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A blog about migration, remittances, and development

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This blog is hosted by Dilip Ratha, lead economist at the World Bank. Its goal is to leverage migration and remittances for development.  
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December 2008

International Migrants Day: the role of women

Submitted by Sonia Plaza on Thu, 12/18/2008 - 19:40

On this International Migrants Day, I would like to focus on female migrants and labor migration policies that affect them.

I took a one day field trip to Arlington, Virginia last summer to observe how international migrant women contribute to development in their home countries, particularly through remittances and tapping the skills of diaspora communities.

It is evident that women (young and old) send remittances often to their home countries. Several of my younger friends from El Salvador, Guatemala, Honduras and other Latin American countries do this. In the case of African countries, I noticed that older women tend to send money to their countries.  They continue to work in order to support their families, even though it might be time for them to retire. 

Case study evidence of migrant labor market performance in receiving countries shows that most immigrants from developing countries, regardless of their destination, suffer an earnings penalty and higher inactivity levels and unemployment rates than nationals.  Additionally, recent arrivals from developing countries to developed ones face lower earnings and greater competition in labor markets, relative to more established immigrants. Unemployment rates for immigrants originating from developing countries are uniformly higher than those from more developed economies. This gap is more pronounced for women than men across all skill levels. The highest unemployment rates are encountered by immigrants from Africa, the Middle East, and Turkey.

International Migrants Day: How are international migrants perceived in destination countries?

Submitted by Neil Ruiz on Thu, 12/18/2008 - 19:27

Today marks the celebration of the unquestionable contribution and sacrifices that many international migrants make to both destination and origin countries.  Migrants work hard, fill jobs that are needed, and send a large portion of their earnings to support their families at home.  Despite all of their contributions, native populations’ opinion and the policies developed by their governments continue to be mixed. 

As the new US President gets inaugurated next month and as the EU continues to work on developing its immigration policy, it is interesting to see what the natives in destination countries think about migrants.  A recent study by the German Marshall Fund of the United States shows that 47% of Europeans and 50% of Americans perceived immigration to be more of a problem than an opportunity.  Of all European countries, the United Kingdom is the most skeptical on immigration in Europe. Over 62% of UK respondents regarded immigration as more of a problem than opportunity.  Furthermore, over 64% of respondents.  A large majority of people in the US and the United Kingdom believe that immigrants take away jobs from natives and also immigration increases tax rates.

  • With these opinions on immigration, how will immigration policies be shaped in the coming year?
  • Will the British develop unfriendly policies towards the migrants who compose 10% of their overall population?
  • Will negative perceptions of immigrants continue to grow as the global recession continues to hurt the US and European economies?

As the economic crisis deepens, migration and remittances has become even more important for development

Submitted by Dilip Ratha on Thu, 12/18/2008 - 18:28

Today is International Migrants Day. Standing in the middle of a global crisis, worried that many countries facing harsh economic realities might make matters harsher for migrants, let me reiterate a few points that I have made before:

1. By and large, people don’t like moving, so let’s not worry that they will flood our gates.
2. Migration benefits all parties. So, if people do come through our gates, we will benefit as a result. 
3. We can do a few things to increase the benefits and reduce the costs associated with migration.

First, by and large, people don't like moving. Most people prefer to live and die where they are born. Worldwide, international migrants number about 200 million. That is only about 3% of the world's population. Migration is rather painful for the migrants and their families. Therefore, migration is more an exception than a rule.

Contrary to popular perception, most of these migrants are not living in the rich countries of the so-called “North”. Indeed nearly half of the migrants from the developing countries live in other developing countries. Such “South-South” migration is actually larger than the size of migration from developing countries to the high-income OECD countries.

Also, contrary to the perception that migrants are mostly asylum seekers or refugees, over 90% of the migrants are economic migrants. People don’t like to move; but when faced with severe poverty and unemployment, a minority of them might move to find employment in foreign countries. By moving, the migrants not only help themselves and their families back home, but also they help their employers in the country of destination.

Are there new innovative financing mechanisms in the fast lane?

Submitted by Sonia Plaza on Wed, 12/17/2008 - 15:46

The UN Conference on Financing for Development (FfD) took place in Doha, Quatar from November 30th through December 2nd. The World Bank,  Agence Française de Développement (AFD) and the Bill and Melinda Gates Foundation jointly organized a side event on "Lessons for Practitioners: Innovative Financing for Development."

The main objective of this session was to discuss how innovative financing mechanisms and instruments can be better tailored to the needs of developing countries and make development finance more effective.

For long-term growth and poverty reduction, developing countries need both “smart” public finance-based mechanisms and innovative “market-based” (i.e., private-to-private) financing instruments.  In the current crisis situation, facilitation of cross-border capital channeled to the private sector is of particular significance.

The panelists shared experiences and perspectives on the use of innovative financing using market-based and public finance-based financing tools, and public-private partnerships. They also discussed the role of various stakeholders and facilitators including bilateral and multilateral institutions in the development and promotion of these instruments. In light of the scarce resources available for developing countries:

Public-Private Partnership Reduces Remittance Fees

Submitted by Tomas Martin Ernst on Tue, 12/16/2008 - 10:05

Pacific Islanders have long faced limited choices and exorbitant fees when transferring money to families and friends. Following numerous focus groups and two high-level public-private stakeholder dialogues convened by the World Bank in Sydney, an inter-governmental body was established in Wellington to address the high costs of remittances in the Pacific. It was tasked with identifying public policy solutions and coordinating actions with New Zealand's financial industry.

Close collaboration between the NZ Ministry of Justice and Police, Reserve Bank of NZ, NZAID, the Ministry of Pacific Island Affairs and the World Bank brought forward a progressive change in domestic regulation, with NZ Parliamentarians approving a modification to the Financial Transactions Reporting Act. The response from industry was immediate. Westpac, a major commercial bank in the Pacific region, in partnership with VISA International, launched a low-cost, prepaid card (Westpac Express VISA Card) on December 1st in Auckland. It will significantly reduce the costs of sending money from the current level of 15 to 40 percent down to 3 to 4 percent!!

Closing one door and opening another: New migration from the South

Submitted by Sanket Mohapatra on Fri, 12/12/2008 - 17:41

One is used to seeing leaders of developing nations asking rich countries for aid and debt relief, requesting preferential trading arrangements, and courting western foreign investors. Making a case to a firmly middle-income country to take in their workers is perhaps something new! 

The President of Bangladesh recently requested Romania to recruit skilled and semi-skilled Bangladeshi workers as a way to contribute to the Romanian economy. Middle-income developing countries such as Romania and Poland that benefited from the opening of EU labor markets have been facing chronic labor shortages (although that might change if their own emigrants in the UK, Ireland and elsewhere return in large numbers) and are now viewed as a potential new labor market destination for poorer developing countries.  

The Central Bank of Bangladesh has reported that remittances are an important source of external finance, amounting to nearly $8 billion in the 2008 fiscal year. While more than half of this came from high income countries in the Gulf, there are some signs that the region has reduced worker recruitment from Bangladesh this year. Neighboring Nepal (expected to receive $2.3 billion in remittances in 2008) has experienced a fall in the number of workers going abroad in September and October. 

Will international money transfers through mobile phones reduce remittance costs?

Submitted by Sanket Mohapatra on Tue, 12/09/2008 - 13:45

Vodafone and Western Union announced a partnership that will allow cross-border remittances between the UK and Kenya through mobile phones, according to the Wall Street Journal (the pilot project is initially for residents of Reading in the UK but will be expanded in future). Safaricom subscribers in Kenya can choose to either withdraw the cash at any of the 4,000 M-Pesa agents, store upto 50,000 Kenyan Shilling (about $640) in their "mobile wallet", or even send it on to another mobile user. The FT adds that the maximum amount that can be transferred internationally is GBP 200 (about $300).

The price Kenyan migrants will have to pay for the convenience of being able to send money to relatives and friends back home through their cellphone is not low. The cost of sending GBP 100 would be GBP 4.90, i.e. about 5 percent of the transfer amount, and GBP 6.90 for sending larger amounts. This is lower  than the average fee of GBP 8.32 (exclusive of foreign exchange commissions) for sending a similar amount through a bank or money transfer firm from the UK to Kenya, but a staggering 40 to 55 times larger than the cost of a transfer through M-Pesa's domestic mobile money transfer service.

Apart from the convenience factor, unless prices come down to comparable levels - or at least somewhat closer to the cost of sending money domestically - there is still a long way to go before the potential of international mobile money transfers can be realized.       

The Driver from Djibouti: From Doha to Dukhan

Submitted by Dilip Ratha on Wed, 12/03/2008 - 20:09

You can only see Ismail’s profile  in the BMW he is driving on a desert highway stretching from Doha to Dukhan. He speaks French. I don't. So he says, in English, pointing to the beautiful homes along the way, "those are the new houses of the big people from Doha."

The car radio is tuned to QBS Country, a station that plays American country music on Qatar Broadcasting Service. "Is there any Qatari music on the radio?" I ask. Ismail fiddles with controls, but after a while, QBS Country is back on. The desert wind hums and whistles as Alan Jackson sings, "Don't rock the jukebox...."

"How long have you lived here, Ismail?"

"Eighteen months," says Ismail. "Too long."

Eighteen months is indeed a long time for migrants in Doha, but the desert land of Qatar has become an oasis for migrants. Relatively speaking, it is by far the largest destination for migrants in the world. 

"Do you send money home, Ismail?"

Ismail turned around to briefly look at me. He thought for a moment, and said, "Yes, about $300 each month."

"How much do you make, if I may ask?"

"Money is good. About $550-600 a month." he said nonchalantly.

Four  out five persons in Qatar is a migrant, implying that for every adult Qatari male, there are about 8 migrants! Three out of four migrants are men, mostly unskilled. Like many neighboring countries, Qatar does not publish data on outward remittances.

Mexico remittances increase as the Peso weakens

Submitted by Sanket Mohapatra on Tue, 12/02/2008 - 12:07

The Mexican central bank's latest data release shows that remittances to Mexico increased by 13 percent in October on a year-on-year basis. This comes after a widely-reported 12 percent year-on-year drop in August and (less widely reported) flat growth in September. 

A recent AP article attributes this increase to the depreciation of the Mexican Peso against the U.S. dollar:

"The U.S. dollar has gained 34 percent against the peso since Aug. 1 as investors shed developing world assets and fled to the relative safety of the greenback. That stronger dollar means money sent home buys much more in Mexico...."

Such an exchange rate change can have a large impact on remittances received in local currency, helping to preserve the purchasing power of often poor recipients (noted in our latest brief on remittances).

It is interesting that this Peso depreciation comes after several years of currency appreciation that eroded the purchasing power of each dollar of remittances received (see chart).  Earlier this year we found that although remittances to Mexico, India and the Philippines increased substantially in nominal dollar terms between 2004 and 2007, after accounting for exchange rate changes and domestic inflation, the increases were much smaller for the remittance recipients.