With a fear of global remittance flow declining to a historic low this year, the United Nations' International Fund for Agricultural Development (IFAD) has urged countries to develop more conducive policy and regulatory environments that enable competition, regulation and innovation on the remittance market, and declare these services essential.
“The COVID-19 restrictions have hit the economic sectors that employ migrant workers, such as tourism, hospitality and agribusiness, hard. As a result, many migrants have become underemployed or unemployed. Remittance flows are projected to make their sharpest decline in history, falling by 20 per cent in 2020,” IFAD said on Tuesday.
Last year, global remittance flow was estimated to be over $550 billion, nearly 5% higher than the corresponding figure in 2018, with Bangladesh positioning itself among the top 10 remittance recipient countries.
However, according to a UN report, global remittance to developing countries are projected to fall by $110 billion in 2020, and not return to pre-pandemic levels for many years thereafter.
In April this year, World Bank projected a 22% decline in Bangladesh’s remittance earning this year owing to Covid-19.
Migrant workers are essential contributors to both the places where they currently live and to their communities back home, having a ripple effect in about 40 sending and over 125 receiving countries worldwide.
In a statement issued on the occasion of the International Day of Family Remittances (IDFR), IFAD President Gilbert F Houngbo said: “Remittances are a lifeline for poor families in low- and middle-income countries. Governments should take measures and do everything possible to facilitate the flow of funds during crises like the COVID-19 pandemic.”
This year, the IDFR is being observed under unprecedented conditions with millions of migrant workers losing their jobs, and many remittance families being suddenly pushed below the poverty line.
Remittance families are typically both resourceful and resilient in the face of difficult circumstances, but Covid-19 is disrupting an entire system that directly involves 200 million migrant workers – half of them women – around the world and their 800 million family members back home.
IFAD, a Rome-based UN specialized agency, stated: “The closure of remittance service providers during lockdowns has further exacerbated the ability of migrants to send money back to their families.”
An IFAD survey last month of the Senegalese diaspora in France found that about 30% of those who stopped or reduced sending money home did so because their money transfer operator was closed, or informal networks were no longer operating.
“IFAD is now tracking the impact of declining remittances on the ‘receiving end’ in developing countries, where typical remittances of US$200 to $300 per month account for about 60% of household income,” said Pedro de Vasconcelos, the head of IFAD’s Financing Facility for Remittances.
“While the reduction in remittances will not fall evenly across countries and communities, the impact is likely be substantial in rural areas where remittances count the most,” Pedro de Vasconcelos added.
Hundreds of thousands of migrants have returned home to their rural communities. At the same time, their families are also negatively impacted by lockdown measures that have paralyzed economic activity and destroyed livelihoods in their countries of origin.
With both sides of remittance corridors being simultaneously affected, disruptions directly affect the lives and livelihoods of one billion people: 200 million migrants who send money to their 800 million relatives.
Almost half of these families live in rural areas where poverty and hunger are the highest.
This year, tens of millions of families who rely on the remittances they receive will fall below the poverty line, resulting in more hunger and less spending in education and health, IFAD expressed concern.
“While keeping remittance services running through the crisis will certainly reduce some of the impact of the decline in migrant incomes, there urgently needs to be a greater reform of the system so that after this crisis ends, migrants can send their money home faster, safer and cheaper,” said de Vasconcelos.
To address the situation, IFAD called on the governments to develop more conducive policy and regulatory environments that enable competition, regulation and innovation on the remittance market, and declare these services essential.
The UN agency also said private sector entities should invest in developing innovative technological solutions for remittance transfers to reduce costs, improve speed, enhance security and increase flows through digital means to remote areas.
Access to remittance services, especially in poor rural areas, needs to be improved, it added.
There should be incentives to develop and use digital products that link remittances to a full range of financial services, so that migrants and their families can be encouraged to save and invest their money creating more opportunities for themselves and their communities.
Since March, IFAD has led a global “Remittances Community Task Force,” comprised of 35 international organizations, inter-governmental bodies, industry and private sector groups, and networks of diaspora organizations. The task force is working on a series of concrete measures to help mitigate the impact of the Covid-19 crisis on the lives of the one billion people directly involved in sending and receiving remittances.