Remittance flows are projected to see their sharpest decline in history, falling by 20 percent in 2020
With the significant decline in money sent home by migrants due to the impacts of the novel coronavirus pandemic, the United Nations' International Fund for Agricultural Development (IFAD) on Monday called for governments across the world to declare remittance service providers essential businesses in times of crisis.
"Remittances are a lifeline for poor families in low- and middle-income countries. Governments should take measures and do everything possible to facilitate the flow of funds during crises like the Covid-19 pandemic," said Gilbert F Houngbo, president of IFAD, on the occasion of the International Day of Family Remittances.
The Covid-19 restrictions have hit the economic sectors that employ migrant workers – such as tourism, hospitality and agribusiness – hard. As a result, many migrants have become underemployed or unemployed. Remittance flows are projected to see their sharpest decline in history, falling by 20 percent in 2020, according to a press release of IFAD.
The closure of remittance service providers during lockdowns has further exacerbated the ability of migrants to send money back to their families. An IFAD survey last month of the Senegalese diaspora in France found that about 30 percent of those who stopped or reduced sending money home did so because their money transfer operator was closed, or informal networks were no longer operating.
"IFAD is now tracking the impact of declining remittances on the 'receiving end' in developing countries, where typical remittances of US$200 to $300 per month account for about 60 percent of household income," said Pedro de Vasconcelos, the head of IFAD's Financing Facility for Remittances.
"While the reduction in remittances will not fall evenly across countries and communities, the impact is likely to be substantial in rural areas where remittances count the most," he added.
Hundreds of thousands of migrants have returned home to their rural communities. At the same time, their families are also negatively impacted by lockdown measures that have paralysed economic activity and destroyed livelihoods in their countries of origin.
With both sides of remittance corridors simultaneously affected, disruptions directly affect the lives and livelihoods of one billion people: 200 million migrants who send money to their 800 million relatives. Almost half of these families live in rural areas where poverty and hunger are high. This year, tens of millions of families who rely on received remittances will fall below the poverty line, resulting in more hunger and less spending on education and health.
"While keeping remittances services running through the crisis will certainly reduce some of the impacts of the decline in migrant incomes, there urgently needs to be a greater reform of the system so that after this crisis ends, migrants can send their money home faster, safer and cheaper," said de Vasconcelos.
To address the situation, IFAD calls on governments to develop more conducive policies and regulatory environments that enable competition, regulation and innovation on the remittance market. It also says these services should be declared essential.
Further, IFAD asks private sector entities to invest in developing innovative technological solutions for remittance transfers to: reduce costs, improve speed, enhance security, and increase flows through digital means to remote areas.
Additionally, access to remittance services, especially in poor rural areas, needs to be improved, says IFAD. There should be incentives to develop and use digital products that link remittances to a full range of financial services so that migrants and their families can be encouraged to save and invest their money – creating more opportunities for themselves and their communities.
Since March, IFAD has led a global Remittances Community Task Force – comprised of 35 international organisations, inter-governmental bodies, industry and private sector groups, plus networks of diaspora organisations – which is working on a series of concrete measures to help mitigate the impact of the Covid-19 crisis on the lives of the one billion people directly involved in sending and receiving remittances.