Remittance flows around the world


Remittances are the resources sent by migrant workers to their countries, which usually involves funds. Billions of dollars are on a yearly basis transferred by migrant workers to the countries of their origin. The overall value of remittances has been estimated to be more than 200 billion dollars. Remittances from migrants in foreign countries most often than not exceed even aid in many developing nations. Such funds are usually the private savings of families and workers abroad who send the money back home for clothing, food, among other expenditures. Remittances also give developing countries the power to pay for development projects as they please.

Remittance flows around the world are annually estimated by the World Bank. This is on the basis of the national balance of payment statistics that are gathered by the central banks and IMF.  Data on remittances usually cover the inflows and outflows from other nations. Remittance outflows from other countries are less concentrated on the development and migration debates. However, they can be a sign of an increase in the immigration numbers of a country when the remittance outflows exceed the remittance inflows. The obtaining of estimate data for bilateral remittances is based on the weighted income of migrants based on the per capita income of their origin country, data on weighted migrant stock, and the weighted income of the migrants’ originating country.

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A large data set covering almost all countries in the world is provided via the World Bank estimates. Such allows an individual to better understanding magnitudes and trends in transfers and, at the same time, compare transfers to other flows, including Official Development Assistance (ODA). However, Alvarez et al. (2015) state that the estimates do not portray accurate values because of the various challenges encountered in the methodology (Alvarez et al., 2015, p. 43). In the category of “compensation for employees,” which the IMF has defined, balancing of payments may, in a great way, overestimate remittances. This occurs where a given country has a huge UN or embassy presence and contains factories that are trans nationally owned and have a large number of employees. Such employees are usually recognized as migrants in the country; hence their salaries are classified as remittances (Alvarez et al., 2015, p. 44). It is therefore not certain to say that the official World Bank and IMF numbers are true or whether they overestimate because of UN, embassies and the salaries of employees in foreign companies being counted as remittances.

According to statistics, migrants who live in a particular country for a minimum of 12 months aren’t separable from the other individuals who were already in the country since the statistics are normally on the basis of residence but not the status of the migration. In personal transfers, which is the second part of remittances, if a transfer is carried out across boundaries regardless of the nationality of an individual or residency status, the IMF still considers it since such information is usually unavailable (Clemens &McKenzie, 2014). The unavailability of the information is contributed by the fact that the sender or receiver of the remittance may be an individual with connections to another country or a migrant. Therefore, remittances may be added together with huge amounts of money, which might have been sent by diaspora members or private investors for property purchase, business investment, and financial transactions — doing so results to a probability in the overestimation of money transfers (Clemens &McKenzie, 2014).

It’s crucial to put into consideration that the recorded growth in remittances across the world in recent years, maybe a derivative of changes in how remittances are measured when comparing remittances estimates with time. In the period 1990-2010, around 80 percent of the rise in recorded remittances can be as a result of changes in measurement (Alvarez et al., 2015, p. 44). Only 20 percent of the changes recorded may be because of an increased number in the international migrants and the money they are probable to earn in the countries they migrate to. To add on, the reporting of remittance inflows and outflows has seen improvements, and individuals migrating have employed formal payment options (Alvarez et al., 2015, p.44). Informal payment channels have also decreased due to anti-money laundering operations.

It’s important also to note that the estimates by the World Bank and IMF are focused on remittances transacted via official channels like banks. It’s not all countries have money transfer operators like western union, post offices, mobile transfer companies where small transactions can be carried out by migrants. Also, informal transfers are not in all countries; hence may be left out by central banks (Clemens &McKenzie, 2014). Such transfers may not be included even though they may be of a significant amount. A good example is the under-reporting of South-Sudan remittances by a huge 50 percent. Some countries don’t report remittance numbers to the IMF in their balance of payments because of the huge unknown amounts in informal transfers (Clemens &McKenzie, 2014). Remittances data may also vary among countries because of differences in national legislative, availability of data, and policy frameworks.


Estimations of bilateral remittance are faced with the challenge of limitations of the information on migrant stocks. The estimates are based on gross national income per capita of the nation where migrants are from and therefore do not account for the GNI being more in such countries since they assume individuals move to countries with a higher income. There are issues of failing to attribute a transaction to a particular country which the World Bank has acknowledged (Clemens &McKenzie, 2014). This happens especially when the transaction is through an international bank. Data on bilateral remittance are, therefore, just estimations that don’t show the actual correct figures. Ratha (2014) expresses the same views as Clemens & McKenzie (2014). They address the issue of there being insufficient data on migrant workers. This is in addition to the data being biased since illegal migrants may opt for unofficial channels that are not considered in the remittance estimates. However, Alvarez et al. (2015) seem to express a different view from Ratha’s in that there have been made changes in measurements with time; hence the data collected can be viable.

Questions and answers.

  1. Is money laundering the only reason for remittances regulation?

No. Governments of various countries may formulate regulations on remittances in a move to encourage investment in local products and services and prevent the repatriation of company profit. A good example is Brazil, where progressive rates have been imposed on all remittances, send to other countries from multinational corporations ().

  1. Which country has the highest amount of remittances outflow?

The United States of America has the greatest number of remittances going out of the country. It can be noted that India is the world’s largest receiver of remittance around the globe, with 80 billion dollars being transferred to the country in 2018.

  1. Should remittances transfer via unofficial channels be considered in the estimation of bilateral remittances?

Yes. Most of the migrants usually work in foreign countries illegally. This means in order to avoid detection while transferring remittances, they prefer the unofficial methods. This makes the data estimates for remittances by IMF and World Bank bias considering the amounts sent through unofficial channels may be huge (Alvarez et al., 2015).

  1. Is there an impacton the economy of developing countries receiving remittances?

Yes. Monetary policy development, as well as financial markets, can be stimulated by the provision of remittances, especially in the developing countries (Peter et al., 2012, p. 520). They improve the allocation of capital, credit capabilities for the poor in addition to taking the place of lack of financial development in the process of improving the growth of the economy.

  1. Do remittances have a negative effect?

Yes.The transfer of remittances may act as avenues for money laundering, which fines the criminal undergrounds. If developing countries do not diversify their source of revenue, they may rely on remittances leading to a moral hazard (Bussolo et al., 2008, p.750). The migrants sending remittances also get charged costly for the transfer of the funds.



Ratha, D. (2014): The hidden force in global economics: Sending money home’, TED Talk

Alvarez, P.S. et al. (2015):‘Remittances: How reliable are the data?’ Migration policy practice V (2): 42-46

Clemens, M. A., and D. McKenzie (2014) ‘Why Don’t Remittances Appear to Affect Growth?’ CGD Working Paper 336, Centre for Global Development, Washington, D.C

Bussolo, M. and Medvedev, D. (2008) ‘Do remittances have a flip side? A general equilibrium analysis of remittances, labor supply responses, and policy options for Jamaica’, Journal of Economic Integration, 23 (3), pp. 734-764

Roy Peter, D.K. 2012, “Dynamic multiplier effects of remittances in developing countries,” Journal of Economic Studies, vol. 39, no. 5, pp. 512-536.




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