Remittances by Emigrants: Issues and Evidence

This paper examines several developmental and financial dimensions of remittances from international migrants.

Remittances are a significant source of development finance for several developing countries. They support consumption levels of low-income families and constitute a direct source of finance for funding small, community–oriented investment projects. From a social point of view, remittances can have positive poverty-reducing effects. Properly mobilized remittances can contribute to increased investment in basic infrastructure, and in financing micro and small-scale firms.

Currently, the potential development impact of remittances is impaired by a costly, concentrated and inefficient international market. To increase competition and reduce costs in the remittances market, it is necessary to:

• Regularize migrants' legal status, making the migrant sector more attractive for formal financial institutions;
• Avoid extra burden on the sector, such as high license costs for new operators;
• Control money laundering;
• Develop better financial infrastructure to channel remittances;
• Leverage remittances on the recipient side by issuing remittance bonds and opening foreign currency accounts for migrant workers in the home country;
• Create education and housing accounts at home for migrants.