Donald F. Terry, Senior Fellow, Jonathan Edwards College, Yale University
The history of remittances is short. It was only 25 years ago (1993) that Western Union rebranded its money transfer product as Dinero en Minutos (Money in Minutes) for remittances from the United States to Mexico. But they didn’t know how big that market was. Nobody knew as the data weren’t there. Fifteen years ago, remittances were unaccounted for by the World Bank Group, the International Monetary Fund (IMF), and central banks. Sending and receiving didn’t make it to their ledgers. Only ten years ago, M-PESA was starting in Kenya. Five years ago, digital was barely mentioned at conferences like this one.
Even today, there are places in the world where nobody knows what is happening in the remittance market, because the information is not considered valuable, and the people are not valued. There’s a long way to go, but the future is in remittances.
Today, a lot is known about how much is sent and received through formal channels, but very little about the remittances sent informally. Transaction costs were once predatory. They became expensive. Now they are just too high. Eventually, they will get to a reasonable cost of 3% as foreseen in SDG 10.c.
Although remittance volumes and costs are known, it is crucial to focus on the receiving side of remittances and the impact they can make in communities and countries of origin. Going forward, we must focus on what we will do with the resources being sent.
Countries and families are not fated to be forever reliant on remittances. Malaysia is very good example of this truth. Two million documented migrant workers (and approximately one million undocumented) send money home to their families in the region. Malaysia is able to provide resources that support another 10 million people outside of Malaysia. Those are real people with real aspirations, who need more options to use money productively and to give those aspirations real capacity.
De-risking is a fraud. The banks simply don’t want the customers. If we are truly interested in stopping terrorism, then we must provide financial inclusion to the millions of people who need it. The answer is in Know Your Customer, Know Your Diaspora: more financial inclusion equates to less terrorism.
There are five pillars to take away from this conference.
1. Recognize the significant contribution of migrant remittances and diaspora investments to achieving the SDGs.
2. Expand and strengthen the collection, analysis, and application of remittance-related data to foster effective public policies and private-sector investment.
3. Review legal and regulatory frameworks to ensure that they are spurring competition, innovation, and technology, leading to greater market efficiency and lower costs.
4. Support financial inclusion and facilitate asset building in order to leverage the impact of remittances and diaspora investment.
5. Convene public, private, and civil society meetings from the local level up to engage in strategies, policies, and actions, and evaluate the implementation efforts.