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Remittance flows to developing countries remained resilient in 2009, expected to recover during 2010-11

Dilip Ratha's picture

We have just released Migration and Development Brief 12 reporting the latest estimates of remittance flows for 2008-09 and forecasts for 2010-11.  Officially recorded remittance flows to developing countries reached $316 billion in 2009, down 6 percent from $336 billion in 2008. With improved prospects for the global economy, remittance flows to developing countries are expected to increase at 6.2% in 2010 and 7.1% in 2011, a faster pace of recovery in 2010 than our earlier forecasts.

The decline in remittance flows to Latin America that began with the onset of financial crisis in the United States appears to have bottomed out since the last quarter of 2009. Remittance flows to South Asia (and to a smaller extent, East Asia) continued to grow in 2009 although at markedly slower pace than in the pre-crisis years. Flows to Europe & Central Asia and Middle-East and North Africa fell more than expected in 2009.

These regional trends reveal that: (a) the more diverse the migration destinations, the more resilient are remittances; (b) the lower the barriers to labor mobility, the stronger the link between remittances and economic cycles in that corridor; and (c) exchange rate movements produce valuation effects, but they also influence the consumption-investment motive for remittances.

The resilience of remittances during the financial crisis has highlighted their importance in countries facing external financing gaps. Remittances are now being factored into sovereign ratings in middle-income countries and debt sustainability analysis in low-income countries. Countries are also becoming increasingly aware of the income and wealth of overseas diaspora as potential sources of capital. Some countries are showing interest in financial instruments such as diaspora bonds and securitization of future remittances, to raise international capital.

Risks to the outlook presented in the Brief include persistently high unemployment rates in high-income countries, unpredictable movements in exchange rates and oil prices, and rising anti-immigration sentiment in some destination countries.


Submitted by Anonymous on
Dear Dilip, Thanks a lot for this awaited report. There is one point I would like to ask further explanation from you. You promote diaspora bonds and securitization as a way for diasporas to invest in their countries of origin. The proceeds you wrote will be used to "support balance of payments needs and finance infrastructure, housing, health, and education projects. This was done in Israel (many years ago) and India. Other countries might follow suit. Also I think we have to look at the historical context why Israel diasporas participated in diaspora bonds. We cannot presume that this will happen in other countries at the present context. You think linking remittances with microfinance institutions while serving underserved customers is laudable but the idea is less appealing because as this involves one set of poor people subsidizing another set of poor people. There seems to be inconsistencies in what you wrote. First, mobilizing diasporas to partner with MFIs is not necessarily through donation or subsidies. They can also invest in MFIs in social enterprises the same line as what you envisioned in diasporas bonds. This is being done in the Philippines now and in Bangladesh. Second, why is it less appealing for diasporas to partner with MFIs to serve the poor. What about diaspora bonds? Who is the target group of diasporas bonds? Are they not also the poor who need education, housing, infrastructure such as farm to market roads, etc? Introducing diaspora bonds would meet more challenges than working with MFIs. The described very well the reason. MFIs on the other hand are closer to people and they are proven time and time again that they are move efficient in delivering financial services to remote areas than formal banks and even in some instances, governments. Kindly clarify because your statement about MFIs is for me misleading considering that there are MFIs now providing remittance-based products to diasporas and their families, and this includes investing in social enterprises. I would appreciate receiving explanation from you. Leila Rispens-Noel Senior Advisor International Network of Alternative Financial Institutions

Submitted by D Phillips on
I am doing research on remittances in relation to a book. Please could you point me to recent research on the use of remittances in non-real-estate investment - e.g. agriculture, small business, commerce, bsnking (microfinance or mainstream). Also please could you suggest some good stuff on direct investment by diaspora based firms in home country commerce and industry. Thank you - I would be most appreciative

Submitted by Roberto Pitea on
If you are still interested, we recently launched a series of studies on migration and development in Egypt, looking at use of remittances for investment (not only real estate) but also Egyptian entrepreneurs in Italy. You can download these studies free of charge here Best regards Roberto

Submitted by A. Tebeje on
Women Migrant Workers Hello/Bonjour, Dilip Ratha: Speaking of remittances, I would like to refer to women migrant workers, more specifically, African domestic workers in the Diaspora. Please note that my story is based on anecdotal stories. However, if studied carefully, these individual stories will make up robust baseline and, hopefully, provide rationale for an overdue action by your organization, the ILO, the U.N. or others. I am speaking of young, migrant workers who go to the Middle East as domestic workers. As these young migrant workers continue to leave in droves, stories of sexual exploitation, including rape, molestation, unwanted pregnancy, mysterious deaths, physical abuse, including merciless beatings, burning with oil or water, falls from high rises that result in death or disability, denial of wages, humanly impossible working hours are slowly coming out of the Middle East. It must, however, be recognized that these migrant workers, who are members of the growing African Diaspora, have an important economic role. While the Diaspora doctors and engineers have a role in institutional capacity building, the migrant domestic workers are the ones that keep families alive, even thriving. Migrant domestic workers give families an enormous purchasing power. They are the major source of remittances as they faithfully send money to feed and clothe extended families, send siblings to school, cover medical expenses for parents and grandparents, pay for weddings and funerals. Many even manage to buy a family home or a business, a status symbol of a successful Diaspora woman. With the increasing population of African women in the Diaspora, there is a sign of the lessening of poverty among families. The remittances from these women get directly into the hands of their families and are used for basic necessities. With a daughter in the Middle East or Europe or North America, as a domestic worker, a family is almost guaranteed of its daily food, clothing and shelter. It can, therefore, be said that the death of a domestic worker in Beirut equals the economic death of a family in Addis Ababa. Or, the return of a pregnant, disfigured or mentally disturbed domestic worker is a burden of enormous proportion to a family which has lost its main source of support. As more of these young women are reduced from bread-winners to dependents, the scope and severity of poverty among families deepen. As more families become poorer, the vicious circle of poverty and dependence continues. Ainalem Tebeje Ottawa, Canada

Submitted by Hazem Elhagrasey on
Hello Dilip, It seems from your data that Russia is now or has been for a year or so the 2nd largest remittance market in the world. Can you confirm that? Do the Russian numbers include domestic remittances or is there any other reason why they would not be counted as the 2nd largest market? I am just curious as this would mean Saudi has now slipped to 3rd... Thanks for the valuable work you do. Hazem Elhagrasey Head of Remittances AlRajhi Bank, Kingdom of Saudi Arabia

Submitted by Ani on
Dear Hazem, You raise a very interesting question, which is addressed in the following blog post: regards, Ani.

Submitted by Anonymous on
How often is this report released / are these projections updated? Thanks and great report!

Submitted by Dilip on
We tend to publish this report twice a year, in October/November and then in March/April. But we do that only if we have useful data and analysis to report. Thanks for reading it. Dilip

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