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How Does Remittance Impact Sustainable Development?

Remittances constitute a significant source of revenue for low- and middle-income migrant countries (LMICs). Amid the global economic downturn, remittances to LMICs reached USD 626 billion in 2022 per the KNOMAD Migration and Development Brief No. 37.

International remittance flows have proven remarkable resilience during the COVID-19 pandemic, enabling global trade expansion and connectivity. With the escalation of the negative impacts of climate change and environmental degradation, remittances will also play a more crucial role in supporting economies and disaster-affected societies.

According to the International Fund for Agricultural Development (IFAD), remittances can contribute to reaching the SDGs in a variety of ways:

  1. At household level. By recognizing the positive socioeconomic impact of remittances on families’ wellbeing (SDGs 1-5)[1];
  2. At community level. By supporting policies and specific actions to promote synergies between remittances and financial inclusion, encourage market competition and regulatory reform, and mitigate any negative impact resulting from climate change (SDGs 6, 7, 8, 10, 12 and 13);[2] and
  3. At international level. By ensuring that the revitalized Global Partnership for Sustainable Development – as outlined in SDG 17[3] – and the Global Compact on Migration promote collaboration across all sectors involved in remittances.

Remittances account for a considerable share of the recipient households’ income, with the majority going toward consumption and the remainder going toward human and physical capital investment and business development. [4]

The most common reasons migrants send money overseas are to meet family needs, repay loans, and purchase personal insurance and investment or inheritance.[5]

By raising per capita income, improving living standards and promoting macroeconomic factors like growth, enhanced foreign direct investment and debt sustainability, money remittance generally contribute to reducing poverty.[6]

The study highlighted that in certain circumstances, increased investment in human capital associated with the receipt of remittances leads to improved health and educational outcomes. Recently, investing

in financial inclusion has been identified as a key tool for maximising the development impact of remittances.[1]

Finally, it was noted that remittances can positively impact poverty reduction and other development indicators contained in the SDGs. However, this is dependent on other factors like the amount and frequency of remittances sent, income levels and sociological aspects like how the family decides to use the money. Remittances alone are not enough to create sustainable and inclusive development. There should be efforts to formalise remittances and foster financial inclusion to contribute to development.

[1] (1) no poverty, (2) zero hunger, (3) good health and wellbeing, (4) quality education, and (5) gender equality.
[1] (6) clean water and sanitation, (7) affordable and clean energy, (12) responsible consumption and production and (13) climate action.
[1] (17) partnerships for the goals.
[1] Olivié, & Santillán O’shea. ‘In-depth analysis: The role of remittances in promoting sustainable development’, European Parliament, June 2022. Retrieved February 3, 2023, from
[1]López Cordova, E. and Olmedo, A., ‘International remittances and development: Existing evidence, policies
and recommendations’, Occasional Paper 41, Institute for the Integration of Latin America and the
Caribbean and Integration (INTAL) – Trade and Hemispheric Issues Division (ITD) and Inter-American
Development Bank, 2006, as cited in Olivié & Santillán O’shea, 2022.
[1] See for example: Nova, 2020; De Haas, 2017; Ratha, 2006; Azam et al., 2016; Ncube and Brixiova, 2013; Janetsky, 2022, as cited in as cited in Olivié & Santillán O’shea, 2022
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