| Remittances: Key to the Fight Against Global Poverty

Remittances: Key to the Fight Against Global Poverty

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At UniTeller, we’re proud to facilitate remittance payments for families around the world. 

As we expand our international reach, nothing brings us greater joy than hearing from users as they celebrate sending and receiving remittances. 

And while economic uncertainties remain in our post-pandemic world, statistics show that remittances have remained strong through the most difficult period in recent memory. 

As a company, we truly believe that every remittance payment has tremendous power — for individuals, families, communities, countries, and regions at large. Every time our clients send money overseas, they help change the world. While that may sound hyperbolic, we believe the facts support the sentiment. 

While it can be challenging to articulate the hope that remittances provide, new studies and research have helped uncover a number of essential truths. By investigating the available data surrounding global remittances, we can better appreciate their true value. 

Here’s a brief overview of some remittance statistics that show how this ubiquitous form of transferring money helps fight poverty and promote economic prosperity.

Remittances Eclipse Foreign Direct Investment (FDI)

Over the last decade, remittances steadily gained prominence throughout the world economy. Before long, they became the number one source of aid to foreign nations. 

In 2018, remittances officially surpassed foreign direct investment (FDI) (i.e., the financial backing of major firms from one country to another).

With the exception of China, remittances to low-and-middle-income countries (LMICs) reached $462 billion in 2018. That was more than $118 billion than FDI flows during the same period of time. 

In other words, remittances became the largest and most important source of foreign aid in the global economy — especially for low and middle-income countries. 

This watershed moment astonished forecasters and set the tone for the coming decade. 

According to Dilip Ratha, lead economist and head of KNOMAD, the Global Knowledge Partnership on Migration and Development,

“Remittances are on track to become the most important game in town when it comes to financing development. In five years, remittances will likely become larger than [overseas] development assistance (ODA) and FDI combined…We could see remittances reach a trillion dollars in the foreseeable future.”

Ratha’s expectation for a trillion-dollar remittance market is supported by the United Nations, which expects remittances to exceed $8.5 trillion by 2030

To be sure, half of Ratha’s prediction has already been validated, as remittance flows to foreign nations (excluding China) have easily surpassed FDI and ODA for the second consecutive year

While these findings are undoubtedly exciting, the question remains: what do these trends actually look like in practice?

Growing Remittances, Growing GDPs

For many nations, remittances are more than a helpful financial gift. 

Instead, they are like oil to a country’s economic engine, endlessly inspiring new growth and potential in their gross domestic product (GDP).

According to The Economist, remittances account for over 5 percent of the GDP in 54 global countries. 

In nations like Tonga, Somalia, and Lebanon, remittances account for over 32% of GDP

And as remittances increase, global poverty sharply declines. 

In fact, the Asian Bank Development Institute found that a “1 percent increase in international remittances as a percentage of gross domestic product can lead to a 22.6 percent decline in poverty gap ratio.”

These astounding findings are derived from a 35-year study of ten Asian countries, including Bangladesh, Malaysia, Pakistan, Thailand, Sri Lanka, India, Indonesia, Nepal, China, and the Philippines.

The Fruit of Remittances: Fighting Global Poverty, Promoting Prosperity 

The ripple effects of remittances are widespread. Indeed, over one billion people are involved with remittances on some level, whether on the sending or receiving end of the transaction.

Remittances help achieve the United Nations’ Sustainable Development Goals (SDGs) in a number of ways, including:

  • Providing Meals: As for their most basic virtue, remittances help provide shelter and put food on the table for families around the world.

    In fact, roughly 75 percent of all remittances are used primarily to pay for meals and cover housing costs.
  • Boosting Savings: While remittances attend to essential daily needs, they can also promote long-term financial savings.

    In Sub-Saharan Africa, for example, a 10 percent increase in remittances saw direct increases in savings by 7 percent.
  • Enhancing Healthcare: Remittances help families increase their healthcare budgets, which are often entirely neglected in low-and-middle-income countries.

    In Mexico, for example, households that receive remittances show a 44% increase in spending on medical care.

    As one journalist aptly asked in the International Migration Review, “Is an ounce of remittance worth a pound of health?” That certainly seems to be the case.
  • Affirming Education: Remittances also play a major role in keeping children enrolled in school. In fact, new research shows that money sent by loved ones overseas keeps 3.5 million children in school worldwide.

    More specifically, countries like El Salvador, Sri Lanka, and Nepal have reported that remittances significantly lower school dropout rates

It’s no wonder that the United Nations declared remittances as “the most important source of external finance for least developed countries, and in some cases, a key driver of economic growth.”

Partnering With UniTeller

When it comes to transferring money and paying international bills, UniTeller maintains the highest standard of excellence. As a fully-licensed money transmitter in the United States and soon to be in Canada, UniTeller remains intensely committed to providing payment services with a transparent and flexible business model. To that end, businesses have minimal to no upfront investment to get started with UniTeller.

In fact, our professional team will provide in-depth training for you and your team, so you can see how the process works and begin completing money transfers right away. By partnering with UniTeller, you’ll also gain access to our multilingual Customer Service department, available seven days a week.

As a UniTeller Selling Agent, you will have total confidence in the speed and safety of the money transfer and international bill payments services you provide. Also, you’ll have access to our extensive network of over 200,000 paying locations and billers in over 80 countries worldwide.

It’s fast.

It’s reliable.

And it’s trusted by countless customers and business owners across the United States.

Want to learn more about becoming a UniTeller Selling Agent? Click here to get started.