How Family Ties Are Fueling the Global Economy

3 min read|Apr 29, 2022|fbtwitteremail

Global remittance payments have been sustaining small economies around the world. In some cases, they bring more money into countries than international aid. And they're a major part of a lot of family budgets.

What is a remittance payment?

Technically, it’s a payment transferred from one party to another.But, today, most people use the term to describe money transferred to a family from a relative living abroad.

How does global remittance work?

Senders save up a portion of their income to pass along to family members who live in another country. Then they remit (or transfer) the money.The payments are usually sent via an international wire transfer or money transfer service.Think: Western Union. Recipients then use the money to cover food, clothes, and other family expenses 

How can I send a global remittance payment?

Start with a money transfer service. And be prepared for the associated fees. Because they’re pricey. Fees linger around 7% of the amount sent. But some countries plan on reducing fees to 3% by 2030. In 2019, about $38.5 billion went toward remittance fees. Here are your options for sending payments:

Money transfer services

Third-party money transfer providers like Western Union and MoneyGram offer remittance services. Some also offer expedited services depending on the recipient country.

Banks and credit unions

While some senders experience difficulty finding banks abroad, lots of financial institutions offer to transfer global remittance payments directly from your account.Fees apply, of course.

Checks and money orders

Some senders use checks and money orders to send payments via snail mail. While this option eliminates the fees, it definitely doesn’t come with the convenience of speedy delivery.

Who’s making remittance payments?

Most remittances from the US are sent by low-income migrant workers.

How many are we talking about?

According to the United Nations, about 1 billion people are involved in sending or receiving remittance payments.And around 800 million are recipients. On average, migrants usually send 15% of their income to their relatives.Think: $200 to $300 every two to three months.Which usually makes up about 60% of the household income for relatives in countries like Nepal, Haiti, and Liberia.

Why are remittance payments a big deal?

Because they play a major role in the global economy. They’re one of the largest sources of income for millions of families.Yep, more than international aid. Even the COVID-19 pandemic didn’t stop the remittance flow.The World Bank found remittance flows to the Caribbean and Latin American countries grew 6.5% to $103 billion in 2020. Because remittance payments usually increase during times of crisis or family emergencies.

theSkimm

Remittance payments have been a major player in the global economy since the '90s. With no signs of slowing down. Especially not during a crisis like the COVID-19 pandemic. And now you know how to send one to your relatives abroad.





Skimm'd by Dae Cason, Megan Beauchamp, Sagine Corrielus, Liz Knueven, Stacy Rapacon, and Alicia Valenski