Among major remittance recipients in the globe, India retains its top spot, with remittances expected to total $80 billion this year, followed by China ($67bn), Mexico and the Philippines ($34bn each), and Egypt ($26bn), said the latest edition of the World Bank’s Migration and Development Brief, released on Saturday (8).
As global growth is projected to moderate, future remittances to low- and middle-income countries are expected to grow moderately by four per cent to reach $549bn in 2019. Global remittances are expected to grow 3.7 per cent to $715bn in 2019.
Remittances to low- and middle-income countries grew rapidly and are projected to reach a new record in 2018, the World Bank’s report said.
The Bank estimates that officially recorded remittances to developing countries will increase by 10.8 per cent to reach $528bn in 2018. This new record level follows a robust growth of 7.8 per cent in 2017. Global remittances, which include flows to high-income countries, are projected to grow by 10.3 per cent to $689 bn.
Remittance flows rose in all regions, most notably in Europe and Central Asia (20 per cent) and South Asia (13.5 per cent), followed by Sub-Saharan Africa (9.8 per cent), Latin America and the Caribbean (9.3 per cent), the Middle East and North Africa (9.1 per cent), and East Asia and the Pacific (6.6 per cent).
Growth was driven by a stronger economy and employment situation in the United States and a rebound in outward flows from the Gulf Cooperation Council (GCC) countries and the Russian Federation.
The Brief notes that the global average cost of sending $200 remains high at 6.9 per cent in the third quarter of 2018. Reducing remittance costs to three per cent by 2030 is a global target under Sustainable Development Goal (SDG) 10.7. Increasing the volume of remittances is also a global goal under the proposals for raising financing for the SDGs.
“Even with technological advances, remittances fees remain too high, double the SDG target of three per cent. Opening up markets to competition and promoting the use of low-cost technologies will ease the burden on poorer customers,” said Mahmoud Mohieldin, Senior Vice President for the 2030 Development Agenda, United Nations Relations, and Partnerships at the Bank.
The average cost of remitting in South Asia was the lowest at 5.4 per cent, while Sub-Saharan Africa continued to have the highest at nine per cent. No solutions are yet in sight for practices that drive up costs, such as de-risking action of banks, which lead to the closure of bank accounts of remittance service providers.
Another persistent factor that keeps fees high is the exclusive partnership between national post office systems and any single money transfer operator, as it allows the operator to charge higher fees to poorer customers dependent on post offices.