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Grass-roots Giving: Increasing the power of the individual remittance
4 March 2010
The trend of migrant workers sending money to loved ones is one of the truest forms of grass-roots poverty reduction. It's also one of the most effective means of aid directly reaching those in need - although, of course, as remittances are a personal arrangement, you need to have links abroad to be a beneficiary. Nonetheless, it can't be denied that such payments are making a significant difference to the lives of many of the world's poor people. Latest figures suggest that 300bn USD are sent in remittances each year.
However, a report by the UN's rural poverty agency, the International Fund for Agricultural Development, suggests that the restrictive laws and high costs surrounding people-to-people money flow hamstring the true potential of remittances as a cure for poverty. Particularly in Africa, the cost of sending money home is extremely high - in some cases up to 25% of the amount sent.
There is a further problem of accessibility. Payout locations are very scarce across Africa in particular, and those in rural areas often have to pay money, to get to where they can collect their money. And remittances are particularly important to rural communities, says IFAD, since they receive 30-40 per cent of remittance flows.
Nonetheless, some simple changes could make dramatic improvements. The G8 leaders last year pledged to make remittances easier, both by promoting competition and removing barriers. In addition the IFAD report advocates increasing the different kinds of institutions which can provide remittances services, such as microfinance institutions and post offices. In Algeria, this has taken off rapidly: around 95% of remittances are now paid through the post office.
Non-traditional donations of this sort are not only vital in terms of the global war on poverty. They show the determination of individuals to lift their own families and communities out of want, not to mention the spirit of generosity and altruism the donations represent. As a vital - and internally motivated - tool in the aid arsenal, remittances deserve to be taken seriously from a regulatory point of view.
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