Remittances for Development

Offering an option for migrants to contribute with their remittance payments to the development of their countries of origin

The volume of remittances that are transferred by migrants into their countries of origin is growing. The World Bank estimates that over 240 billion Dollars of formal remittances were transferred in 2007 – which is more than twice as much of the worldwide development aid.

In the recent past it was recognised in international development policy that remittances by migrants could contribute immensely to the development of their countries of origin. Currently one obstacle consists in the existing options for the money transfer. These are not only costly for the sender but in many cases also intransparent. At the end less money (between 10% and 30%) reaches the beneficiaries. In many cases migrants make use of informal channels to transfer money. Through the development of alternative transfer mechanisms additional options are created which can offer the sender and the recipient significant benefits.Thereby three components are activated that address the difficulties on the side of the sender, the transfer mechanism itself and the side of the recipient of remittances.
 

Addresses the sender (e.g. migrants in Germany). One important task is to inform migrants about existing alternative mechanisms and to motivate them to contribute to the development of their countries of origin. The sender has the opportunity to decide, if and how his money should contribute to the economic and social development of his family and country of origin. With this additional options for the use of the money are opened up.

An alternative transfer mechanism should be at a lower price and should guarantee the sender transparent processes. A microfinance bank as a partner in the recipient country strengthens particularly the sustainability of the remittances. With the inclusion of local banks additional options are offered to also transfer money into rural areas.

With an own banking account the recipient of the money will be included in official financial systems and is able to participate more actively in economic processes. Additional services and products such as tuition fees, co-financing of housing constructions or guarantee items for credits for the set-up of small trade enterprises will open up new opportunities for the recipient.

 

Here you can find information about a concrete project on remittances.