Remittances – an engine for development that still needs to move up a gear

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High-level speakers at today’s opening of the Global Forum on Remittances, Investment and Development in Kuala Lumpur, shared a common message – public and private sector must work further together to leverage the immense development potential of remittances in the Asia Pacific region.

The three-day event, which has attracted more than 400 participants from all over the world, got underway with keynote addresses from Jessica Chew Cheng Lian, Deputy Governor of Malaysia’s Central Bank; Charlotte Salford, Associate Vice President of the International Fund for Agricultural Development (IFAD); and CeylaPazarbasioglu, Senior Director at the World Bank group. Together, participants will explore ways to increase the efficiency of remittance markets and services, improve financial inclusion and stimulate diaspora investments.

Remittances to low- and middle-income countries – the money migrant workers sent back home to their families – amounted to US$256 billion in the Asia Pacific region in 2017. This amounts to 10 times the net official development assistance going to the region.

While about 70 per cent of remittances are used for immediate needs such as food, shelter and healthcare, the other 30 per cent – over US$77 billion regionally – is dedicated to building more secure and self-sustaining futures, through better education, savings and investing in assets and income-generating activities.

With a broad global consensus on the power of remittances to drive development, it is high time that we move beyond recommendations and implement scaled-up initiatives. And these need to become an integral part of our strategy to reach the SDGs by 2030.” said Charlotte Salford, IFAD Associate Vice President, 

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High costs of sending money home, limited access to basic financial services, and markets that are still operating in a cash-to-cash manner rather than through digital means, limit the flow of remittances, the amount receivers have in hand, as well as the development and economic impact for the boarder community.

“More can and should be done to amplify developmental impact of remittances. Remittance service providers, being a regular point of contact to send and receive money are strategically positioned to be the change agents for entire communities by providing financial education and solutions that can help pull families out of poverty traps,” said Jessica Chew Cheng Lian, Deputy Governor of the Central Bank of Malaysia.

Mobile technologies and digital money could potentially transform markets, reduce costs and time for sending remittances, but their development is still hampered by a lack of harmonization of regulations between countries.

“We have come a long way since we started to realize the magnitude and potential of remittances flows, and began to work as a community to increase the focus on policies affecting international remittances. Remittance senders saved over an estimated $90 billion more in remittance fees over the last decade: that’s how large the impact has been,” said CeylaPazarbasioglu, Senior Director for the Finance, Competitiveness and Innovation Global Practice, World Bank Group.

The average cost of sending money home to the Asia Pacific region is 6.86 per cent, which is slightly below the world average of 7.13 per cent, but still far from the 3 percent target set out by the international community in Sustainable Development Goal 10 – reducing inequalities.

In addition, benefits for families back home could be much higher if they had access to targeted financial services to help them save and/or invest their funds and access credit. At least two thirds of remittance families in Asia Pacific still live outside the formal financial systems.

Outcomes from the Forum will feed into the ongoing national, regional and global efforts to reach the Sustainable Development Goals, as well as the ongoing negotiations towards a UN Global Compact for Safe, Orderly and Regular Migration to be approved in late 2018.

This Forum paves the way for regular fora in the region, building on synergies and taking stocks of progress.

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