The importance of sending money ‘home’
Barclays bank wants to stop supporting money-transfer operations in Somalia, but official figures say that the money that migrants from developing countries wire to relatives is more valuable than foreign aid
A petition containing more than 25,000 signatures was delivered to Downing Street on Wednesday urging the prime minister to put pressure on Barclays bank to reverse its withdrawal of support for 250 money-transfer companies operating in Somalia. Removing the “lifeline” of diaspora remittances, claim the signatories that include the Somalia-born double Olympic champion Mo Farah, it “could mean life or death to millions of Somalis”. Following a tightening of banking regulations, Barclays says it only wants to work with money-transfer companies that “have sufficiently strong anti-financial crime controls”.
The emotive stand-off has highlighted the growing importance of remittances sent “home” by migrants to their families. The World Banksaid earlier this year that remittance flows to developing countries have more than quadrupled since 2000. In 2012, it estimated that diaspora remittances to developing countries were worth $401bn and is predicting this to rise to $515bn by 2015.
The leading recipient of “officially recorded” remittances in 2012 was India with $69bn, followed by China ($60bn), the Philippines ($24bn), Mexico ($23bn) and Nigeria and Egypt ($21bn each). But all these countries have large populations with proportionately large diasporas spread across the world. When remittances are viewed as a percentage of GDP, the top recipients in 2011 were Tajikistan (47%), Liberia (31%), Kyrgyz Republic (29%), Lesotho (27%), Moldova (23%), Nepal (22%) and Samoa (21%).
However, the World Bank admits that the “true size of remittances are much larger than these official figures”. In April, Adams Bodomo, the African studies programme director at the University of Hong Kong,published research showing that Africans living outside the continent now send “far more” money home – “in value and usefulness” — than is distributed by aid donors from developed nations. In 2011, remittances sent to developing countries were valued at $351bn, compared to $129bn in official foreign aid. But Bodomo says the real figure could be up to four times higher.
“Africans living abroad send money back home through wire transfers that can be tracked. But they also send money unofficially through parcels in the mail or deliver it personally on visits to the family. Up to 75% of remittances sent to Africa arrive through informal channels, according to African Development Bank estimates,” he wrote on theGood Governance Africa website.
He added: “Africans living abroad send money home on a regular basis directly to family or friends, who can judge their needs better than the government. These monies go directly towards paying school fees, building houses and growing businesses … Remittances are more efficient than foreign aid because they come without conditions, for the most part. They are gifts of love to family members meant to bring about the development of the family – and hence the nation. Foreign aid funds, on the other hand, are not free gifts.”
But wiring remittances is a far-from-efficient process, as anyone queuing up outside, say, a Western Union or Moneygram will tell you. On average, the traditional money transfer companies take a 10% commission. No wonder peer-to-peer transfers via mobile phones and the internet are proving increasingly popular.