KUALA LUMPUR, Malaysia, May 7, 2018 /PRNewswire/ -- Last year, migrant workers sent US$ 256 billion to their families in the Asia-Pacific region, according to the report "RemitSCOPE - Remittance markets and opportunities – Asia and the Pacific" and a new web portal released today by the International Fund for Agricultural Development (IFAD). While remittances benefit about 320 million family members in the region, most of them in rural areas, remittance markets still need to transform to ensure that families can benefit fully from the flows.
''The promise of technological innovation in the remittance marketplace could bring about a fundamental transformation for hundreds of millions of families. But this transformative change has not yet happened," says Pedro De Vasconcelos, IFAD Senior remittance expert.
De Vasconcelos pointed out that outdated regulatory barriers result in higher and less transparent costs. They also make it less likely and more difficult to convert remittances into savings and investments.
According to the report, the cost of sending money to the region has decreased by only 0.67 percent since 2015, reaching 6.86 percent in 2017. This is still more than twice the 3 per cent set by the international community in its Sustainable Development Goals. Cash-to-cash transactions remain by far the most common form of transfer. It is only recently that technology is beginning to move markets towards account-to-account transfers through digital operations.
"For digitalization of transfers to happen, regulators and private sector companies need to work together to harmonize legal and regulatory frameworks between countries," he said.
In the region, families generally spent about 70 percent of remittances to meet basic needs, such as food, healthcare and education. The remaining 30 percent, amounting to $77 billion, could be invested in asset-building or income-generating activities, according to De Vasconcelos.
"If you give people the opportunity to invest, they will invest, but for that, access to financial services is key," said De Vasconcelos.
Although financial inclusion has increased since 2011, the majority of remittance receiving families are still excluded from financial services. Remittances are crucial in rural areas where poverty is the highest. Worldwide, about 40 percent of remittances go to rural areas. In the Asia- Pacific region, remittances go disproportionally to countries with a majority of rural populations such as Nepal, India, Bangladesh, Viet Nam, Pakistan and the Philippines.
SOURCE International Fund for Agricultural Development