Remittances to developing countries to reach $406 billion this year despite the global economic crisis.
Remittance costs remain high; promise of mobile remittances remains unfulfilled.
New remittance rules in the United States and Europe to increase market competition and consumer protection.
November 20, 2012 – International migrants are weathering the effects of the ongoing global economic crisis and are on track to remit $406 billion in savings to their families in developing countries in 2012, an increase of 6.5 percent over the previous year, says the World Bank's latest Migration and Development Brief, published today.
Remittances to developing countries are projected to grow by 7.9 percent in 2013, 10.1 percent in 2014 and 10.7 percent in 2015 to reach $534 billion in 2015.
Worldwide remittances, including those to high-income countries, are expected to total $534 billion in 2012, and projected to grow to $685 billion in 2015.
However, not all developing regions are faring well in 2012 as, three years into the crisis, migrant workers in high-income Europe are coming under pressure. Western European countries are major destinations for migrant workers from Sub-Saharan Africa and Europe and Central Asia. Remittance flows to the two regions decelerated this year, with remittances to Sub-Saharan Africa to remain flat at $31 billion and Europe and Central Asia to contract by 0.9 percent to $41 billion.
In contrast, remittance flows are continuing to grow strongly to South Asia, the Middle East and North Africa (MENA) and East Asia and Pacific regions, with large numbers of workers in the Gulf Cooperation Council (GCC) countries, where high oil prices are driving vigorous economic activity.
For South Asia, remittances in 2012 are expected to total $109 billion, an increase of 12.5 percent over 2011; East Asia and Pacific region is estimated to attract $114 billion, an increase of 7.2 percent over 2011; while MENA is expected to receive $47 billion, an increase of 8.4 percent over the previous year.
Remittances to Latin America and the Caribbean are supported by region-wide economic recovery and a moderately improving labor market in the United States, but moderated by a weak European economy. Given this, the Latin America and Caribbean region will likely see a more modest growth of 2.9 percent in 2012, totaling an estimated $64 billion.
Going forward, the Bank expects continued growth in remittance flows to all regions of the world, although persistent unemployment in Europe and hardening attitudes towards migrant workers in some places present serious downside risks.
Another obstacle to growth of remittance flows is the high transaction costs for remitting money. Remittance fees averaged 7.5 percent during the third quarter of 2012 in the top 20 remittance corridors, although there is substantial variation across countries. For example, in large remittance source countries such as the GCC, the United States and the United Kingdom, the average cost was around 5 percent, while in Germany it was 15 percent. The average remittance cost for Sub-Saharan Africa was 12.4 percent, the highest amongst all developing regions.
“Going forward, the Bank expects continued growth in remittance flows to all regions of the world.”
The Migration and Development Brief urges action to fulfill the promise of mobile remittances, which has great potential, given the skyrocketing use of mobile telephones throughout the developing world. Cross-border mobile remittances could expand access and lower costs, but have not taken off due to a variety of regulatory and operational challenges. Mobile remittances fall in the regulatory void between financial and telecom regulations, with many central banks prohibiting non-bank entities to conduct cash-in and cash-out services. Central banks and telecommunication authorities, thus, need to come together to craft rules that will facilitate branchless banking.
As a key player in the migration and remittances arena, the World Bank is working on a new initiative, the Global Knowledge Partnership on Migration and Development (KNOMAD), which is aimed at facilitating multidisciplinary debate and discussion on migration issues, developing policy options, and assisting sending and receiving countries implement pilot policies.
The Bank is working to develop financing instruments for leveraging migration and remittances for national development purposes. For example, diaspora bonds can be a powerful financial instrument for mobilizing diaspora savings to finance specific public and private sector projects, as well as to help improve the debt profile of the destination country. The Bank has set up a Diaspora Bond Task Force to provide technical assistance to countries interested in implementing diaspora bonds for financing development projects.