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Remittances the fact of Migration and Development

Remittances are in effect a share of the additional output created by the productivity gains which migration delivers. The flow of remittances is primarily a function of the numbers of migrants, the amount of money they earn, and their propensity to remit. Remittances can provide developing countries with large injection of resources, enabling them to narrow the trade gaps, increase foreign currency reserves, service their debts, and make progress in reducing poverty and achieving sustainable development. From a report of World Bank, it has come out that a ten percent increase in the share of international remittance in a country’ GDP will lead to a 1.6 percent decline in the proportion of people living in poverty[1]. Remittances are a particularly valuable source of finance for developing countries because they tend to be more stable and predictable than other financial flows such as FDI and portfolio investments. Besides, remittances tend to be counter-cyclical, providing some buffer against economic shocks, because migrants send more money home when their families and communities are in need.
For individual remitter
For host country of remitter
Ø  Strengthen ties with former home
Ø  May repay financial and other debts at home
Ø  Risks being an excessive drain on often meager disposable incomes
Ø  Relatively small leakage from developed countries (migrants on average remit a small percentage of total income earned)
Ø  May serve as indirect compensation for brain drain

For recipients of remittances
For country receiving remittances
Ø  Increased incomes
Ø  Access to goods that migrants send or bring with them
Ø  May fund increased human capital investment (e.g. education for family members)
Ø  May provide capital for entrepreneurs
Ø  Remittances may provide insurance against risk
Ø  Steady remittance income may act as economic distinctive
Ø  Important source of foreign exchange
Ø  May boost financial sector and investment
Ø  May push exchange rates up decreasing export competitiveness
Ø  May help to alleviate poverty, especially in particular regions or during emergencies
Ø  Opportunities for leveraging loans using expected remittances
Ø  Migrants visiting home may bolster tourism and related industries
Ø  Migrants demand for nostalgia products may create new export markets for domestic industry
Ø  Migrants may help fund relief, development or community organizations

[1] International Development Committee, ‘Migration and Development: How to Make Migration Work for Poverty Reduction’ Sixth Report of Session 2003-2004(The Stationary Office Limited:London,2004) p.56