Speaking at a conference on the impact of the global economic crisis on remittances (organized by COS Utrecht, AfroEuro Foundation, OxfamNovib and the ICMPD), Dr Manuel Orozco, of the Inter American Dialogue (Georgetown university) explained that annual remittances from the EU and the US to developing countries will decline by $32 billion. Participants at the 19 March conference heard that the crisis may reduce remittances. They also heard that it has made many re-examine how they can make more effective use of the money transferred. Ways to reduce transfer costs, ensure payments are sensibly used and raising financial literacy were all discussed.Ten lessons emerged from the presentations and discussions:
1) Remittances are critical to different extents in different developing countries: They contribute around 25% of GDP in Sierra Leone and Suriname.
2) Changes in prosperity in the EU already impact heavily on remittances from the UK, Spain and Italy. The EU as a whole makes up 1/6th of global remittance flows.
3) More migrants shift to the grey economy as countries tighten their regulation and as anti-immigration sentiment rises.
4) Decline in remittances is felt in three areas: asset building, poverty reduction and the multiplying effect of local purchases by recipients.
5) The loss of incomes in developing countries can cause migratory pressures, but some speakers stressed that the global crisis could deter migration as prospects are reduced in the developed world.
6) Remittances and capital flows from the EU represent 10% of foreign aid. They are substantial comprising direct remittances, nostalgic trade (purchase of items from origin country), donations and investments.
7) Different effects of the crisis, such as the impact of mortgage costs, often has a smaller impact on migrants. The crisis may be an opportunity for migrants to re-examine remittances and ensure the recipients use them wisely, by controlling the way the payment is made.
8) Approaches to alleviate situation focus on financial literacy. E.g. the inter-american dialogue worked with a project using $80,000 to reach 25000 people, with a financial literacy program convincing 5000 people to mobilize 1000$ deposits into microfinance institutions.
9) Some remittances go further because of devaluation, Seychelles currency has fallen 52% Ukraine by 34% and South Africa by 27%.
10) Efforts to reduce the cost of transactions have ranged from negotiations with banks, the introduction of deregulation to encourage competition and allow new intermediaries, and the use of new technologies such as mobile phones for micro payments and websites such as geldnaarhuis.nl to compare options.
See some blips interviews recorded during this event:
- Chukwu-Emeka Chikezie, Afford UK
- Pedro de Lima, European Investment Bank
- Leila Rispens-Noel, INAFI International
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