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Foreign workers send home three times the amount of money spent on aid

The amount of money worldwide that migrants and foreign workers send back home increased by more than 50 percent over the past decade, according to a new analysis.

Technically known as ‘remittances,’ the total amount of these cash transfers grew from $296 billion dollars in 2007 to $445 billion in 2016 – triple what is spent by rich countries on foreign aid each year.

Roughly 1 billion people will either send or receive money, from abroad this year, according to the International Fund for Agricultural Development (IFAD), which sponsored the study and published the report Sending Money Home. IFAD is an agency within the United Nations that finances agricultural development in poor countries.

The upward trend in remittances worldwide represents a significant increase that has weathered a global financial crisis and increasing anti-immigrant policies in many wealthy countries. The money sent back home by foreign workers does a lot to reduce poverty globally, a fact not widely recognized by the public or policy makers.

Nearly half of the money sent home goes to people living in rural areas, according to the analysis. Families use the money to pay for food, health, education and to support businesses, which for the poorest communities typically are focused on farming.

“It is not about the money being sent home, it is about the impact on people’s lives,” IFAD President Gilbert Houngbo, said in a statement. “The small amounts of $200 or $300 that each migrant sends home make up about 60 per cent of the family’s household income, and this makes an enormous difference in their lives and the communities in which they live.”

More than 100 countries each take in more than $100 million in remittances each year. The countries with the largest amount of outgoing cash transfers are the U.S., Saudi Arabia and Russia with Asia representing roughly 55 percent of the total. The leading recipient countries include Pakistan, Mexico and the Philippines – all of which receive significant foreign aid or development assistance from the U.S. government.

World Bank head Jim Kim called remittances an important way to help end extreme poverty by 2030 because of their ability to ‘increase prosperity.’ Meeting the three key Sustainable Development Goals (SDGs) of ending extreme poverty, universal health access and universal completion of primary school by 2030 will cost an additional $148 billion a year, says one study.

Money sent home grew at a faster rate than both migration and population, a fact that IFAD says shows migrants are getting better pay. That may improve more in the future as aging populations in wealthy countries will increase the need for more labor from migrants. They fill jobs in sectors ranging from construction to agriculture to child care.

“Remittances can help the families of migrants build a more secure future, making migration for young people more of a choice than a necessity,” IFAD’s Pedro de Vasconcelos said.

Remittances are used for a variety of things and are not necessarily targeted at the three areas, but they will help with that financing gap. IFAD estimates that $6.5 trillion will be sent to low- and middle-income countries between 2015 and 2030. That could increase if another SDG is attained – lowering how much it costs to send money home.

Transaction costs eat up more than $30 billion a year. The average migrant pays $15 to send $200, more than 7 percent. Fees are higher for certain regions. It costs an African living in the U.K. nearly 10 percent of the total to send money home.

The fees matter because remittances are a significant economic boost to some countries. In fact, remittances account for more than one-third of the GDP for Liberia, Eritrea and Somalia.

The SDG pertaining to remittances calls for the fees to fall 3 percent 2030. Doing so would save $20 billion per year by 2030, says the report. That is why the World Bank, IFAD and others are pressuring banks and transfer operators to cut fees.


About Author

Tom Murphy

Tom Murphy is a New Hampshire-based reporter for Humanosphere. Before joining Humanosphere, Tom founded and edited the aid blog A View From the Cave. His work has appeared in Foreign Policy, the Huffington Post, the Guardian, GlobalPost and Christian Science Monitor. He tweets at @viewfromthecave. Contact him at tmurphy[at]