by Awesome Author | Jul 28, 2019 | Credit Cards & Payment Systems
My parents are back home. My wife is back home. My grandmother is back home. My son is back home. Speak with almost any immigrant, and you’ll find that nearly all are sending money to their families in their home country. Often moving for the hopes of a better life, the lives of those they have left at home are not forgotten.
The International Day of Family Remittances (IDFR)
The International Day of Family Remittances (IDFR), adopted by the United Nations General Assembly and celebrated annually on the 16th of June, recognizes the contribution of over 200 million migrants to improve the lives of their 800 million family members back home and to create a future of hope for their children. The day serves to bring awareness to the positive impact these contributions have on the local communities, countries, and even entire regions.
What is a remittance?
A remittance is a sum of money sent abroad and typically used to pay family members back in a person’s home country. These payments are usually sent by mail but can be sent via wire transfer or through increasingly common apps/services. Tracking remittances is difficult due to many countries’ lack of records and the fact that only funds sent through formal channels are included; however, economists at the World Bank estimate that over $690 Billion was sent by migrants to individuals in their home countries in 2018.
Not All Remittances Are Created Equal
In raw numbers, India and China send the most money back home, almost $63 Billion and $61 Billion respectively; however, when looking at the impact remittances have on their home country, it’s necessary to identify the relative value of the payments vs. the home nations GDP. For example, as referenced in the previous paragraph, India received almost $63 Billion in remittances in 2017; however, this only accounts for 2.8% of India’s $2.3 trillion GDP. Contrast this with El Salvador and Nepal, whose remittances were equivalent to 17% and 28% of their GDP respectively: what an impact! You can already see how large of a role these payments can and do play in their home countries.
Remittances Fighting Poverty
It’s estimated that over half of all remittance flows go to rural areas, where poverty and hunger are concentrated. But do these payments actually have as much of an impact as we think? Well, studies have shown that a 10% increase in remittance can reduce the poverty rate by almost 4%! Despite these statistics, not everyone thinks remittances are as beneficial as they claim to be.
Image Credits: Pixabay
Remittances: Benefit or Detriment?
Many officials argue that remittances have not been proven to spur economic growth in the home countries. In fact, the data supports this claim by estimating that a majority of remittance payments are spent on consumption vs. any developmental project. Additionally, some say that remittances encourage individuals not to work by providing a safety net. In Gambia, where remittances account for roughly 20% of Gambia’s GDP, not everyone believes this to be beneficial. Renowned Gambian academic, Dr. Ismaila Ceesay, argues that a large amount of remittance comes at a huge cost to Gambians by creating a dependency and leaving workers unproductive: “Many Gambians don’t want to work anymore. Because they know that somebody is going to send money.” While the overall economic impact of remittances on a home country’s economy is hotly debated, it’s difficult to argue the positive impact these payments have on an individual or family.
We often lose sight of the economic disparity in the world and how even small amounts of money can change lives. As Gilbert F. Houngbo, President of the International Fund for Agricultural Development said: “It is not about the money being sent home, it is about the impact on people’s lives. The small amounts of $200 or $300 that each migrant sends home make up about 60 percent of the family’s household income, and this makes an enormous difference in their lives and the communities in which they live.” Let us celebrate the contributions made by these individuals, as they work hard to build a better life not just for them, but for those they left behind.
This article by Miquel Sousa was previously published on SendFriend
About SendFriend:
In the aftermath of the devastating earthquake of 2010 hit Haiti, our founder, David, was a young analyst at the Office of the Special Envoy to Haiti at the World Bank. He witnessed firsthand the resilience and strength of the worldwide Haitian community, as Haitians around the world sent home over $2 billion to support their loved ones in their time of need.
However, as Haitians stepped up their financial support, David saw money transfer companies charge exorbitant fees, north of 7% for people to send money home.
Visits to the Philippines exposed David to the global nature of this problem. As a student at MIT, he was inspired by blockchain technology and guided toward it by Professors and technologists as a potential solution to the high cost of international remittances. The result was SendFriend.
Featured Image Credits: Pixabay
by Awesome Author | Aug 26, 2018 | Blockchain, Credit Cards & Payment Systems
Blockchain Remittance
Blockchain remittance firms are experiencing record growth thanks to an increase in global migration. As populations continue to migrate, the need to send money back to their home countries is growing. Blockchain remittance firms are providing this essential service at a reduced rate.
These international payments are vital to the livelihood of millions of people around the world. They’re primarily used for living expenses such as food, transportation, and education. Making these statements more tangible, East Asian countries received $129 billion in remittance payments last year according to the World Bank.
Remittance Stats
A recent study revealed that the remittance sector has grown to a staggering $585 billion industry. In 2017 alone, $439 billion was sent to developing countries, equating to around 700 million families living off of remittance payments globally.
Remittance payments have also become the main source of foreign income for many nations. According to a May report in Forbes, Mexico’s remittance payments have now superseded their oil industry to become the country’s main source of foreign income.
Mexico isn’t alone in their dependence on remittance payments. The World Bank released their 2016 remittance statistics in April of this year. The report revealed that remittance payments are now more stable than private capital flow in terms of international growth. This means that the remittance industry could be a smart investment in most parts of the world.
The High Costs of Sending Remittance Payments
Sending money internationally isn’t cheap, and non-profits such as the World Bank have been combating these high fees for years. Since 2008, remittance fees have declined 7.32 percent. This decrease saved migrants $90 billion in fees over the same time frame.
Whenever someone sends money internationally, numerous third-party organizations are involved in the transaction. Each verification step adds a small fee to the total cost. In addition, international conversion rates must be accounted for. World Bank reports have averaged these costs to be around 7.45 percent of each transaction processed.
Blockchain Remittance Fintech: Technology to Help Millions
Blockchain remittance companies are taking the industry to the next level by facilitating a frictionless experience for users. Traditionally, international money transfers can take days to complete due to the number of verifications that are required. Blockchain remittance companies provide instant money transfer services.
Remittance Firms: Abra
Africa relies heavily on remittance payments. Until recently, large financial firms, such as Western Union and MoneyGram, dominated the market. This changed when blockchain remittance companies began to spring up across the continent. Firms such as Abra are now changing the local markets.
The Abra platform allows users to transfer money for free across the globe. In addition to these cost savings, users are able to send transactions directly from their mobile devices. Abra offers a direct peer-to-peer money transfer technology that doesn’t require the use of any bank. And, the platform automatically deposits funds onto debit cards that it provides for users.
Abra is pioneering remittance FinTech with this all-inclusive approach. This non-reliance on the traditional banking system is important in developing nations because they often lack the means to implement the expensive infrastructure required to institute these organizations. By circumventing the current system, Abra users don’t have to worry about how to transfer money from blockchain to bank account.
Migrants are saving on fees and conversion rate costs by removing the middleman from the remittance system. These savings are too large to ignore, and now, industry leaders are researching this technology.
Blockchain Remittance on the Rise
For the first time ever, this year’s Global Money Transfer Summit (GMTS) will feature blockchain remittance FinTech. The GMTS is the largest international money transfer conference in the world. Every year, representatives from major financial institutions are chosen to speak at this event.
Among those invitees are representatives from Ripple, Stellar, and Cashaa. These popular cryptocurrency representatives will discuss the future of the money transfer industry and why blockchain technology is an essential path for the industry to travel.
Remittance Cryptocurrencies: Ripple
Ripple (XRP) was one of the first bank-focused cryptocurrencies to enter the market in 2012. Designed primarily for large international inter-bank money transfers, Ripple’s developers describe it as a real-time gross settlement system. The Ripple platform utilizes the XRP token to facilitate these global transfers instantly.
Ripple has managed to secure major partnerships with numerous large financial organizations including Fidor Bank in Munich, Bank of America, and Santander. In May 2015, Ripple became AML compliant after receiving a $700,000 fine from FinCEN for not complying with the Bank Secrecy Act. Today, the cryptocurrency remains in the top five coins in terms of market capitalization.
Remittance Fintech: A New Horizon
Blockchain technology is transforming the remittance sector, and Ripple isn’t alone in their quest to service the international money transfer industry. Today, numerous remittance-focused cryptocurrencies are available. You can expect to see further integration of this game-changing technology.
Now that the industry has openly acknowledged the benefits that blockchain technology brings to the table, the demand for blockchain-based remittance services is expected to increase significantly. This is great news for the millions of families that rely on this lifeline to survive.
This article by David Hamilton was previously published on Coincentral.com
About the Author:
David Hamilton aka DavidtheWriter has published thousands of cryptocurrency related articles. Currently, he resides in the epicenter of the cryptomarket – Puerto Rico. David is a strong advocate for blockchain technologies and financial sovereignty.
