For many developing countries, remittances—the money sent from expats back home to their families—are a major source of revenue, in some instances comprising upward of 20 percent of GDP. Over the last decade, remittances to the world’s least developed countries (LDCs) eclipsed even foreign direct investment. Remittances are not only stable; they are growing, despite the recent financial crisis that brought the global economy to its knees. Progressively, capital-scarce developing countries are recognizing the importance of harnessing this source of income, knowledge, and investment to spur better economic development.
“If remittances at the level recorded by the World Bank were a single economy, it would be the 22nd largest in the world, bigger than Iran or Argentina.”
Remittances are by no means small potatoes: In 2011 alone, remittances to the LDCs reached $26 billion, with $489 billion in remittances worldwide, according to the 2012 United Nations Conference on Trade and Development’s (UNCTAD) The Least Developed Countries Report. In fact, a January 2013 article in The Guardian noted, “If remittances at the level recorded by the World Bank were a single economy, it would be the 22nd largest in the world, bigger than Iran or Argentina.”
Remittances constitute a significant portion of many household budgets, help insulate against food price shocks and natural disasters, and generally boost consumption. According to a 2008 report from the United Nations Development Programme, because migrants can secure a higher income abroad, they are able to send more money back home to family and friends, providing a “type of insurance for poor households.” For example, with the help of remittances, families at nutritional risk are better equipped to weather shocks such as the 2008 food price crisis.
“Of the $26 billion in remittances to LDCs in 2011, an astounding 44 percent was absorbed by Bangladesh. The country tallied 4.9 million emigrants in 2010 alone.”
Bangladesh is particularly benefitting from this source of income. Of the $26 billion in remittances to LDCs in 2011, an astounding 44 percent was absorbed by Bangladesh. The country tallied 4.9 million emigrants in 2010 alone. Findings from the Bangladesh Integrated Household Survey (BIHS), a nationally representative survey of rural Bangladesh funded by USAID and conducted by IFPRI, show that although only approximately 9 percent of rural households in Bangladesh received remittances from abroad, the average yearly amount is enormous for remittance receiving households—accounting for 105 percent of households’ annual total expenditures. Remittances not only benefit individual households, but have a large ripple effect as they infuse capital into the larger economy.
“Nationally representative surveys such as BIHS make it possible for IFPRI to estimate the incidence and amount of remittances,” said Akhter Ahmed, Chief of Party of IFPRI’s Bangladesh Policy Research and Strategy Support Program, “and may also help us uncover the wider impact of these remittances.”
Why did Bangladesh come out at the top of the remittances list? Senior Research Fellow Ephraim Nkonya noted that, according to the World Giving Index, Bangladesh is among the most charitable countries in the world. “Charity begins at home,” he said, “and the Bangladeshi people are teaching the world a good lesson!”
It’s clear that as the global market slows, and sources of development finance dwindle, remittances are playing—and will continue to play—a progressively indispensable role in the development process.
For a report on the full set of data from the Bangladesh Integrated Household Survey, see:
http://www.ifpri.org/publication/status-food-security-feed-future-zone-and-other-regions-bangladesh
The dataset can be found here:
http://hdl.handle.net/1902.1/21266
