LONDON (Thomson Reuters Foundation) – Lowering the fees migrant workers pay to send money home could result in $1 billion more being spent on education in developing countries, the United Nations said on Tuesday.

Financial institutions are under pressure after a report by UNESCO, the U.N. body for education, found the charges to send money to some countries were too high.

“It isn’t fair at all,” said Manos Antoninis, the director of the report.

“Some remittance corridors in Africa carry fees of over 20 percent … The fact people are still prepared to transmit money even through these tunnels means there is a desperation and a need for such funding to be used by families in the poorest countries.”

Remittances sent by migrants working in rich countries are a substantial source of income for many households in Africa, Asia and Latin America, and can help to lift families out of poverty by providing financial stability.

A total of $613 billion was sent globally in 2017 – a sum far higher than official development aid – with the majority going to low and middle-income countries, the World Bank said.

In some countries such as Kyrgyzstan, Nepal and Liberia, the money makes up more than a quarter of national GDP, it said.

However, costs remain high, at an average of about 7 percent of the total sum sent, according to UNESCO’s 2019 Global Education Report.

World leaders have pledged to cut the cost of sending remittances to 3 percent under the sustainable development goals.

If the target was met, it could save migrants more than $25 billion each year and lead to $1 billion extra spending on education by families, the report said.

Traditional banks are the most expensive, with average fees of more than 10 percent, while costs to send money to some regions such as sub-Saharan Africa average about 9 percent.

Critics have called for more regulation and increased competition in the markets to help ensure migrants have affordable options and costs are transparent.

“Big, well-endowed companies have managed to carve out monopolistic positions and the maintain them through very clever marketing,” Leonard Doyle, a spokesman for the International Organization for Migration, told the Thomson Reuters Foundation.

“For example, one of the biggest remittances companies … will have sales persons at church meetings all across America every Sunday.”

Financial groups said work to digitize financial services was lowering the cost of payments, including remittances.

“More people than ever before benefit from access to the global financial system,” said Dylan Riddle, a spokesman for The Institute of International Finance, the global association of financial institutions.

“In order to serve the remaining underserved population – nearly 2 billion people around the world – we’ll need banks, policymakers and NGOs to work together to eliminate existing obstacles and explore new solutions.”

Global Remittance Flows in 2021: A Year of Recovery and Surprises


Migrants worker at a construction site
Migrants worker at a construction site

KNOMAD and the World Bank have just released our new semi-annual report – Migration and Development Brief 35. It is remarkable to see the recovery in remittance flows in 2021, proving again their reliability as an absolute lifeline for families of migrants back home, especially in times of need.

In 2021, we expect remittance flows to low- and middle-income countries (LMICs) to reach $589 billion in 2021, a 7.3 percent increase over 2020. Remittances now stand more than threefold above official development assistance and, excluding China, more than 50 percent higher than foreign direct investment.

This recovery follows the resilience of flows seen in the second half of 2020 which almost compensated for the disruption suffered during the second quarter; flows for the year recorded only a modest 1.7 percent decline in the face of one of the deepest global recessions.

Growth in remittance flows has been exceptionally strong (21.6 percent) in Latin America and the Caribbean. In most other regions, remittances have also recovered strongly, registering a growth of 5 to 10 percent in Europe and Central Asia, the Middle East and North Africa, South Asia, and Sub-Saharan Africa, but a slower pace of 1.4 percent in East Asia and the Pacific (excluding China).

In all developing regions of the world, migrants stepped up their support to families back home, especially to countries affected by the spread of the COVID-19 Delta variant.  Their ability to help was enabled by a welcome pickup in economic activity and employment in major migrant destination countries, grounded partly in the exceptional COVID-19 emergency fiscal stimuli and accommodative monetary policies.

In 2021, the top five remittance recipients in current US dollar terms were India, China, Mexico, the Philippines, and the Arab Republic of Egypt. As a share of gross domestic product, the top five remittance recipients in 2021 were smaller economies: Tonga, Lebanon, the Kyrgyz Republic, Tajikistan, and Honduras. The United States was the most significant source country for remittances in 2020, followed by the United Arab Emirates, Saudi Arabia, and Switzerland.

The cost of sending money across international borders remained high, around 6.4 percent on average in the first quarter of 2021. Sending remittances to Sub-Saharan Africa is particularly high (8 percent). Corridor-specific data reveal that remittance costs tend to be higher when remittances are sent through banks than through digital channels or money transmitters offering cash-to-cash services.

The international migrant stock seems to have declined for a second consecutive year, with weak new migration flows and large return migration in 2020 and 2021. The number of foreign workers in the Gulf Cooperation Council (GCC) region, which is among the top destinations for migrants and leading sources of remittances, continued to decline in 2021. Migrants’ attempts to enter the United States through its southern border increased in 2021. However, there was an increase in transit migrants stranded in Mexico and Central American countries.

Remittances are expected to continue growing in 2022, but there are downside risks. The COVID-19 crisis is far from over and poses the most crucial downside risk to the outlook for global growth, employment, and remittance flows to LMICs. The fiscal stimulus programs in major migrant destination countries cannot continue indefinitely. Moreover, the shift from cash to digital remittance channels, which was observed at the peak of the COVID-19 crisis in 2020, has likely run its course. Further growth will require accelerating access to bank (transaction) accounts (which is essential for using digital channels) for migrant populations. This process is hindered by anti-money laundering and countering the financing of terrorism (AML/CFT) regulations, which remain stringent, e.g., not facilitating e-KYC onboarding.

Policymakers should continue their efforts to keep remittances flowing by lowering the cost of remittances, increasing access to banking for migrants and remittance service providers, and making policy responses to the COVID-19 crisis (in terms of access to vaccines, healthcare, housing, and education) inclusive of migrants. Migrants may also need protection against overwork or underpayment by employers during the crisis. Finally, many migrant origin communities are unexpectedly facing the return of migrants in large numbers. They may need support in providing healthcare, quarantine facilities, and other social services to mitigate this situation effectively.

Money foreign workers send to home countries to set new record

Remittances to low- and middle-income countries are projected to grow 7.3 percent this year from 2020, the World Bank said.

Transfers to Latin America and the Caribbean are forecast to have soared 21.6 percent, spurred by factors including hurricanes, concern about COVID-19, improvement in the United States economy and a jump in the number of migrants traveling to the US [File: Alexandre Meneghini/Reuters]

Remittances to low- and middle-income countries are projected to grow 7.3% this year from 2020, the Washington-based development lender said in a report Wednesday. Transfers to Latin America and the Caribbean are forecast to have soared 21.6%, spurred by factors including concern about Covid-19, hurricanes, improvement in the American economy and a jump in the number of migrants traveling to the U.S.

The global increase is bigger than the 2.6% that the World Bank forecast in May after a drop of 1.6% in 2020 — far less than the 20% tumble originally predicted. Transfers from family abroad have helped to support people suffering economic hardships in their nations of origin.

Remittances likely increased 9.7% for the Middle East and North Africa, 8% for South Asia, 6.2% for sub-Saharan Africa and 5.3% for Europe and Central Asia. In East Asia and the Pacific, remittances probably fell by 4%.

“Remittance flows from migrants have greatly complemented government cash-transfer programs to support families suffering economic hardships during the Covid-19 crisis,” Michal Rutkowski, the World Bank’s global director for social protection and jobs, said in a statement. “Facilitating the flow of remittances to provide relief to strained household budgets should be a key component of government policies to support a global recovery from the pandemic.”

Other highlights from the report:

In 2021, the top five remittance recipients are India, China, Mexico, the Philippines and Egypt

As a share of gross domestic product, the biggest remittance recipients are Tonga, Lebanon, the Kyrgyz Republic, Tajikistan, and Honduras

The cost of sending money across international borders averaged 6.4% in the first quarter of this year, more than double the 3% target set in the bank’s sustainable development goals. Remittances to sub-Saharan Africa are particularly expensive at 8%

The U.S. was the largest source country for remittances in 2020, followed by the United Arab Emirates, Saudi Arabia, and Switzerland

U.S. officials encountered a record of more than 1.7 million migrants crossing the border with Mexico over the past year. The majority of migrants apprehended in fiscal 2021 — almost 1.4 million — hailed from Mexico and the Northern Triangle of Honduras, El Salvador and Guatemala. But Covid-19 spurred hundreds of thousands of people, primarily from Latin America and the Caribbean, to head north, complicating the efforts of the Biden administration.

The increase in migrants headed for the U.S. likely is a “significant factor” behind the increase in the volume of remittances to Latin America and the Caribbean, according to the World Bank.

“In particular, the spectacular increase in remittances in Mexico may reflect funds received by transit migrants from Honduras, El Salvador, Guatemala, Haiti, Venezuela, Cuba, and many other nations,” the development lender said.

The adverse effects of Covid-19 on countries and the damage brought by hurricanes Grace and Ida also contributed to an increase in remittance flows to Mexico and Central America, the institution said.