Remittances -- A Unique Segment of the Global Financial System
2017 demonstration in the Philippines demanding an
end to government's labour
export policies.
Remittances -- the billions of dollars sent by
migrant workers to their home countries -- make up
a unique segment of the global financial system.
This segment accounts for more than five per cent
of Gross Domestic Product (GDP) for at least 60
low- and medium-income countries -- more than the
total of foreign direct investment or official
development assistance handed out by governments
of the so-called developed world. In 2019, the
remittances to these countries hit a record $554
billion, according to the World Bank, with 200
million migrant workers in 40 countries, such as
Canada, sending home funds to support 800 million
relatives in more than 125 developing nations.
 Half of the
receiving families live in rural areas where
remittances count the most, said Gilbert F.
Houngbo, President of the specialized United
Nations agency called the International Fund for
Agricultural Development (IFAD). Houngbo is a
former Prime Minister of Togo who has led IFAD
since 2017. He told UN News that with the onset of
the COVID-19 pandemic, the World Bank projects
that cross-border remittances will fall by 20 per
cent, or $110 billion, to $445 billion,
"potentially pulling tens of millions below the
poverty line while undermining progress towards
fulfilling the 2030 Agenda for Sustainable
Development."
With no recovery anticipated for 2020, it is
predicted that savings will be depleted and local
conditions will worsen. Remittances are not
expected to return to pre-pandemic levels for some
time, Houngbo told UN News via e-mail. "While the
reduction in remittances will not fall evenly on
all families, nor across all continents, societal
impacts will be substantial and sustained," he
explained.
In response, Switzerland and the United Kingdom
-- joined by several other UN Member States, the
World Bank, the United Nations Development
Programme (UNDP) and other UN agencies and
industry groups -- issued a global "call to
action" on May 22 to ensure that migrant workers
and diaspora communities can keep sending back
money in ways that can also improve the remittance
system. The UN agency report says: "The call urges
policymakers not only to declare the provision of
remittances as an essential public service, but
also to support the development of more efficient
digital remittance channels. To regulators, it
asks that they provide guidance for
'know-your-customer' requirements, that are
critical for scaling up digital financial
services, particularly for undocumented persons
with no access to a bank account.
"And it encourages remittance service providers
to explore ways to ease the burden on their
migrant customers by lowering transaction fees,
which now average 6.8 per cent worldwide, more
than [twice] the target set in the Sustainable
Development Goals, according to the World Bank's
most recent Migration and Development Brief."
"Remittances are a lifeline in the developing
world -- especially now," said U.S.
Secretary-General António Guterres on March 19.
"Countries have already committed to reduce
remittance fees to three per cent. The crisis
requires us to go further, getting as close to
zero as possible."
For its part, the IFAD says it is partnering with
financial technology firms, mobile operators,
commercial banks and postal networks, to integrate
digital solutions to improve remittance transfers
to rural areas. In addition to its Financial
Facilities for Remittances initiative, it is
strengthening the ability of rural families to
weather tough times through financial literacy and
planning programs, among other capacity-building
efforts. For the past 15 years, the focus of
international attention on remittances has been on
the "sending side," particularly high transaction
costs.
"We need to emphasize, however, that the
development impact of remittances is really on the
receiving end -- where, at this time, families are
struggling with the sudden disruption of their
economic lifelines," Houngbo said.
The fees banks and financial institutions charge
to send them make remittances a hugely profitable
business. It was to make sure this small fortune
would be channeled through City Bank that after
9/11 the U.S. passed anti-terrorist financing
legislation which targeted community-based money
transfer systems calling them terrorist
organizations. The financial institutions collect
these fees in the name of high ideals as one of
the ways to benefit from the enslavement of the
oppressed countries of Asia, Africa, Latin America
and the Caribbean and to perpetrate their
enslavement.
According to a report by the Organization for
Economic Co-operation and Development (OECD),
approximately three per cent of the world's
population resided outside their home country in
the year 2000. "A more integrated and globalized
world has allowed labour movement between
countries to become more fluid, with more and more
workers moving abroad to seek ways to provide for
their families. Thus, immigrants who seek to send
back remittances have become an integrated part of
the economy," the OECD writes.
June 16 has been dubbed International Day of
Family Remittances by the UN. The aim is not to
end the enslavement of entire countries by the
international financial institutions but to call
on those institutions not to charge interest on
the sending of remittances or lower it to no more
than three per cent.
This article was published in
Volume 50 Number 33 - September 5, 2020
Article Link:
Remittances -- A Unique Segment of the Global Financial System
Website: www.cpcml.ca
Email: editor@cpcml.ca
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