Migrants' Contributions Exceed Figures of Foreign Aid

A recent United Nations study revealed that migrants working in industrialized countries sent home more money than donor nations did in foreign aid in 2006. I guess you’re wondering how much funds a group of migrant workers could provide in comparison to that of entire countries? To be exact, migrants working in developed countries (DCs) sent home an approximated $300 billion to their families in 2006 – surpassing the $104 billion provided by donor nations in foreign aid to less developed countries (LDCs). Therefore, how do international institutions like the U.N. expect to accomplish its objectives, as in those set forth by the Millennium Development Goals (MDGs), if migrants can provide more funds than it does in foreign aid?

According to Sending money home: Worldwide remittances to developing countries, a report generated by the International Fund for Agricultural Development (IFAD), Asia received the largest share of the remittances – more than $114 billion – followed by Latin America and the Caribbean with $68 billion, Eastern Europe with $51 billion, Africa with $39 billion, and the Near East with $29 billion. Kevin Cleaver, Assistant President of IFAD, stated in a U.N. News Centre article that, “[These figures], which [are] conservative estimates, shows that the seemingly small sums sent home by migrant workers when added together dwarf official development assistance.” The study also found that the remittances sent home regularly by more than 150 million migrants exceeded foreign direct investment (FDI) in developing countries, which in 2006 totaled around $167 billion.

Nevertheless, it would be quite impractical to try and regulate this phenomenon within the countries of which these funds are being outsourced. These transactions are typically sent in the denominations of hundreds of USD at a time, through more than 1.5 billion separate financial transactions. It can be argued that this money is not being recycled within the economy and is in turn hurting these countries. This has been one of the leading arguments for stricter immigration policy amongst advocates within the United States. However, to my knowledge, no nation has seemingly faltered as a result of this to date.

Instead of dwelling on the facts, policies should be set forth abroad by international institutions to productively guide these funds to stimulate economic growth. The report provided by IFAD shows that a majority of these remittances flow to families in rural areas, and is mostly used for basic necessities such as food, clothing and medicines. Yet, 10 to 20 percent is being saved, but not in the proper financial institutions. Therefore, to effectively utilize the money being saved in LDCs, which in 2006 would have amounted to between $30 and $60 billion, organizations like the U.N. should provide educational programs to encourage people in LDCs to save their money in financial institutions, which would then create major opportunities for local development.

In theory, in addition to increased foreign aid for LDCs, the U.N. must harness these funds and increase efforts to leverage remittance flows for greater development impact. The key to resolving the overlying problem of LDCs’ governments inefficiently allocating resources is to better direct their economic plans. If these remittances sent by migrants were effectively used by LDCs in addition to foreign aid provided by DCs, the total amount of funds available for economic growth in 2006 would have been, at most, $164 billion; not to mention the $167 billion already provided in the form of FDI that would have allowed for significant global progress towards accomplishing the MDGs.