Remittance
Remittances are the transfer of funds between parties as a bill, an invoice, or even a gift. However, "remittance" refers more broadly to the funds migrants send to their relatives in their home country while working and living abroad. These are also referred to as worker or migrant transfers.
What is a remittance?
Remittance means "send back." In terms of money, a remittance is the sending of money to a recipient who lives abroad. Most families living in slow-growing economies and developing nations rely heavily on these remittances as their main source of income. Foreign workers who send a portion of their pay to their families back home frequently do this.
Most money transfers are now done electronically. You can do this with the help of a money transfer service or a bank's electronic payment system. With this method, the person who sends the money pays a fee for the transfer. Since digital transfers usually take less than ten minutes and save time, this is often the most popular way to send money abroad.
People who live in small, developing countries with slow economic growth depend a lot on remittances because family members who work abroad send them a big chunk of their money this way. When a natural disaster happens, money sent home from abroad is very important because it helps raise money for relief efforts.
These things greatly improve living standards in less developed countries with slow economic growth. With these remittances, people in less developed countries can open bank accounts, which is good for economic growth.
Recognizing Remittances
Most remittances come from people who work abroad and send money to their families back home. The most common way to send money abroad is through an electronic payment system at a bank or a money transfer service like Western Union. Most of the time, the people who use these services pay for them. Transfers can get where they need to go in as little as ten minutes.
Remittances are becoming more and more important to the businesses of small and developing countries. They want to help fight poverty worldwide and raise living standards in countries with low incomes. They also help with disaster relief and often go above and beyond what official development aid does (ODA).
Since the late 1990s, remittances have been more important than development aid; in some cases, they make up a big part of a country's GDP (GDP).
In 2018, the amount of money sent back to low- and middle-income countries reached a record high of $529 billion. This was 9.6% more than the previous record high of $480 billion in 2017. In 2018, $344 billion was spent on foreign direct investment in these countries other than China. The total amount, which goes from $633 billion in 2017 to $689 billion in 2018, includes money sent back to high-income countries.
People in less developed countries can also use remittances to help them open bank accounts, which helps the economy grow.
The 2020 Financial Crisis
The economic crisis of 2020 was terrible for migrants and their families back home.
Bank of the World said that by the end of 2020, family remittances would be 14 percent lower than before the epidemic. In addition to a drop in new migration and an increase in migrant repatriation, it also predicted a rise in migrant unemployment.
There are good reasons to worry about the high cost of international remittances, especially since there is more attention on global financial inclusion. Some countries only allow bank wires for remittances because they are more transparent. However, the Bank of the World says that banks are the most expensive way to send money, and wires are especially expensive.
In the first three months of 2019, banks charged an average of 11 percent to move money. On average, post offices charged more than 7 percent. If the destination is an island in the Pacific Ocean or Africa, the fees may be more than 10 percent.
Specific Considerations
Financial intelligence agencies are worried that remittances could be used to fund terrorism or launder money.
Rarely do countries let the public know how they keep track of how much money people send back home. Even though most money transfers happen over the Internet or by wire, where they can be easily tracked, a large amount of money is still sent in less clear ways.
As a result of recent fintech waves, the fees for sending money abroad are going down. Payoneer, Wise, and Worldremit are all players on the rise. Western Union is making its hardware more up-to-date. The next step is to set rules and keep an eye on things to ensure that financial inclusion is safer.
What is India’s annual remittance?
In FY21, the remittance to India was $87 billion, representing 2.75% of India’s GDP.
Which countries bring in the most amount of remittance to India?
The top three countries with the most remittance to India are the UAE, the USA, and Saudi Arabia.
Which countries get the most remittance from India?
The countries which get the most remittance from India are Bangladesh, Nepal and Sri Lanka.
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