A new paper has been published within the framework of the ILO-EU project “Towards Sustainable Partnerships for the Effective Governance of Labour Migration”: the study “Migrant Remittances to Tajikistan. The Potential for Savings, Economic Investment and Existing Financial Products to Attract Remittances” examines remittance use and the potential for enhancing development impact.
Tajik migrants make an enormous contribution to the Tajik economy. The amount of remittances sent home by migrants from Tajikistan was estimated to be about US$ 2.67 billion or 49% of GDP in 2008 (National Bank). The remittances sent to Tajikistan help the migrants’ families to solve some of their financial problems, and a large amount of these resources are used to cover their immediate needs. Investment in longer term sustainable economic activities is, however, quite limited.In the beginning of 2009, the ILO initiated a study which included a survey of 1,267 households that currently have a family member living and working abroad, and a survey on financial products to attract savings and economic investments from migrants. The final goal of the study was to come up with recommendations and new mechanisms for integrating remittances into the economic development in the country. While the deposits of the banking sector have been growing, the section of the population for which remittances are the primary source of income continue to keep their savings away from banks and financial institutions, thus leaving significant monetary opportunities unmet.
Various estimates show that there is still big potential for unused savings to be attracted to the financial system. According to the National Bank estimates, about 2.67 billion US dollars were remitted to Tajikistan by emigrants in 2008. Our household survey results show that, on average, 12% of remittances were saved for less than six months (short-term savings), making up about 331 million US dollars. 11% is saved for more than six months, making up about 286 million US dollars. Totally, therefore, about 617 million US dollars were saved from remittances in 2008. Even if 10% can be attracted to the financial system, it is already 61.7 million USD, a significant amount of money by any standards.
Some gaps and barriers are hindering financial institutions from developing more efficient remittance-backed mechanisms. However, should these barriers be overcome there is huge potential. Taking the USD 2.67 billion remittances flowing into Tajikistan in 2008 and estimated savings from remittances (USD 617 million) and combining this with our survey data, one can estimate how much could be saved, and for what purpose. According to the survey, 7.3% of households in Tajikistan saved for tuition fees; 22.8% for “a rainy day”; 22.2% for buying or renovating an apartment or a house; 18.9% for special events; 16.2% for healthcare needs; and 4.6% for old age.
Having investigated the savings and investment patterns of emigrants and the potential (as well as the barriers) of remittances to be better integrated into the economy via financial products that attract savings and economic investments from migrants, the final chapter provides recommendations for the design and implementation of financial products and mechanisms to leverage remittances for enhanced and long-term development.
Currently, some of the study findings are being applied in cooperation with banks and micro-finance-institutions in Tajikistan.