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Remittances are a lifeline in a crisis

UNDP recognizes the vital contribution of migrants on the International Day of Family Remittances

In times of crisis, the money migrants send home is a lifeline for millions of families around the world. Remittances put food on the table, cover emergencies like the loss of crops, and help pay for education and medical expenses. They also play a crucial role in countries affected by crises. As COVID-19 devastated lives and livelihoods, migrants kept sending money to their families left behind.

Remittances to low and middle-income countries reached US$558 billion in 2020 and $605 billion in 2021– vastly exceeding official development assistance.

Following the escalation of the conflict in Ukraine, over 1,000 Ukrainian diaspora organizations have supported initiatives including collecting food and clothes, sending money to buy basic items as well as raising funds to rebuild their country. While remittances to Ukraine dropped by 15 percent between February and April 2022 compared to the same period in 2021, the World Bank estimates they will rise by over 20 percent in 2022, thanks to the efforts Ukrainian migrants around the world make to support their families in Ukraine.

Likewise, diasporas from neighbouring countries, such as Hungary, Moldova and Poland, have mobilized resources to support the hosting of Ukrainian refugees in their native countries. Through hometown associations created with the support of UNDP and the Swiss government, the Moldovans abroad contributed up to $300,000 to help their communities at home respond to the crisis, which included both financial and in-kind help.

“Locals went to the border to collect refugees and bring them to our village. This was a huge burden for our community, and it was obvious that we needed more support. I informed our network of migrants,” said Veronica Vrinceanu, President of the Hometown Associations for migrants originating from Sireti village. “In just a few days I started receiving calls from our diaspora and migrants abroad, offering their support. Migrants sent back home money, food, clothes, sanitary products, toys, stationery – in order to help their families and local authorities to cope with the crisis,” she said.

“In just a few days I started receiving calls from our diaspora and migrants abroad, offering their support." - Veronica Vrinceanu, migrant association president

Keeping crisis affected families afloat

In a very different context, remittances from friends and relatives abroad help reduce the distress caused by droughts and food shortages.

"I don't know how my family would have survived if my son and daughter hadn't sent $450 in remittances every month. We would have died if they hadn't made it to Europe,” said Halimo Abukar Jama, a 57-year-old mother of nine children who has lived through Somalia's civil war.

Remittances have contributed to household expenses and act as a form of insurance for Somali households facing shocks to their income and livelihoods. With the acceleration of the adverse impacts of climate change and environmental degradation, remittances will play an increasing role in supporting economies and societies affected by disasters.

Abdirashid Duale is the CEO of Dahabshil, Africa's Largest Money Transfer Company.

“Remittance services are keeping people alive in this time of unprecedented drought, exacerbated by the effects of climate change and conflict. People suffering from dwindling food supplies and skyrocketing prices would not be able to survive without the generosity of family and friends abroad,” he said.

“Cash and digital transfers are made by millions in the diaspora every day. For these lifelines to increase and continue to flow smoothly, international banks, lawmakers and regulators need to work together in a fair, secure and transparent way with compliant indigenous remittance companies,” Duale added.

“Remittance services are keeping people alive in this time of unprecedented drought, exacerbated by the effects of climate change and conflict. - Abdirashid Duale, Dahabshil CEO

Reliable wages help more than the migrants who earn them

To support families back home, migrants need decent work, to be integrated into their host communities, to have access to services, and to have social protection. It is more difficult for undocumented migrants or those working informally to benefit from a stable source of income that will enable them to send remittances home. Efforts to provide documentation to migrants in host countries and promote access to decent work and social protection are crucial to foster their socio-economic integration, but also for them to support their families and communities back home. Migrants cannot contribute fully, nor can development be sustainable, if they are not treated with equality and inclusion, with their rights fully respected.

Sending remittances can also be difficult and costly. The Global Compact for Safe, Orderly and Regular Migration, in its Objective 20, calls on the global community to “promote faster, safer and cheaper transfer of remittances and foster financial inclusion of migrants”. The Sustainable Development Goals (SDG), adopted in 2015 as part of the UN Agenda 2030 for Sustainable Development, include a target aimed to lower the cost of remittances. However, in 2021, the average cost of sending $200 remained above 6 percent, twice the SDG target of 3 percent.

In Venezuela, for instance, remittances have been vital to poor families. “The reality that the country is living at the moment cannot be hidden. Most of the remittances are used to buy food, pay for services, buy gas for cooking and medicines,” said Carlos, a Venezuelan construction worker in San Martin, Colombia. Because of the lack of formal channels, Carlos has to pay a 20 percent commission to send remittances through informal channels. This money, which would be vital in alleviating poverty at home, only benefits intermediaries.

The lack of formal channels is also a serious issue in Afghanistan. With 5.9 million Afghans abroad according to mid-2020 UN Population Division estimates and 97 percent of the population at risk of sinking into poverty inside the country, remittances help struggling families survive. However, after the takeover of the government by the Taliban in August 2021, the United States froze USD $7 billion of Afghan reserves, while the International Monetary Fund (IMF) shut off the financing system. The country’s liquidity crisis has left the banking and financial system in disarray and remittances in a parlous state.

"Most of the remittances are used to buy food, pay for services, buy gas for cooking and medicines,” - Carlos, migrant worker

Even before the Taliban takeover, the informal hawala system dominated and now it is the only route for ordinary Afghans to transfer money. The hawala system is an informal method of transferring money, including across borders, through a network of money brokers. However, hawala has been linked to crime, money laundering and terrorism in Afghanistan and globally.

Harnessing the potential of remittances

When it is easier for diasporas to invest in, transfer knowledge to and support communities in their countries of origin, they can further contribute to alleviating the suffering of communities caught in crisis. Policymakers, regulators and remittance service providers have an important role to play in leveraging the effects of these flows. Investing in financial inclusion and entrepreneurial skills is key to helping remittance-recipient households make the most of this capital, especially in crisis-affected countries.

On the International Day of Family Remittances, UNDP joins its partners in the UN Network on Migration in calling on stakeholders, member states and international organizations to create the conditions that will facilitate the faster, cheaper and safer provision of international remittances.