Last year Bangladesh earned remittance worth US$ 13.5 billion, equivalent to 6.1 percent of the country’s gross domestic product (GDP).
Over the past one decade the country posted a steady remittance growth rate of 4.2 percent, much lower than some of its South Asian neighbours – Pakistan (10.8), Nepal (9.8) and Sri Lanka (9.4) but higher than India (3.3 percent).
These statistics were made available by a report released by the International Fund for Agricultural Development (IFAD) on Monday. The report – RemitSCOPE – will be presented at the Global Forum on Remittances, Investments and Development – Asia Pacific to begin in Kuala Lumpur on Tuesday (May 8). The forum will bring together more than 300 policymakers, private sector stakeholders and civil society leaders to map out the road ahead for enhanced remittances.
In 2017, migrant workers sent US$ 256 billion to their families in the Asia-Pacific region, according to the report – ‘RemitSCOPE – Remittance markets and opportunities – Asia and the Pacific.’
While remittances benefit about 320 million family members in the region, most of them in rural areas, remittance markets still need to transform to ensure that families can benefit fully from the flows, stated the IFAD report.
India (US$69 billion), China (US$64 billion) and the Philippines (US$33 billion) are the three largest remittance-receiving countries in the world; Pakistan (US$20 billion) and Viet Nam (US$14 billion) are also in the top 10.
In Bangladesh, 65 percent of the total value of remittances goes to rural areas, the report said pointing out that “Rural remittances are particularly important in Asia and the Pacific because remittances ‘count’ more in small towns and villages where living expenses are lower, and typically the cost of sending remittances to rural areas is higher than to corridors linking high-volume urban markets.”
Worldwide, an estimated 40 percent of the total value of remittances goes to rural areas. In Sri Lanka this percentage is as high as 82, in Nepal 81 percent, India 67 percent, Viet Nam 66 percent, Pakistan 61 percent and in the Philippines 56 percent.
In Nepal remittance accounts for nearly a third (31.3 percent) of the country’s GDP, in Sri Lanka it’s 8.9 percent of GDP, in Pakistan 7.1, Bangladesh 6.1 and in India 2.8 percent.
”The promise of technological innovation in the remittance marketplace could bring about a fundamental transformation for hundreds of millions benefiting from these flows. But this transformative change has not yet happened,” said Pedro De Vasconcelos, IFAD Senior remittance expert.
He pointed out that outdated regulatory barriers on both sending and receiving ends result in higher and less transparent costs for the 2 billion transactions a year – most amounting to just US$200 to US$300 each. They also make it less likely and more difficult to convert remittances into savings and investments.
According to the report, the cost of sending money to the region has decreased by only 0.67 percent since 2015, reaching 6.86 percent in 2017. This is still more than twice the 3 per cent set for high volume corridors by the international community in its Sustainable Development Goals. Lower transfer costs mean more money available to families.
According to the report, cash-to-cash transactions remain by far the most common form of transfer. It is only recently that technology is beginning to move markets towards account-to-account transfers through digital operations. There are now more than 1 million payment locations through the region, reflecting a greater digitalization of transactions.
But De Vasconcelos explains further efforts are needed. “For digitalization of transfers to happen, regulators and private sector companies need to work further together to harmonize legal and regulatory frameworks between countries and support the design of products driven by customer needs,” he said.
In the region, families generally spent about 70 percent of remittances to meet basic needs, such as food, clothing, healthcare and education. The remaining 30 percent, amounting to $77 billion, could be saved and invested in asset-building or income-generating activities, helping families to build livelihoods and their future, according to De Vasconcelos.
“If you give people the opportunity to invest, they will invest, but for that, access to financial services is key, and still too many families, in particular in rural areas, cannot save, borrow and invest money through proper financial services,” said De Vasconcelos.
Although financial inclusion has increased since 2011 with half of adults in the region having a bank account (excluding high-income economies) this does not represent the reality of the substantial majority of remittance receiving families where financial exclusion remains predominant.
In the region, 400 million people, one out of every 10 people, are directly affected by remittances either as a sender or as a receiver, said the IFAD report.
Around US$6 trillion in remittances are expected to be sent to developing countries by 2030: over half of these flows will arrive in the Asia Pacific regions, very often in small towns and villages, said the report.unb