According to a report released on Monday by the Rome-based United Nations International Fund for Agricultural Development (IFAD), migrant workers living in Europe last year provided a lifeline to more than 150 million people around the world by sending home $109.4 billion in remittances.
A key finding of the report on remittances from migrants based in Europe, Sending Money Home: European flows and markets, flags that benefits for families back home could be significantly higher if they had access to more competitive money transfer markets and targeted financial services to help save and/or invest their funds.
IFAD President Kanayo F. Nwanze underscored, We need to make sure that this hard-earned money is sent home cheaply, but more importantly that it helps families build a better future for themselves particularly in the poorest rural communities where it counts the most.
On the sending end, Western Europe and Russia accounted for 75 per cent of the flows.
In 2014, the six top-ranked sending countries were the Russia ($20.6 billion); the United Kingdom ($17.1 billion); Germany ($14 billion); France ($10.5 billion); Italy ($10.4 billion); and Spain ($9.6 billion).
Despite these numbers, the report notes that remittances amounted to less than 0.7 per cent of individual country (gross domestic product) GDP representing an insignificant outflow of wealth from the host countries.
On the receiving side, in 2014, about one third, or $36.5 billion, of European remittances went to 19 countries in the Balkans, the Baltics and Eastern Europe, including 10 European Union member States.
The remaining two thirds, or $72.9 billion, went to some 50 developing countries outside of the continent.
Of the 19 European remittance-receiving countries, the report showed that nine agriculture-based economy States relied heavily on Europe flows highlighting a GDP representation of 22 per cent in Moldova and 17 per cent in Kosovo.
Beyond Europe, Northern Africa and Central Asia were the regions most reliant on European flows, largely from France and Russia, respectively.
As unprecedented numbers of refugees fleeing conflict enter Europe, the report also notes that the continent was a source of considerable remittances to fragile States including Iraq, Mali, Somalia, Sudan, Syria and Yemen with the potential to help stabilize and rebuild, if better leveraged.
While the majority of remittances are used for basic goods, such as food, clothing, shelter, medicine and education, studies indicate that up to 20 per cent could be available for savings, investments or to repay loans for small businesses.
With 40 per cent going to rural areas estimated to equal at least three times official development assistance to developing countries the report suggests that remittances play a critical role in transforming vulnerable communities.
Nwanze emphasized that the immense potential of remittances for development is still largely underutilized but it is within our capacity to make every hard-earned euro, ruble, pound, krona, or Swiss franc sent home count even more.
If migrant workers and receiving families in rural areas had more options to utilize their funds, such as improved access to basic financial services like savings and credit and non-financial including technical assistance for business development or financial education programmes IFAD estimated that of the $80 billion globally that could be available for investment, about $34 billion could be for rural areas.
Remittances offer a unique opportunity to bring millions into the formal financial sector, said Pedro De Vasconcelos, co-author of the report and Coordinator of the Financing Facility for Remittances at IFAD.
He said, Given the frequent interaction between remittance senders, receivers and the financial system, remittances could spark a long-term and life-changing relationship.
While significant progress has been made over the last few years to lower transfer costs, De Vasconcelos added that more could be done through increased competition.
By reducing transfer costs to 5 per cent, as per the G20 objective set in 2009, an additional $2.5 billion would be saved for migrant workers and their families back home.
The report will be presented in Milan from 16 to 19 June at the fifth Global Forum on Remittances and Development, where Heads of State, policymakers, private sector stakeholders and civil society leaders aim to map out the road ahead for enhanced remittances.
The Forum will open with the first observance of the International Day of Family Remittances.