Remittance facts for kids
A remittance is money sent by a person working in a foreign country back to their family or homeland. Most of the time, these transfers are made by migrant workers who move to other countries to find better-paying jobs. This money helps their families pay for food, medicine, and school.
Remittances are a huge part of the global economy. In 2021, people sent about $780 billion to their home countries. This is more than three times the amount of money that governments give as foreign aid. Most of this money flows from wealthy countries to developing countries.
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Why remittances matter for families
When workers send money home, it helps their communities grow. Researchers have found that this money improves health and education in lower-income countries. Families use the funds to buy better food and pay for doctor visits.
However, sending money is not always free. Banks and transfer companies often charge high fees. This means the family receives less money than the worker actually sent. Governments try to help by making these transfers cheaper and easier.
Global reach of money transfers
The amount of money sent home has grown quickly over the last twenty years. In 2001, it was about $72 billion, but by 2022, it reached over $626 billion for middle-income countries.
People send money for several reasons:
- Altruism: They want to help their family members have a better life.
- Repayment: They might be paying back the money their family spent to help them move abroad.
- Investment: They may want to save money to start a business in their home country later.
Top countries that receive money
Many countries rely on these funds for a large part of their economy. The table below shows some of the top countries that received remittances in recent years.
| Country | 2020 | 2021 | 2022 | % of GDP (2023) |
|---|---|---|---|---|
| 83.1 | 89.4 | 111.2 | 3.4% | |
| 42.9 | 54.1 | 61.1 | 3.7% | |
| 59.5 | 53.0 | 51.0 | 0.3% | |
| 34.9 | 36.7 | 38.0 | 9.2% | |
| 26.1 | 31.3 | 29.9 | 7.0% | |
| 29.6 | 31.5 | 28.3 | 6.1% |
How people send money home
There are many ways to send money across borders. Some are traditional, while others use new technology.
Traditional companies
Companies like Western Union and MoneyGram have been around for a long time. They have thousands of agents worldwide where people can pick up cash. However, they can be expensive, sometimes charging 8% to 12% in fees.
Digital and Fintech apps
In the 2010s, new "fintech" (financial technology) startups appeared. These companies use the internet and mobile apps to send money faster and for less money. Some even use Blockchain technology to make transfers almost instant.
Remittances in different regions
The United States is the top country where remittances come from. Other major senders include the United Arab Emirates, Saudi Arabia, and Switzerland.
Asia
Asia receives the most money overall. Countries like India and the Philippines have millions of citizens working abroad. In some places, like Tajikistan, remittances make up more than one-third of the entire country's economy.
Latin America
In Mexico and Central America, remittances are very important. In countries like Haiti and Honduras, this money can be more than 20% of the GDP (the total value of everything a country produces).
Africa
Nigeria is the biggest receiver of money in Africa. However, sending money to Africa is often very expensive because there is less competition between companies. The United Nations wants to reduce these costs to less than 3% by the year 2030.
History of money transfers
Sending money home is not a new idea. In the 1800s and 1900s, European countries like Italy, Ireland, and Spain depended on money sent by their citizens who moved to the Americas.
In 1901, Italy was the first country to pass a law to protect this money. Today, the World Bank keeps a database to track the prices of sending money. This helps people compare costs and find the cheapest way to support their families.
Safety and security
Governments watch money transfers closely to make sure the money is being used for legal purposes. They use special units to track large amounts of money.
While most people are just trying to help their families, these rules are in place to keep the global financial system safe. Sometimes, these rules make it harder for people in places like Somalia to receive money, so governments are working on better ways to help them safely.
See also
- Hawala
- Migrant worker
- Developing country
