Migrant workers pay too high fees to send money
17 November 2005, WASHINGTON - Hard-working migrants are sending billions of dollars home to their families in Eastern Europe, the Middle East and elsewhere - twice as much as three years ago, and twice as much as formal development aid.
17 November 2005
WASHINGTON - Hard-working migrants are sending billions of dollars home to their families in Eastern Europe, the Middle East and elsewhere - twice as much as three years ago, and twice as much as formal development aid.
But the World Bank, in a study released Wednesday, says they are paying too much of their earnings to transfer the money - from 10 to 15 per cent - and called for more competition and better bank services to bring down the costs.
In a proposal that could generate some controversy, the Bank also proposed that issuing identification cards to migrant workers - a move already made by some individual states in the U.S. - could give them cheaper access to formal banking services for the transfers.
An estimated 200 million guest workers will send about 167 billion dollars home to developing countries this year, representing a "powerful force for poverty reduction", according to Francois Bourguignon, World Bank chief economist.
Another 65 billion dollars is sent back to developed countries like France, Spain and Germany, but the remittances there have less of an impact in terms of share of gross domestic product.
Remittances sent to developing countries have a much bigger affect: in Tonga, remittances make up 31 per cent of GDP; in Moldava, 27.1 per cent; in Lesotho, 25.8 per cent and in Haiti, 24.8 per cent.
In decreasing order, other countries that benefit most from remittances include Bosnia and Herzogovina (22.5 per cent of GDP), Jordan, Jamaica, Serbia and Montenegro, El Salvador, Honduras, Philippines, Dominican Republic, Lebanon, Samoa, Tajikistan, Nicaragua, Albania, Nepal, Kiribati in the Pacific Ocean, and Yemen (10 per cent of GDP).
Another 50 per cent beyond the 167 billion dollars flowing to developing countries could also be transferred through unofficial channels that could not be documented, said World Bank economist Dilip Ratha.
"The challenge facing policymakers is to fully achieve the potential economic benefits of migration, while managing the associated social and political implications," Bourguignon said.
Migrant remittances have been directly associated with declining poverty in countries like Uganda, Bangladesh and Ghana. "They are also associated with increased household investments in education and health, as well as increased entrepreneurship," the Bank said.
The World Bank said that poor migrants and their families back home need access to formal financial services for sending and receiving the money. It called for expansion of banking networks, permission for domestic banks in origin countries to operate overseas, and participation of micro-finance institutions and credit unions in the transfers.
India, which in pure dollar amounts receives the most remittances from abroad, with 21.7 billion dollars, and Mexico, which received the third highest amount, 18.1 billion dollars, and the Philippines, the fifth highest with 11.6 billion dollars, have already moved ahead on that front.
The governments there have opened the postal system to increase competition, and it's even possible to transfer money using cell phone text messages. Mexico in fact issues identification cards to its migrant workers abroad so they can open bank accounts in the United States.
The World Bank conceded that some "regulation is necessary to curb money laundering and terrorist financing", but warned against receiver countries trying to tax the inflow.
The bank also warned that migration "should not be viewed as a substitute for economic development in the origin country".
The other top remittance recipient countries, in terms of actual dollars, include China, ranking second with 21.3 billion dollars; France, ranking fourth with 12.7 billion dollars; Spain, sixth with 6.9 billion dollars; then Belgium, Germany, United Kingdom, Morocco, Serbia, Pakistan, Brazil, Bangladesh, Egypt, Portugal, Vietnam, Colombia, United States and Nigeria.
Subject: German news