Remittance: the state of play

June 12, 2015

Remittance, sending money from a migrant person’s place of work to their home country, is the lifeblood of today’s global society.


It flows silently and unseen, from family member to family member, providing livelihood and often crucial sustenance while cementing relations across thousands of miles. In a recent article, Canadian born Sarah Hagi described remittance as “one of the most subtle and most meaningful reminders of my heritage”, a rock solid link to a place you don’t need to be born in to call home, borne of a duty to serve your family.

And it’s growing. This year, despite the currency weakness of origin countries, the World Bank estimates the global value of remittance to developing countries to be almost half a trillion dollars. In India, a country that regularly tops the list of remittance destinations worldwide, the value of remittances sent home are triple that of foreign direct investment.

But the price of such crucial financial aid is high – in some cases, prohibitively so. The cost of remittance to African countries remains stubbornly at 12%, representing a “$2 billion remittance supertax”. To some countries within the region, the cost of remittance is as high as 29%, while the global average remains a still sizeable 7.8%. For every $100 a worker sends home, their family members only see $92.

Why is remittance so costly in exactly those countries where it’s proving most helpful to fostering economic growth? While the reality of remittance is intertwined with the existence of migration itself, its role in the international economy has only exploded in the last couple of decades. In this new but ferociously growing market, a very small number of companies have been able to exert near monopolistic power, choking families’ ability to send money home.  It is accepted by academics and policymakers alike that the cost of remittance must primarily be tackled by loosening this stranglehold, and nurturing competitors to the likes of Western Union to help bring down their margins.

Across the world, people are calling for lowering the costs of remittance, to encourage remittance especially to communities where foreign aid is either insufficient or ineffective. As World Bank Chief Economist Kaushik Basu argued, ‘remittances act as a major counter-balance when capital flows weaken… Also, when a nation’s currency weakens, inward remittances rise and, as such, they act as an automatic stabilizer’. This has been backed up time and time again. To countries experiencing economic turmoil, not only does remittance provide relief, it stabilises the economy. And while there is progress, there is not enough.

Over the coming weeks. Transfer Guru will look more closely at the costs, inequalities, and solutions to these problems. We want to hear from you on what you look for from a remittance service. What are your experiences of sending money home? What are you looking for from a provider? Tell us below how you would like to see the remittances market changed, from clear T&Cs to lower fees.

We think it’s unfair you pay almost a tenth of the money saved for your families into the pockets of middlemen. We think it’s unfair you are told you’re getting a good deal when you’re not. We’d like to change this.

TransferGuru Research

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