Remittance Channels Research Articles

Are remittances “resilient?” Evidence from Sri Lanka between COVID-19 and the crisis

Remittances have been characterized as resilient flows of capital that provide financial relief to migrant households and emerging economies during downturns, crises and other periods of hardship. This article examines patterns of remittance transfer to Sri Lanka between January 2020 and December 2022, drawing on Central Bank statistics and online remittance surveys with migrant workers to test prominent assumptions about the drivers of remittance behavior. Findings indicate little evidence to support explanatory factors linked to the resilience hypothesis, instead pointing to the likelihood that fluctuations in official remittance figures reflect shifts between formal and informal remittance channels.

Covid–19: Foreign Remittances and Migrants' Well-Being in Bangladesh

ABSTRACT: The COVID-19 pandemic has disrupted every sphere of life and livelihoods around the world. Many migrant workers from the Global South, such as Bangladesh, working in the Gulf countries were reported to be impacted by COVID-19, but the direct voices and views of migrant workers themselves and their households are largely unknown. This research adopts a mixed-method approach to assess the impact of the pandemic on foreign remittances to Bangladesh and the well-being of migrant households. The primary data collection involved fieldwork conducted in four migrant-dense villages, situated in Mymensingh and Meherpur districts of Bangladesh. A set of 221 household surveys was administered. In addition to the surveys, 52 semi-structured interviews were carried out, engaging with key individuals at community, district, and national levels such as heads of migrant households, returnee migrants, managers of migration financiers, owners of labor recruiting agencies, officials of the district manpower office etc. Results show that although a significant number of Bangladeshi migrant workers returned home since the COVID-19 pandemic and the outflow of Bangladeshi migrant workers shrank by 69 percent in 2020, remittance inflows at the national level witnessed a growth of 18.5 percent in 2020, which did not resonate with the negative prediction made by the World Bank. However, this research found a macro-micro mismatch, indicating a substantial decline in remittances at the household level. This might be due to the existence of a robust unofficial channel for remittance sending. Approximately 62% of migrant households in the case study sites experienced a 32% reduction in remittances during the COVID-19 pandemic compared to the pre-COVID-19 period. In response to the decline in remittance income, a majority of migrant households (77%) resorted to utilizing their accumulated savings. Additionally, approximately 20% of households sought financial support and borrowing from friends, relatives, and community members. At the community level, the local economy experienced a sharp downturn, leading to a ripple effect that affected everyone within the community. To address the unofficial remittance sending, the Government of Bangladesh should implement effective measures to curb unofficial remittance channels. Upskilling initiatives have the potential to alleviate the vulnerability of Bangladeshi migrant workers, fostering increased income stability. Policymakers should place greater emphasis on crafting savings instruments tailored to the specific needs of migrant households. It is also imperative to prioritize an income diversification policy at the community level to mitigate dependence on remittances.

THE IMPACT OF FINANCIAL INCLUSION OF MIGRANTS ON ECONOMIC GROWTH

Introduction. In the global economy, people migrate between regions or countries in searching better life. The migration is beneficial for both the country of origin and the host country. Economic benefits consist in sending money by migrants’ home through various remittance channels such as commercial banks, cash money market, electronic transfers. That is why the lack of access to regular financial services is a significant challenge to the economic independence of migrants and their self-sufficiency. As a result, international humanitarian organizations are increasingly promoting the financial integration of refugees, their empowerment, integration into the host economy, promoting self-sufficiency and financial inclusion. This actualizes the scientific research of economic growth and financial inclusion of migrants, because a passive response to the problem threatens the harmonious development of regions that are actively involved into migration processes. The purpose of the article is the research with focus to analyze the constituent elements of economic growth in the conditions of migration flows increasing and to outline directions for strengthening the financial inclusion of migrants. Results. The constituent elements of economic growth in the conditions of financial inclusion of migrants were considered. It was provided a taxonomic analysis of the theories of migration, its motivation and attraction factors. The Ukrainian economy was analyzed under of migration flows growing, estimated the pace of its recovery and reconstruction due to international aid and remittances from migrants. It was evaluated the financial integration and financial inclusion of migrants in terms of the availability of basic financial services. The factors affecting the financial inclusion of migrants and preventing the receipt of financial services were identified. It was outlined the directions for strengthening the financial inclusion of migrants. Prospects. The subject of further scientific research is the research of the level of digital financial inclusion of migrants, which can become an effective tool for overcoming socio-economic problems and stimulating economic development.

Parental migration, sibling migration, and the educational outcomes of children left behind in rural China

In the appearance of massive rural–urban migration in China, there is an increasing number of left-behind children in rural areas. Extensive literature has examined the impacts of parental migration on the educational and cognitive development of rural left-behind children and had mixed findings. However, the influence of sibling migration and the potential channels have been mostly omitted in previous research. This study aims to evaluate the associations between parental and sibling migration experience and rural left-behind children’s educational outcomes through the channels of remittances and children’s time allocation, and explores gender differences in the overall association and particular channels. We utilize data from the 2014 and 2018 waves of the China Family Panel Studies (CFPS) and include 2,313 children aged 10–15 in rural China. We propose a conceptual framework and apply structural equation models to identify the overall effects and channels through which parental and sibling migration experience might affect rural left-behind children’s educational expectations and cognitive test scores. Our results show that sibling migration experience harms rural left-behind children more than parental migration experience, and the negative effects are especially pronounced to girls. Remittance sent back home partially offset the negative effects of parental and sibling migration experience on rural children's educational expectations.

Nexus between financial inclusion, workers’ remittances, and unemployment rate in Asian economies

Unemployment is one of the biggest macroeconomic issues, and economists and policymakers have provided various options to tackle this menace. Financial inclusion and remittances are an important part of any economy and help increase the level of employment. However, despite extensive research, several gaps and issues in understanding the intricate relationship between financial inclusion, workers’ remittances, and the unemployment rate in Asian economies persist. This paper seeks to bridge these gaps and address the issues by examining the relationship between financial inclusion, workers’ remittances, and the unemployment rate in Asian economies using rigorous econometric methodologies, such as two-stage least squares (2SLS) and generalized method of moments (GMM) methods. The findings of 2SLS and GMM demonstrate that ATM, remittances, internet users, GDP, and financial globalization adversely influence the unemployment levels in Asia, Central Asia, East Asia, Southeast Asia, West & Middle East Asia, and South Asia in 2SLS and GMM models. However, the influence of inflation on the unemployment level is favourable in some regions. Therefore, it is important to give priority to policies that encourage financial inclusion, such as increasing underprivileged populations’ access to banking services, credit, and insurance. Moreover, reducing transaction costs, streamlining money transfers, and promoting formal remittance channels can boost remittances.

Impact of informal remittance channels in Bangladesh: Understanding the role of hundi in financial crime beyond economic aspects

Despite the existence of legal and regulated systems, a significant proportion of Bangladeshi immigrants choose to utilize informal channels for the purpose of transferring funds. This practice has the potential to result in macroeconomic ramifications for Bangladesh. The rise of Hundi in Bangladesh has emerged as a noteworthy economic issue in recent times, particularly owing to its detrimental impact on the nation's foreign reserve and its utilization as a conduit for money launderers to unlawfully move funds abroad. The primary objective of this research is to analyze the implications of Hundi as a means of facilitating illicit financial operations. This study utilizes a qualitative research approach and a purposive sample consisting of 16 hundi dealers, 23 customers, and 7 senior bank officials working in the banking intelligence sector to investigate the hundi system's role in money laundering, despite the difficulties in accessing influential hundi dealers involved in significant transactions. The findings underscore the adverse economic consequences of Hundi, as it bypasses formal channels, thereby failing to contribute to Bangladesh's foreign reserves. Furthermore, it points out the exploitation of Hundi as a means for money laundering, enabling the assimilation of illicit funds into the legitimate economy, and supporting unlawful endeavors such as overseas property acquisition. The recommendations put forth suggest the implementation of strategies to enhance digital transactions, the establishment of a dedicated remittance application, and the design of a user-friendly agent banking system within the formal banking sector.

Towards an encompassing concept of remittance in the digital era: Assessing the role of formal banking and mobile money accounting in its spatial flow

Drawing from capital mobility theory, this article adopts an encompassing view on remittance that covers both domestic and international financial transfers, to retrospectively explore and evaluate the relative influences of formal banking (FB) and mobile money accounting (MMA) on the extensive supply of remittances from individuals living within the economic community of the West African states (ECOWAS), during the COVID-19 pandemic. To that end, the study uses random utility maximization to model ECOWAS level data extracted from the 2021 Global Findex Survey. The results show that FB and MMA had respectively 12.2% and 54.5% positive impacts on the marginal utilities (MUs) individuals derive from supplying remittances. The comparative evaluation of the two remittance channels suggested that FB and MMA were neither substitutes, nor complements into the individual’s extensive supply function of remittances within ECOWAS. However, MMA was found to be 4.47 times more effective than FB, at driving outbound remittance behavior. Additionally, the findings revealed a significant income gradient in outbound remittance behavior; as well as highlighting a 22.4% gender based gradient in remittance sending in favor of females; and a 6.4% regional gradient favoring urban residents. Moreover, the econometric findings suggested that expending financial inclusion through easing access to key financial products and services; as well as government welfare programs, and employment income, significantly increased the likelihood of remittance sending within the ECOWAS bloc. Hence, important implications for endogenous regional growth and future research are discussed.

Remittance Modality: Unpacking Canadian Money Transfer Mechanism Choices

Numerous international development targets aim to encourage and formalize remittances, because they can support development efforts while controlling and monitoring illicit capital flows. Despite continued efforts to promote formal remittance channels, informal remittances flourish among specific population groups. This study uses data from the Canadian Study on International Money Transfers to analyze the determinants of remittance modality or channel choice. Previous empirical work tends to classify remittances as either formal or informal. In contrast, this article considers a variety of channels. It shows that the dichotomization of formal versus informal remittances masks crucial differences across remittance channels. Due to Canada's unique geographical positionality, cash transfers operate distinctly from informal methods despite often being treated as a homogenous group in other studies. Interestingly, remitters are also more likely to use formal money transfer operators (most of which offer cash pickup options to recipients) than informal channels to send funds to countries with larger informal sectors. Within the context of Canadian remittance outflows, this invalidates the frequent assumption that more informal destination country economies push remitters to opt for informal transfer methods.

Estimating the magnitude of money laundering in the United Arab Emirates (UAE): evidence from the currency demand approach (CDA)

PurposeDespite the vulnerability of rapidly developing and emerging market economies, researchers have paid less attention to the determination of the size of money laundering (ML) in these economies, including the United Arab Emirates (the UAE). Therefore, this paper aims to estimate the magnitude of ML in the UAE between 1975 and 2020 based on the currency demand approach (CDA).Design/methodology/approachThe study uses the Gregory–Hansen cointegration technique alongside the autoregressive distributed lag bounds testing procedure to estimate the CDA model.FindingsThe results illustrate that an amount equivalent to about 19.034% of the GDP is laundered in the UAE between 1975 and 2020, on average, with the value lying between 15.129% and 23.121%. In addition, the results demonstrate the importance of the real estate market, gold trade, remittance channels and the size of the underground economy in facilitating the laundering of illicit funds in the country.Originality/valueTo the best of the authors’ knowledge, the study is the pioneering attempt at estimating the amount of illicit funds laundered in the UAE. Besides, the adoption of a novel, yet robust, approach based on the modification of the CDA technique also sets the study apart as it ensures a correct, clear, unambiguous and indisputable estimate of the magnitude of ML is obtained. In addition, it is expected that the outcome of the study will expand the frontiers of knowledge among policy makers and relevant agencies and ensure the adoption of the most efficient and effective measures to curb the ML menace in the country.

Asymmetric effect of real exchange rate changes on poverty: The role of remittances and the informal sector

The objective of this study is to analyze the asymmetrical effects between the real exchange rate and poverty in some Maghreb countries through the remittances channel and the informal sector channel. We aim at answering the following question: to what extent does the variation of the real exchange rate contribute to explain the evolution of poverty through the channels of remittances and the informal sector? To do so, we applied the NARDL technique on data for three countries (Algeria, Tunisia, and the Maghreb) over the period from 1980 to 2018. The results show that real exchange rate depreciations have a larger positive effect on poverty through remittances. The results are expected to be of considerable importance for developing countries in designing exchange rate and inflation policies that affect the poverty levels of their populations through the remittance mechanism and the size of the informal sector.

Defying the Odds: Remittances during the COVID-19 Pandemic

This paper provides an early assessment of the dynamics and drivers of remittances during the COVID-19 pandemic, using a newly compiled monthly remittance dataset for a sample of 52 countries, of which 16 countries have bilateral remittance data. The paper documents a strong resilience in remittance flows, notwithstanding an unprecedent global recession triggered by the pandemic. Using the local projection approach to estimate the impulse response functions of remittance flows during January 2020–December 2020, the paper provides evidence that: (i) remittances responded positively to COVID-19 infection rates in migrant home countries, underscoring its role as an important automatic stabilizer; (ii) stricter containment measures have the unintended consequence of dampening remittances; and (iii) a shift from informal to formal remittance channels due to travel restrictions appears to have also played a role in the surge in formal remittances. Lastly, the size of the fiscal stimulus in the host country is positively associated with remittance flows to migrants’ home country as the fiscal response cushioned the economic impact of the pandemic.

The role of formal and informal remittances as the determinants of formal and informal finan-cial services

Research background: The choice of financial services and remittances are important as they influence the livelihood of remittance recipients, who are mostly poor and financially excluded. In literature, extensive evidence suggests a positive impact of the size of remittances on access to financial inclusion and financial development of remittance-recipient countries. However, a concern of such studies is that they might provide a biased outcome as the available data of remittances tend to be formal, whereas informal remittances are difficult to observe. Hence, their evidence might not be applicable in developing countries where remittance transfer via informal channels is very popular. Purpose of the article: The main objective of this study is to examine the effect of the remittance channel (formal and informal) on the choice of formal, informal financial services of credit and savings of remittance recipients. Methods: As our dependent variable is a financial service which is a categorical variable (formal and informal), the paper will employ a multinomial logistic regression model to estimate the impact. The data employed in this analysis is from the Finscope survey conducted in Myanmar in 2013 and 2018. Myanmar is the best context for our study, as it is one of a big migrant-sending countries and a developing country whose financial sector is significantly underdeveloped. Findings & value added: Our findings show that formal remittances promote the use of formal financial services such as credit and savings. However, there is no evidence regarding women recipients` informal channels and formal financial services. Our evidence also suggests there is a need for the government to encourage migrant workers to transform informal remittances into formal ones by removing the barriers of formal remittance channels to promote the use of formal credit and saving among remittance-recipients who are poor and financially excluded.

Interactive effect of exchange rates with remittance on informal remittance channel: a dynamic analysis

Purpose- It has been commonly observed that remittance flows to low- and middle-income countries surpassed overseas development assistance. It is also often noted that the sums remitted through formal channels represent only a fraction of total remittances: a large though unknown amount of funds finds its way to families in migrants’ areas of origin through informal channels. In Nigeria for instance, there is high prevalence of informality and the country currently has multiple exchange rates and adopts the managed floating exchange rate system. The objective of this paper is to examine whether multiple exchange rate has been an incentive for the popularity of unsafe informal channels in the remittance ecosystem of Nigeria. In order to achieve the objective, this study examines the interactive effect of exchange rate with remittance on informal remittance channels in Nigeria. Methodology- Annual time series data were employed for the study. The data spanned the period 2004 to 2020 and were sourced from Index Mundi.com and the Global Economy.com. Autoregressive distributed lag (ARDL) model was used to analyze the data. Findings- The interactive term i.e., LOGOEXC*LOGREMR (official exchange rate * personal remittances received) has positive and significant influence on informal remittance channel only in the short run. Conclusion- Exchange rate has been an incentive for the popularity of unsafe informal channels in the remittance system of Nigeria. The implication is that government must carry out exchange rate reforms, including a unified market-clearing rate that reduces the gap between official and parallel market exchange rates which would enhance sending remittances through formal channels. Keywords: Exchange rates, remittance, commercial banks, autoregressive distributed lag (ARDL), Nigeria. JEL Codes: B26, C51 F31

Informal Channel: An alternative for Remittances and International Money Transfers between China and African Countries

Foreigners in different countries rely on different remittance channels for sending and receiving money. This paper analyses the privileged remittances channels that foreigners use in China to send money to their home country and to receive money in China. This paper explores foreigners’ choices of remittance channels in China and the reasons for their choices. On the other hand, the paper aims to highlight the barriers and difficulties foreigners in China experience when sending and receiving money through a formal institution. To the best of our knowledge, this paper is the first to investigate the remittance channels used by foreigners in China; this is the innovation of this study. Using a questionnaire, we collected data from 105 foreigners living in different cities in China; and used descriptive statistics to analyze the data. Findings show that foreigners in China willing to use formal remittances channels face several barriers and therefore rely on informal channels to carry out their transactions of sending and receiving money. To render the formal remittances channels accessible for every foreigner, banks and formal Money Transfer Operators (MTOs) in China should promote English service for foreign customers and deal with computer system problems that reverse names and surnames. In addition, they should deal with the problem of restrictions for some nationalities, reevaluate the transaction amount limits, and offer less complex administrative procedures.

Financial Sector Development and the Preference for Informal Remittance Channels: Evidence from Bangladesh

The potential socioeconomic benefits of remittances remain untapped as a large portion of remittances is transferred through informal channels worldwide. In this paper, we explored the effect of the financial sector development in the home country on the preference for informal remittance channels using a nationally representative household dataset from Bangladesh along with subdistrict level data on bank branches. However, the identification of the effect of the banking network on the choice of remittance channel is challenging due to the unobserved heterogeneity problem. We circumvent this problem by using an instrumental variable (IV) approach. We found that greater accessibility to the banking network at the subdistrict level significantly reduces the use of the informal remittance transfer channels: a 10% increase in the availability of the total number of bank branches reduces the probability of using the informal channels, at least once, by 1.79% and hundi by 2.3% on average. The results are consistent and robust across different specifications and estimation methods. The main policy implication of this result is that the expansion of bank branches can enhance the inflows of remittances through formal channels and thereby can magnify the macroeconomic benefits of remittances globally.

Remittances through formal and alternative channels and its effect on financial inclusion in Kenya

In the current dynamic world, those with no or little access to key financial products and services suffer a great deal of disservice. This study examines the effect of remittance channels (commercial banks and alternative sources) have on financial inclusion and then check the moderating effect of money remittance regulation on the relationship between the remittance channels and financial inclusion in Kenya. It uses the World Bank and Central Bank of Kenya’s dataset on remittances and financial inclusion covering the period from 2009 to 2018. We estimate our model using the Ordinary Least Square assumptions to find the association. We find that remittances from alternative channels other than commercial banks influence financial inclusion in Kenya. We further notice that the money remittance regulations have no moderating effect on the relationship between remittance channels and financial inclusion in Kenya. Our results suggest that commercial banks are not able to appropriately sell their products and services to remittance-receiving households while fintech and other internet remitting service providers seem to roll on products and services that enhance the use of savings and credit facilities. We suggest that more avenues and policies should be enacted to foster the use of alternative sources while improving structures within commercial banks to empower financial inclusion in Kenya

Les enjeux de l'épargne des migrants

Les transferts de fonds internationaux des migrants vers les pays en développement ont totalisé en 2018 la somme de 529 Md$, soit trois fois plus que l'aide publique au développement (APD) et plus que les investissements direct étrangers (IDE). Dans certains pays d'Afrique subsaharienne, ils pèsent jusqu'à 15 % à 20 % du produit intérieur brut. De nombreuses études économétriques se sont intéressées ces dernières années à l'impact de ce flux massif de capitaux étrangers sur le développement et la croissance des pays bénéficiaires, avec des résultats contrastés selon les cas. La première partie de cet article évalue l'intérêt de drainer ces flux à travers le système bancaire (par opposition aux autres canaux de transferts) et de les transformer en épargne bancaire. La seconde partie explique comment le système bancaire marocain a réussi à canaliser les flux financiers de la diaspora marocaine, à travers des exemples comme celui de la Banque Populaire du Maroc, pionnière en la matière dès les années 1960. Enfin la troisième partie de cet article met en lumière les nouveaux défis que posent l'évolution générationnelle de la diaspora ainsi que les ruptures technologiques en cours sur la pérennité de ce modèle. Classification JEL : G21, O16, O20, O55.

Effects of the reward of internal migration on poverty status of rural households left behind in Ogun and Osun States, Nigeria

Abstract In this study we analysed the effect of the reward of internal migration on the poverty status of rural households in South-West Nigeria. The types and channels of internal remittances received by rural households as well as the poverty profile and effect of internal remittances on the poverty status of rural households in South-West, Nigeria were assessed. Structured questionnaire was used to obtain primary data from respondents. Data were analysed using descriptive statistics, Multidimensional Poverty Index and Binary Logit regression. Findings revealed that 56.2% of the household heads were male, 67.4% were married, 42.3% had primary education and 58.3% received internal remittances through personal delivery (69%) with a mean age and household size of 55 years and 5 persons, respectively. However, based on Multidimensional Poverty Index benchmark of 0.333, 80.0% of the rural households were poor with a poverty intensity of 0.863. Binary Logit showed that age squared, remittance receipt, rearing of small livestock and farm size increased households’ likelihood of escaping poverty. In conclusion, internal remittances reduced poverty of rural households in the study area and as such continuous flow of remittances into rural households should be enhanced in order to facilitate improved standard of living.

Voice, exit and voice again: democratic remittances by recent Russian emigrants to the EU

ABSTRACT This article contributes to the research on diasporic and migrant communities’ engagement the democratisation of their home countries. It focuses on the case of the most recent wave of political emigration from Russia that has taken place during President Putin’s third term. It confirms the thesis that emigration, particularly forced emigration, whereby political dissidents are squeezed out from their country by the authorities in hopes of calming simmering political protest, has stopped being the safety valve it once was. Drawing on Levitt’s seminal work on social remittances, it analyses the content and channels of political remittances by recent Russian emigrants. In terms of the democratic remittances’ content, six main broadly defined thematic areas of mobilisation can be distinguished: free and fair elections; human rights and civil freedoms; fighting corruption; environmental protection; anti-war activities; counteracting Russian propaganda and the ‘hybrid war’. The channels of these democratic remittances are divided into direct (activities targeted at the Russian society) and indirect ones (targeted at Russian diaspora and political elites and society in the receiving countries). It draws the attention to immeasurable political remittances, those which cannot be easily assessed, yet undeniably impact the country of origin and its society.

Effects and transmission channels of remittances on tradable sectors in Nigeria

The inflows of remittances affect the exchange rate of Nigeria. Since the price of tradable goods is determined by the exchange rate, the channel through which remittances influence the tradable sector of an economy is the exchange rate. Thus, this study examined the transmission channel of the effect of remittances on the tradable sector in Nigeria using annual time series data from 1981 to 2016. The ECM was employed, and the findings show that remittances have a positive effect on the tradable sector despite a negative relationship between the exchange rate and the tradable sector. This, therefore, suggests that the Dutch disease phenomenon does not hold in Nigeria with regard to the exchange rate and the competitiveness of the tradable sector.