability in recipient countries. By providing families with additional financial resources, remittances enable individuals to access essential medical services, medications, and health insurance coverage that may have been previously unaffordable or inaccessible.
These funds can also be invested in healthcare infrastructure projects, such as the construction or renovation of hospitals and clinics, enhancing the quality and accessibility of healthcare services for communities. Moreover, remittance recipients may allocate funds towards health education initiatives, promoting healthy behaviors, disease prevention, and awareness of healthcare services. Overall, remittances play a vital role in strengthening healthcare systems and improving health outcomes in recipient countries.
6. Development of small businesses
Remittances give a big boost to small businesses by providing the money they need to start up or grow. This helps create more jobs, gets money flowing in the local area, and helps communities grow in a good way.
7. Enhancing Financial Inclusion
Remittances push people to use regular banks more, which helps them become part of the financial system. This means they can get loans, save money, and invest for the future. It's like opening doors to more ways to grow financially in the long run.
Regular remittance recipients who maintain bank accounts can establish a credit history. This credit history can be crucial for accessing loans and other financial products in the future, enabling them to invest in education, start businesses, or purchase homes. Remittance recipients may use their bank accounts to save a portion of the money they receive. This habit of saving can lead to greater financial stability and resilience against unexpected expenses or emergencies.
With increased financial literacy and access to formal financial services, remittance recipients may explore investment opportunities beyond traditional savings accounts. This could include investing in stocks, bonds, or other investment instruments, thereby diversifying their financial portfolios.
8. Promote social and economic integration
Remittances keep families close, even when they're far apart. This is especially meaningful for families who split up because of moving to another country. It helps them stay connected and support each other, regardless of distance.
Remittances, money sent by people working abroad to their families back home, are still really important for many families worldwide. With more people moving to find better jobs, the demand for affordable and dependable remittance services keeps increasing. Governments, groups that help development, and companies can all help make remittances better and ensure the money gets to the families who need it.