Alliance Online - April 2008
Migrants and their remittances: new hybrids for development
Jeremaiah M Opiniano
A hybrid develops when two different things are combined. Clearly, some 200 million migrants worldwide and the earnings they remit to their home countries are two different things. Migrants, the first part of the hybrid, are a group whose welfare is something many countries and their policymakers are wary of discussing. Until now, immigration has often had a negative connotation, with developed countries instituting controls to migrants’ entry into their societies.
 Alliance Magazine is the official media sponsor of the 8th International Workshop on Resource Mobilisation (IWRM), 22-25 May 2008, Kuala Lumpur, Malaysia. Organized by the Resource Alliance, the conference is designed to help build the capacity of non-profit organizations in the Global South through a programme of practical workshop sessions and inspiring case studies. Jeremaiah Opiniano will be speaking at the IWRM about the importance of migrants’ remittances for development. |
But migrants – both professionals and the low-skilled – have got noticed: the billions they remit to their home countries became the subject of a 2003 World Bank report, Global Development Finance, which revealed that neither foreign direct investment nor official development aid can keep pace with the rise, and direct developmental impact, of migrants’ remittances.
Suddenly, in the last four or five years, people from various sectors are talking about ‘diaspora for development’ – social and economic investments, philanthropy, knowledge transfer, business and entrepreneurship. Development paradigms and issues are now being juxtaposed with migrants: social development, globalization, technology, even climate change. In short, there is a new development hybrid: migration and development. From being a segment of global society that was once a sore point for many people and policymakers, these 200 million ordinary foreigners and their resources now offer to the world new and innovative ways of influencing its development.
The lure
The remittances sent by legal and irregular temporary workers, immigrants and refugees to their homelands are the lure of this new hybrid. The World Bank’s Migration and Remittances Factbook 2008 estimates that the world’s inward remittance flows reached US$297.1 billion in 2006, with developing countries receiving US$221.3 billion of that figure. And this excludes remittances sent through non-bank channels.
Countries with large migrant populations such as India, Mexico, China and the Philippines have received the most remittance inflows, while the US, Saudi Arabia, Switzerland and Germany are the top source countries for remittances. But the developmental impact is also visible in countries like Lesotho, Lebanon and Haiti where remittances comprise a significant proportion of gross domestic product.
These monies, the hard-earned incomes of migrant workers, are the largest source of external financing for the developing world, and they are sent directly to families and beneficiaries. While FDI and ODA funds are subject to burdensome administrative processes before actual disbursements are made, this is not the case with remittances.
Of course, remittances are not without drawbacks: adding to inequality between the haves and have-nots despite seeing some reductions in poverty levels; perpetuating dependency and creating low work productivity at home; creating family problems associated with the migrant’s absence; and making states complacent about pursuing reforms because they know they can rely on future inflows.
Remittances and other resources: what happens to them?
Inevitably, since overseas migration is here to stay, development stakeholders devote considerable energy to thinking about how to harness remittances plus migrants’ non-cash resources such as knowledge, skills, and social capital.
Before going into this further, David de Ferranti and Anthony Ody remind us of something: remittances are privately owned resources, and remitters decide on their use ‘to maximize their own expected (private) welfare’.[1] Remittances are therefore largely spent on meeting basic needs, which may be ‘unproductive’ as far as development analysts are concerned.
On the other hand, the use of remittances may not be unproductive: spending them for the schooling of migrants’ children is one big human capital investment (with education leading to assured incomes for degree holders). Migrants and their families also try to save, whether for immediate needs or for medium-to-long-term benefits such as housing. Some remitters take riskier options: they set up enterprises in their home country despite their absence, or they even dabble in bonds (like Israel’s diaspora bonds), the stock market, mutual funds, and other financial instruments.
Remittances and philanthropy
Some of this money also goes into philanthropy. In countries like the Philippines, single-year cash donations from citizens abroad to individual projects are bigger than three-decades-old accumulated donations by a network of corporate donors. According to Philippines’ Central Bank data, Filipinos abroad donated US$218 million (or some PhP11 billion according to the 2003 Balance of Payments of recorded cash donations by migrants), while Philippine Business for Social Progress provided some PhP4.8 billion to development projects from 1970 to 2006. Given the philanthropic bonanza coming from migrants, the government of El Salvador has offered US-based Salvadoran migrant groups matching grants through the Social Investment and Local Development Fund or FIDSL.
Some newer hybrids have spun off: the Multilateral Investment Fund, since the late 1990s, has supported projects linking remittances and microfinance. Another links remittances and rural development, for example in three Mexican states (Guerrero, Oaxaca, and Michaocan) where women migrants have remitted seed capital for family-run agricultural investments coupled with receiving entrepreneurial training.[2] D-MADE (Development Marketplace for the African Diaspora in Europe), an initiative by the World Bank and some European governments, encourages African diaspora groups to access grants to finance entrepreneurial projects to benefit African home countries.
This is not to mention skilled migrant scientists, engineers and businesspeople transferring their knowledge to their homelands – a ‘brain gain’ rather than a brain drain.[3]
The lesson
Why should financial institutions and donors care about remittances, asks World Bank economist Dilip Ratha, the lender’s leading remittances expert. His answer? Remittances are large, pro-poor, and well targeted to the needs of the poor. Financial institutions can also make money out of them while serving a social need at the same time, through low-cost money transfer services, bank products, and even social investments. And the market is global.[4]
Slowly, bilateral donors and a small number of foundations and North-South NGOs are moving into migration advocacy, remittances included. The remittance mania has not, however, spurred many donors to offer programmes and grants related to migrants and refugees. Imagine, for instance, a northern NGO co-financing a homeland livelihood project by a group of Filipino domestic helpers in Hong Kong, or refugees from Sub-Saharan African countries in Europe influencing homeland politics.
The world’s new development hybrid is slowly bringing good news to migrants, including those whose rights and dignity are not respected in host countries. The logic is simple: curtailing migrants’ rights will hit their development contributions to origin and settlement countries – remittances included. And the greater development community might miss out on many opportunities from this crossbreed.
1 David de Ferranti and Anthoy Ody. ‘What can remittances and other migrant flows do for equitable development?’ In Barbara Merz et al (2007) Diasporas and Development Massachusetts, USA: Harvard University Press.
2 Manuel Orozco (2004) ‘International Financial Flows and Worker Remittances: Issues and Lessons’, in Bridging the Gap: International migration and the role of migrants and their remittances in development Netherlands: Oxfam Novib.
3 Asian Development Bank (2006) Converting Migration Drains into Gains. Harnessing the resources of overseas professionals.
4 Dilip Ratha (2007). ‘Why should financial institutions care about remittances?’ Presented at a workshop on ‘The Impact of Remittances on Finance for Development: Analyzing Operational Frameworks’ organized by the OECD and the Spanish Ministries of Foreign Affairs and Finance.
Jeremaiah M Opiniano is executive director of the Institute for Migration and Development Issues (www.filipinodiasporagiving.org) in the Philippines. Email ofw_philanthropy@yahoo.com
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