Thursday, October 18, 2007

IDB: Remittances to developing countries exceed 300 billion USD

- Migrant workers worldwide sent home more than US$300 billion in 2006 – IDB

The Inter-American Development Bank recently released the results of a study commissioned by it and the International Fund for Agricultural Development to track the amount of remittances flowing into developing countries during FY 2006, and those results are astounding. More than US$300 billion flowed into the countries along a stream of remittances, showing once more that, though individual amounts may be small and seemingly insignificant, when taken together remittances dwarf official development assistance. Approximately 150 million migrant workers, primarily from North America and Europe, are responsible for the huge amount of remittances.

The amount provided by donor nations to the developing countries in question in so-called official development assistance totaled approximately $104 billion last year. Foreign direct investment, those investments by private firms in developing countries, also was significantly lower than remittances, coming in at around $167 billion.

The IDB hopes that this study is the beginning of a systematic monitoring of remittances which will enable the Bank and the relevant countries to channel these monies in ways which will have a greater and optimal impact on development. Currently, Asia is the top destination for remittances, receiving more than 114 billion of the 300 total, following by Latin America with around 68 billion. However, on an individual nation basis, India and Mexico lead the pack with 24.5 and 24.2, respectively.

The IDB said that remittances are mostly used for necessities such as food, clothing and shelter, but that individuals also are saving between 10-20 percent of the monies on average. Unfortunately, this money is being horded in the proverbial cookie jar, rather than being put to work in financial institutions, thereby not positively effecting change in local economic development.

Question: Why might the recipients of remittances believe their money is safer stored at home than in local banks?

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