A migrant centred approach to remittances

Facts and figures

  • In 2015, worldwide remittance flows are estimated to have exceeded $601 billion. Of that amount, developing countries are estimated to receive about $441 billion, nearly three times the amount of official development assistance. The true size of remittances, including unrecorded flows through formal and informal channels, is believed to be significantly larger.
  • In 2015, the top recipient countries of recorded remittances were India, China, the Philippines, Mexico, and France. As a share of GDP, however, smaller countries such as Tajikistan (42 percent), the Kyrgyz Republic (30 percent), Nepal (29 percent), Tonga (28 percent), and Moldova (26 percent) were the largest recipients.
  • High-income countries are the main source of remittances. The United States is by far the largest, with an estimated $ 56.3 billion in recorded outflows in 2014. Saudi Arabia ranks as the second largest, followed by Russia, Switzerland, Germany, United Arab Emirates, and Kuwait. The six Gulf Cooperation Council countries accounted for $98 billion in outward remittance flows in 2014.
  • The cost of remittances is the highest in Sub-Saharan Africa and in the Pacific Island countries (for example, it costs more than 20 percent to send $200 from Australia to Vanuatu, and 19 percent from South Africa to Zambia). As of the third quarter of 2015, the average cost worldwide remained close to 8 percent---far above the 3 percent target set in the Sustainable Development Goals.

Source: WB Migr&Remittances Factbook 2016

The ILO’s rights-based approach to remittances

The ILO intervenes on the demand side of financial services. This involves working with migrant workers and the beneficiaries of remittances to strengthen their capacity to make informed/ rational choices about the use of remittances and remittance-linked services. Improved financial education/inclusion can enhance the welfare of low-income households as well as support enterprises and job creation and is topical for development.

The ILO also intervenes on the supply side of financial services in order to leverage the use of remittances for income generating activities. This involves working with financial institutions so that they develop adequate and innovative financial services.

The ILO also works closely with workers’ and employers’ organizations:

- Employers’ organizations encourage entrepreneurship development in low income countries through the investment of remittances, and provide financial orientation and access to financial payment facilities in the migrants’ host countries.

- Workers’ organizations provide financial orientation for migrant workers and their families, both in countries of origin and destination, advocate for more accessible financial infrastructure, and support the development of adequate financial schemes/services for migrant workers.

Together with its International Training Centre in Turin, the ILO has developed financial education training tools and programmes in order to develop the knowledge and skills that are required for responsible budgeting, including spending, saving, borrowing, and investing, and has carried out trainings in Benin, Burkina Faso, Cambodia, Ethiopia, Indonesia, Kenya, Mali, Mauritania, Moldova, Morocco, Myanmar, Philippines, and Senegal. This done in close collaboration with local authorities and social partners, and in Singapore, Malaysia, Thailand, France, Spain and Italy with migrant associations. Training to microfinance institutions is also provided through the course “Making microfinance work: managing product diversification”.

The ILO has also carried out action research on migrant remittances and microfinance in various countries (Bangladesh, Mexico, Nepal, Senegal, South Africa) and feasibility studies on the possibility of using a portion of migrant workers’ remittances to develop health microinsurance products in origin countries (Mali, Senegal, Comoros).

ILO Instruments

ILO Convention No 97 states that “Each Member for which this Convention is in force undertakes to permit, taking into account the limits allowed by national laws and regulations concerning export and import of currency, the transfer of such part of the earnings and savings of the migrant for employment as the migrant may desire.”

The ILO’s Multilateral Framework on Labour Migration highlights that “the contribution of labour migration to employment, economic growth, development and the alleviation of poverty should be recognized and maximized for the benefit of both origin and destination countries” (Principle 15) –and among the guidelines that may prove valuable in giving practical effect to the above principle (15.5) providing incentives to promote the productive investment of remittances in the countries of origin; (15.6.) reducing the costs of remittance transfers, including by facilitating accessible financial services, reducing transaction fees, providing tax incentives and promoting greater competition between financial institutions.