The importance of remittance business in helping economies around the world
As the data suggests, the benefits that individuals and economies both reap from remittances are unprecedented, especially during our time, Oxford Economics refers to them as ‘A Lifeline for Developing Economies Through the Pandemic and into Recovery.’ A key takeaway from Oxford’s study on remittances is the effect of the remittance multiplier, which addresses the proportionality of the level of output of the country that is the recipient of the remittance payment to the gross domestic product of the said country. It has been made abundantly evident by numerous studies across the world that the impact of this effect can be roughly numerically translated to $1 of remittances translating to a $0.4 increase in final domestic GDP. Furthermore, it has been concluded that with an estimate of roughly $548bn invested in remittances the resulting impact on the GDP of developing-countries was $219bn.
There are several ‘first round’ effects that also occur and have a direct correlation with the reception of remittance payments from family members in foreign countries. These include but are not limited to – at the most basic level – food security, shelter and clothing, as well as education, which tends to be higher in most developing countries at all stages including the foundational levels. Remittances have also been known to be used on services such as health care, debt and cultural expenditures that are unavoidable such as funeral or marriage costs. It is very evident that the impact of remittances on developing economies is large. This is why it is of utmost importance that remittances keep flowing into developing countries where they are needed the most.
In order to keep remittances flowing we need to ensure all money transfer services abroad are supported by legal and regulatory framework similar to the frameworks set by the UAE Central Bank. These frameworks will formalize all channels used for cross-border transactions. In addition to that we need to constantly invest in digital solutions to better serve and attract digital audiences around the world. Innovative solutions are already beginning to shift the landscape of remittance services using apps and online transaction services to increase convenience for senders of remittances and their families.If you are an individual who is capable of stably providing remittance payments then it is highly crucial that transfers are consistently being made to loved ones across the globe not only for their personal interest, but rather the interest of society and the country as a whole to prosper and develop improving the well-being across all fields and industries.
Sources: Oxford Economics