In some African countries, Christopher Lydon reminds us on his show Radio Open Source, money sent home from abroad now makes up a quarter of the Gross National Product. We're covered remittances before (and some of the innovations being tested to make helping the homeland easier), but this show is a fabulous introductory overview of the concept and the controversies:
Migrant workers will remit more than $232 billion to their families this year. The money migrant workers earn harvesting produce in California, cleaning houses in Singapore, and tending children in Kuwait is meager by the standards of the developed world, but it means everything for their families back home. $232 billion is twice what the world paid out in international aid last year; in Latin America it was more than aid and foreign direct investment combined. This is big business, and economists are just starting to take notice.
This year, the LA Times has been running a series of articles on remittances, calling them The New Foreign Aid. Policy makers like this line they like to shrug off questions about the slim foreign aid budget by coupling those numbers with the huge sums of money that workers are remitting home. Its all going to the same place, right?
Thanks for posting this. I'll read the article whe n I have a chance.
This reminds me of a response on a similar topic that I posted to another friends blog. Ive poked at the issue a bit and learned a few things.
AS you note, these remittances are often from low paid service workers sending money to family. Many of these are here illegally. Of the $20 billion (thats billion with a b) sent to Mexico by the estimated 9 million family members in the States, $18 billion went through the wires.
Fees are about 5% and the transaction can take days to complete.
Doing the math, thats almost a billion dollars in fees, and another $10 million in returns on the float. Most of these folks use transfer agencies (think Western Union) because they are afraid that banks will report them to the government. Rather than earning nearly 4% on the money they earn, theyre paying that amount. (If you dont think 6% is much, your money doubles in just over 12 years; and paying it rather than earning it is a 10% spreadthats real money for folks who cant afford it).
This is our government at work.
So, anyone want to start a service workers credit union?
Thanks for pointing this story out Alex. The article was a fascinating read.
A non-profit wire service to provide cheap and reliable international transfers would seem to be a really powerful and positive next development endeavor for an organization like the Grameen Bank. Imagine them stepping into the transfer market and undercutting that brutal 10% transfer fee by like 7%, then applying their own 3% fee to microlending in the communities where the remmitances are going even 3% of this flow of billions in capital would add up very quickly. As the LAT points out, while this flow has many great characteristics about it, its not optimized for building community fundamentals in the communities where it terminates, e.g. health services and education (especially when transferers are getting soaked by the transfer companies).
i'm seeing a partnership between the Grameen Bank and a foundation willing and able to think really big as far as building and maintaining new networks like that....
Grameen + Google.org in five years maybe? ;)