Africans are helping themselves with remittances; $60.5bn received in 2016

The amount of money migrants send to their families in developing countries has risen by 51 percent over the past decade – far greater than the 28 percent increase in migration from these countries, according to a new report released by the International Fund for Agricultural Development (IFAD) today.

Sending Money Home: Contributing to the SDGs, One Family at a Time is the first-ever study of a 10-year trend in migration and remittance flows over the period 2007-2016. While the report shows that there have been increases in sending patterns to almost all regions of the world, the sharp rise over the past decade is in large part due to Asia which has witnessed an 87 percent increase in remittances.

Despite the decade-long trend, Gilbert F. Houngbo, President of IFAD, said the impact of remittances must first be viewed one family at a time. “It is not about the money being sent home, it is about the impact on people’s lives. The small amounts of $200 or $300 that each migrant sends home make up about 60 percent of the family’s household income, and this makes an enormous difference in their lives and the communities in which they live.”

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Share of remittances by region in 2016
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Growth of remittance flows by region: 2007-2016

More than 200 million migrant workers are now supporting an estimated 800 million family members globally. It is projected that in 2017, one-in-seven people in the world will be involved in either sending or receiving more than $450 billion in remittances.  Migration flows and the remittances that migrants send home are having large-scale impacts on the global economy and political landscape.

Total migrant worker earnings are estimated to be $3 trillion annually, of which approximately 85 percent remains in the host countries. The money migrants send home averages less than one percent of their host country’s GDP.

 

Taken together, these individual remittances account for more than three times the combined Official Development Assistance (ODA) from all sources, and more than the total foreign direct investment to almost every low- and middle-income country.

“About 40 percent of remittances – $200 billion – are sent to rural areas where the majority of poor people live,” said Pedro de Vasconcelos, the manager of IFAD’s Financing Facility for Remittances and lead author of the report. “This money is spent on food, health care, better educational opportunities and improved housing and sanitation. Remittances are therefore critical to help developing countries achieve the Sustainable Development Goals.”

Transaction costs to send remittances currently exceed $30 billion annually, with fees particularly high to the poorest countries and remote rural areas. The report makes several recommendations for improving public policies and outlines proposals for partnerships with the private sector to reduce costs and create opportunities for migrants and their families to use their money more productively.

“As populations in developed countries continue to age, the demand for migrant labour is expected to keep growing in the coming years,” said de Vasconcelos. “However, remittances can help the families of migrants build a more secure future, making migration for young people more of a choice than a necessity.”

The report is released ahead of the International Day of Family Remittances commemorated annually on 16 June. Its analysis and recommendations set the stage for discussions at the Global Forum on Remittances, Investment and Development 2017 on 15-16 June at UN Headquarters in New York.

In Africa, where several families rely on handouts from family and friends living abroad, remittance flows grew to 36 percent. Europe is also the main source of remittances to several fragile states in Africa. However, more than half of all migrants from Africa send money within their home continent. Out of the US$60.5 billion received in 2016, close to 80 percent of remittances went to five countries: Nigeria (US$19 billion), Egypt (US$16.6 billion), Morocco (US$7 billion), Algeria and Ghana (US$2 billion each). For 19 receiving countries, remittances are critical, as they rely on these flows for 3 percent or more of their GDP. For six countries, remittances make up more than 10 per cent of their GDP: Liberia (31 per cent), The Gambia (22 per cent), Comoros (20 per cent), Lesotho (18 per cent) and Senegal (14 per cent).

Despite its reliance on remittances, transfer costs in Africa remain one of the highest averaging 10 percent, with South Africa at about 14.6 per cent – the highest in the world.

As remittances have grown by 36 percent over the last decade, so has migration at 29 percent. Africa has 33 million migrants, with about one half remaining on the continent. The pace of migration growth is similar to population growth, a trend that differs from other regions. Preferred destinations outside of Africa are Europe (especially southern Europe); followed by Gulf states, particularly from East African countries and Egypt; and the United States from a wide array of countries. Some African countries maintain particular ties to their former colonial power, with migration flows from Anglophone countries (Ghana, Nigeria) to the United Kingdom; from French-speaking countries (Algeria, Comoros, Côte d’Ivoire, Mali, Morocco, Tunisia, Senegal) to France; and from Portuguese-speaking countries (Angola, Cape Verde, Guinea-Bissau) to Portugal.

Intra-regional migrations are drawn to regional economic hubs such as South Africa for Southern African countries (2 million); Côte d’Ivoire (2 million) and Nigeria (1 million) for Western African countries; and, to a lesser extent, Ethiopia and Kenya for Eastern African countries.