Remittance in Tanzania
Tanzanian-born Benjamin Fernandes sought to improve the remittance economy with Nala – a pioneering consumer payment platform. Utilizing USSD technology found in feature phones, NALA does not require internet connectivity for access and its design aims to reduce user data costs. NALA is the first East African company to receive acceptance into Y-Combinator and, in 2018, it won three awards in Africa: EcoBank Africa Fintech Challenge, AppsAfrica Disruptive Innovation Award and the SeedStars Best Startup in Tanzania. This innovative and revolutionary platform is making waves in the African tech scene and changing the remittance economy.

Revolutionizing the Way People Manage Finances

NALA is revolutionizing the way people in Tanzania and in Africa manage their finances. Launched in 2018, the company initially focused on helping Tanzanians and Ugandans manage their financial well-being. Over time, the company pivoted to become a money transfer application for the African diaspora. Now, NALA is available in five countries – Tanzania, Uganda, Kenya, Rwanda and Ghana – and is continuously expanding to other parts of the world.

To date, NALA has helped more than 8,000 customers with transactions of more than eight figures, making it an invaluable resource for those looking to send money to Africa.

NALA, the Tanzania-based fintech startup, has just secured a whopping $10 million in funding to expand its operations across the African continent. This sizable investment comes from “top angel investors like the creators of Monzo, Robinhood, Alloy and Deel and Peeyush Ranjan, the head of Google Payments who also joined in on the investment.”

In 2022, NALA launched a crowdfunding campaign to give its early adopters a chance to purchase shares in the company. This ambitious move shows just how committed NALA is to becoming a leading fintech player in Africa. The potential for growth in Africa’s fintech sector is enormous, and NALA’s bold move to secure such a large funding round is a sign that it is well-positioned to capitalize on this potential. With the backing of some of the world’s top angel investors, NALA is sure to make waves in Africa’s fintech space in the coming years.

Shaking Up the Remittance Economy

NALA is shaking up the remittance market with its innovative solution. With Wise, Remitly and SendSprint dominating the market, NALA takes it one step further by giving its users flexibility and full control over the remittances they send to Africa. According to the World Bank, “the average transfer fee to Africa is estimated at 9% – that’s $3.3 billion out of the $48 billion sent to sub-Saharan Africa last year.” NALA has set out to reduce this fee and bring transparency to the costs of remitting money to Africa, by offering its users low and transparent transfer costs.

NALA, as of December 2022, has expanded to more than 19 European countries as part of its mission to financially empower African people across the world. It is offering an easy and cost-effective way for customers to send remittances from Europe to African countries through this move.

The World Bank estimates that, on average, the cost of sending remittances from European countries like Italy, France and Germany is between 3% and 7%, with the entire process taking up to two days. With NALA, it is a simple and fast process that actually saves money. The expansion has had a significant impact on the 11 million African migrants living in Europe by providing them with more options for remittance payments.

Breaking the Barriers

NALA has built a unique platform that breaks the barriers to its customers’ accessing payments. The app is able to offer users a convenient way to send money, whether it is for a few dollars or thousands. NALA offers “full control over your remittances” and its service is available at the time and date of your choice. NALA aims to achieve a revolution in the workings of the remittance system through its innovative solution.

– Frida Sendoro
Photo: Flickr

Filipino Remittance
Each year, millions of global emigrants from the Philippines send billions of dollars in aid back home. Even in 2020 – a year of notable economic turmoil, Filipinos leveraged low fees and favorable currency exchanges, sending nearly $35 billion in remittances. Currently, the Philippines is ranked fourth in the world by money received from overseas, just behind India, China and Mexico. Filipino remittance is a large boon for many facing poverty in the Philippines. Throughout the pandemic, more than 2 million Filipinos fell into poverty, raising the poverty rate to 18.1%. During this period, severe job loss occurred, along with a sharp decline in tourism and a rapid rise in inflation. Even the number of workers going overseas decreased, placing more pressure on Filipinos already established and working around the globe.

Now, Filipinos continue to look to family living outside of the Philippines for support as the country attempts to recover from the pandemic.

A Brief History of Remittances in the Philippines

Though the roots of Filipino labor migration go back to the 17th century, the Filipino government began supporting the practice in the 1970s. At that time, rising oil prices were creating economic problems in the Philippines. However, the oil-rich Gulf countries needed workers to build infrastructure. The Philippine government established an overseas workers program with these countries to make use of the nation’s excess laborers.

During this period, it was men working in construction that made up the majority of Overseas Filipino Workers (OFWs). However, women soon took the lead. They rose to prominence as the demand for teachers, nurses, domestic workers and entertainers increased.

OFWs commonly send money from their paychecks back home to family, becoming a significant part of the Philippine economy. The World Bank has noted that remittance started at 1.5% of the nation’s GDP in 1977 and has risen since, peaking at 12.8% in 2005. In response to the growth of Filipino remittance, some Philippine businesses, like LBC Express, opened storefronts around the world to help OFWs send money and goods directly back home.

In recent years, the Philippine government has decreased programs encouraging citizens to work outside of the country. The government said it wants the decision to work abroad to be a choice instead of a necessity. Regardless, Filipino remittance remains high.

Filipino Remittance in the Modern Day

Remittance remains a strong part of the Philippine economy — most recently making up 9.6% of the nation’s GDP in 2020. However, the geographic concentration of workers sending money home has shifted to the West. In 2020, Filipinos living in the United States sent the most money back to the Philippines. Remittances from workers in the Gulf countries dropped by as much as 36% from their 2015 peak.

Yen Osborne, a moderator of the Facebook group “Filipino Community in Illinois,” spoke with The Borgen Project about her thoughts on remittance and its role within her online community. “It’s a great benefit to the families attending their financial needs,” Osborne said. According to her, it is normal for Filipinos to send a monthly allowance to their families living in the Philippines using a variety of online services and bank-to-bank transfers.

Osborne also raised concerns about the negative effects of people in the Philippines becoming reliant on remittances. “The bad side is people are getting lazy knowing they have a family member who sends them monthly [money],” Osborne said. At the same time, with exception of the pandemic, the Philippines’ economic growth has risen. According to the World Bank, the Philippines’ average economic growth increased to 6.4% in 2019, while foreign remittance in the country’s GDP grew to 9.3%.

Osborne concluded that remittance is ultimately a positive part of Filipino life. For her, it’s a part of “Filipino culture where we help our families.”

–  Ryan Morton
Photo: Flickr

Remittance to Nigeria
The common saying “sending money back home” resonates greatly with the Nigerian diaspora. It pertains to the term “diaspora remittance” which involves a person living abroad sending money back to their country of origin. In the case of Nigeria, it is members of the diaspora sending money back home. As the largest recipient of diaspora remittance in Sub-Saharan Africa, remittance to Nigeria now constitutes a significant part of the GDP, namely 4% in 2020.

The Critics

Though some have contested that diaspora remittance is detrimental to Nigeria given that it arguably enables the government to dodge the responsibility of providing sufficient welfare for its citizens, it is not all doom and gloom. An often neglected point is that diaspora remittances are in fact beneficial in terms of sharing knowledge and skills, promoting trade and investment and fostering entrepreneurship within the country.

Unfortunately in Nigeria, this remittance has principally provided improved welfare for families as opposed to transparent investment and development of the nation, which could consequently prompt the diaspora to return if they so wish. Many families in rural areas are heavily reliant on remittances as the money sent is a large proportion of the recipient household’s total income, despite it paradoxically only being a minuscule part of the sender’s income. As such, the U.N. describes remittances as a “lifeline” for millions of families.

Whilst this is good news, one cannot ignore that when it comes to diaspora remittances, there remain issues of mismanagement and poor utilization of flows nationally. Examples are a notable lack of investment opportunities for skilled professionals abroad and the expensive cost of sending money back home.

The Effective Utilization of Remittance to Nigeria

The idea is that investing back home should be appealing and encouraged through the establishment of supportive initiatives. There have been some attempts, an example being “Naira4Dollar.” The Central Bank of Nigeria introduced this new scheme in February 2021 offering beneficiaries of remittances 5 nairas for every $1 of remittance sent through the bank.

Nevertheless, remittances have continuously allowed the Nigerian government to strategically take a back seat with regard to welfare, as it reassures government officials that Nigerian counterparts abroad will financially cover its families. It simply reduces the incentive to provide for the basic needs of their citizens. The current rampant levels of poverty and unemployment further support this, particularly among the youth despite increased remittance inflows from places like the U.S. and U.K., which, according to PWC, are large Nigerian diaspora communities.

This explains why, according to The Guardian, roughly 50% of Nigerians have announced themselves as willing to relocate abroad if able, primarily for the purpose of employment opportunities. However, to combat this tragic reality and at the same time ensure the investment of remittances in more than purely welfare, it is critical for governmental action.

The remittance to Nigeria increased in 2021 and, as Vanguard reports, it could increase in 2022 as well. However, there is a need for change in the management of remittance flows.

PowerhouseCoopers’ (PWC) Proposals

Luckily, PowerwaterhouseCoopers (PWC), a multinational professional services network, has made proposals to respond to this exact issue. PWC deems it crucial to the establishment of a clear policy to ensure the transformation of remittance inflows into funds for productive investments to develop enterprises and create employment. In the same breath, a philanthropic means of utilizing remittances will serve to provide further opportunities to develop infrastructures like schools, hospitals and roads.

All in all, one should not frown upon remittance to Nigeria. Whilst it may appear to be merely a short-term solution to Nigeria’s social and political issues, it can serve to be a long-term and sustainable solution. As the PWC has suggested, the issue can resolve through policy change fostering investment and employment opportunities, a process that has begun in Nigeria and evidently needs more development.

– Claudia Efemini
Photo: Unsplash

remittances in the Dominican RepublicRemittances have become an integral part of the Dominican Republic’s economy. Furthermore, remittances in the Dominican Republic have helped alleviate some of the economic consequences of the COVID-19 pandemic, reducing poverty throughout the country.

What Are Remittances?

Remittances are money or goods that immigrants send back to their families in their countries of origin. Their use has been growing significantly in the past few years, particularly for developing countries. Data on the total financial value of remittances is not completely accurate because many of the transfers involved are unofficial and are difficult to track. However, the official value of remittances makes up a portion of each country’s GDP. For middle-income countries, remittances make up about 1.5% of the GDP, rising to close to 4% for low-income countries.

Remittances in the Dominican Republic

Remittances make up a significant part of the Dominican Republic’s economy, with estimates placing the value of remittances at about 8% of the total GDP in 2019 — double the average of most low-income countries. While some remittances come from Europe and other Latin American countries, a staggering 75% come from the United States.

The use of remittances has grown rapidly in the past three decades. In 1990, the total value of remittances sent to the Dominican Republic was around $300 million, but by 2020, the amount rose to more than $8 billion. Remittances help support people’s livelihoods and the overall economy, which is why remittances are so important to the Dominican Republic.

Remittances During the Pandemic

The COVID-19 pandemic did affect the overall flow of remittances, but not as much as predicted. The total value of remittances worldwide dropped just 1.6% from 2019 to 2020, which is quite insignificant considering the more drastic impacts of the pandemic. However, for the Dominican Republic and a few other Latin American countries, the value of remittances received actually grew in 2020.

The start of the pandemic caused a sharp decline in remittances, then stabilizing throughout the rest of the year and eventually resulting in overall growth. In fact, by June 2020, the Dominican Republic received 25.7% more remittances compared to June 2019. Remittances were able to stabilize or grow because many remittance-reliant immigrants in the U.S. and Europe were able to retain their jobs or acquire new jobs quickly after the start of the pandemic.

Remittance Impacts on the Economy

In the years before the pandemic hit, the Dominican Republic experienced a growing economy with reduced poverty and a larger middle class. Therefore, the recession caused by the COVID-19 pandemic delivered a blow to the nation. The economy shrank by 6.7% in 2020 due to the effects of the COVID-19 pandemic. However, the growth in remittances in 2020, after the initial pandemic-induced decrease, helped keep the Dominican Republic’s economy from plummeting in size. The consistent and growing prevalence of remittances in the country’s economy has been an indicator of future growth.

The Dominican Republic’s economy saw positive growth in the second half of 2020 that will likely continue into 2021. Because other important sectors of the economy, such as tourism, will recover more gradually, remittances will play an ever-larger part in the economy’s recovery and the decrease in poverty.

Ritika Manathara
Photo: Unsplash

Blockchain Startup in MexicoAs internet connectivity expands around the globe so do the benefits of blockchain technology and its potential to better the lives of those living in poverty. In Mexico, accessible financial services and insurance programs are vital to the improvement of the quality of life of Mexicans living below the poverty line. Saldo.mx, a blockchain startup in Mexico, helps facilitate this access.

Blockchain Startup in Mexico

A blockchain startup in Mexico has utilized the security of blockchain technology to meet the needs of Mexicans living in poverty. Saldo.mx offers Mexicans a secure and easy-to-use platform on which they can pay their bills using remittance money from abroad.

This is a significant development in the Mexican fintech market as Mexico receives billions of dollars in remittances from the United States each year, with $10.6 billion reaching Mexico in the third quarter of 2020 alone.

Especially during a time of economic crisis caused by the COVID-19 pandemic, the ability to securely receive timely remittances is crucial for the financial security of Mexicans who rely on remittance payments for their survival.

Saldo’s services have the capacity to reach millions of Mexican customers, as it has been estimated that by the end of 2020, upwards of 81 million Mexicans will have internet access and thus the ability to quickly receive and utilize much-needed cash without having to wait for physical cash to arrive from abroad.

Consuelo: Access to Affordable Insurance Plans

One of Saldo’s newer services is Consuelo, which allows users to find fixed health and life insurance policies. Consuelo uses blockchain technology to connect its users to an insurance plan with a “smart contract,” which eliminates the need for a claim adjuster and gives the users direct access to affordable plans.

By removing a costly middleman and lessening the financial bureaucratic burden on customers, Consuelo gives its users a chance at obtaining health and life insurance and decreases long-term financial insecurity concerns.

Consuelo also helps uninsured Mexicans bypass the bureaucratic messiness of the national public healthcare system, which is supported by numerous uncoordinated social security institutes. This allows for better continuity of care by allowing Mexicans to remain with the same doctor by staying on their plan provided by Consuelo rather than facing the possibility of having to switch to another doctor through the national system after losing their jobs.

The Diverse Applications of Blockchain Technology

Innovation is not confined to affluent areas of developed countries. Especially in the age of the internet, new solutions can be developed and rapidly disseminated from any part of the world and can impact the lives of millions. In Mexico, receiving international transfers of money and gaining access to affordable health and life insurance plans can be difficult for the unbanked and those without stable employment. Startups like Saldo exemplify the potential of internet entrepreneurship and blockchain technology in helping lift the global poor out of poverty.

– John Andrikos
Photo: Flickr

remittances in PakistanThe global COVID-19 pandemic has sent many countries’ economies spiraling downward. Developing countries such as Pakistan have been hit especially hard due to poor infrastructure and social safety nets. However, one piece of encouraging economic news resulting from the pandemic is that remittances in Pakistan have increased to a record high.

Why Remittances Are Crucial to Developing Countries

In essence, remittances are sums of money sent back to a country from its citizens currently working abroad. For example, if a man in Pakistan leaves his family to work in Australia due to a better job market, he may send back sums of money to support his family still living in Pakistan. Remittances are vitally important for several reasons.

Firstly, the family still in Pakistan often relies on remittances to pay for essentials such as food and clean water, or other important services like sending children to school. These payments allow Pakistanis to increase their human capital, which refers to the amount of value a person can provide for the economy. Healthy, more educated people help an economy more than unhealthy, uneducated people. More human capital in turn improves the economic outlook for the country as a whole.

Furthermore, remittances are an important system that encourages migration and opens up the labor market for people seeking jobs. Educated people in Pakistan can view remittances as a form of insurance that their families will be taken care of, which makes them more likely to temporarily migrate to a different country with better job prospects. For those remaining in Pakistan, a smaller supply of local workers opens job opportunities and increases wages.

How COVID-19 Increased Remittances in Pakistan

In July 2020, remittances in Pakistan were the highest ever recorded for a single month. Pakistani citizens abroad sent $2.77 billion were sent back to Pakistan, an increase of 12.2% from June 2020. This number also represents an increase of 36.5% from July 2019. The countries from which most remittances in Pakistan came were Saudi Arabia, the United Arab Emirates, the U.K. and the United States. Remittances for the year now stand at $21.8 billion. As a result, Prime Minister Imran Khan thanked workers abroad in a statement recognizing the immense value of remittances for Pakistan’s economy.

Analysts reason that the increase in remittances in Pakistan is primarily from far fewer pilgrimages to Mecca. Having spent less money on Hajj, workers abroad had more to send back to Pakistan. Additionally, canceled flights and reduced travel overall contributed to increased remittances. Another reason remittances increased is the rising efficiency of channels used for overseas workers to return their money. For example, Pakistan reduced the threshold for a formal money transfer from $200 to $100, allowing greater accessibility to transfers.

Ultimately, the increasing remittances in Pakistan represent exciting news for an economy otherwise devastated by the pandemic. Hopefully, news like this will continue to surface as the world discovers silver linings emerging from the pandemic.

– Evan Kuo
Photo: Flickr

COVID-19 and the Venezuelan crisisOf all households in Venezuela, 35% depend on financial support from family members working overseas. According to local economic researcher Asdrúbal Oliveros, remittances to Venezuela will suffer a heavy blow as a result of the COVID-19 pandemic and its severe effect on the global economy. With an estimated $2 billion decrease in remittances, the health of millions of Venezuelans is in serious danger due to the combined effects of COVID-19 and the Venezuelan Crisis.

The World Bank believes the pandemic will cause a 20% decrease in global remittances, the biggest drop in recent years. With 90% of citizens in Venezuela living in poverty, the drastic fall in remittances and oil prices spell trouble for countless people. Furthermore, the unprepared Venezuelan healthcare system has struggled to control the pandemic.

Despite numerous U.N. groups imploring for money-transfer businesses to make international transfers cheaper, Venezuela’s foreign exchange policy and volatile economic system are difficult to reform. “Venezuelan remitters” are instead left using unnecessarily complex methods to send money back home.

The Venezuelan Government Under Nicolás Maduro

In 2019, the Venezuelan government politicized humanitarian aid when it vilified the U.S. government’s foreign aid as the beginning stage of a U.S. invasion. However, the government has finally acknowledged the long-denied humanitarian crisis in Venezuela. President Nicolas Maduro has accepted the deliverance of aid after negotiations with the International Federation of Red Cross and Red Crescent Societies (IFRC). Subsequently, the United Nations declared it was increasing its efforts to aid Venezuela.

Despite the progress made, politics continue to negatively affect potential aid. According to Miguel Pizarro, a U.N. Representative, the political influence leaves many without fundamental necessities. Pizarro explains, “If you demonstrate and raise your voice and go to the streets, you do not have food, medicine, water or domestic gas.” Pizarro continues, “Eighty percent of Venezuelan households are supplied with gas by the state. If you become active in the political arena, they take away that right.”

Sharp declines in oil value, numerous embargoes globally and negligent economic policy largely caused the humanitarian emergency in Venezuela. Since 2014, the nation’s GDP has fallen by 88%, with overall inflation rates in the millions. A 2019 paper published by economic researchers at the Center for Economic and Policy Research attributed medicine, food and general supply deficits in 2018 to the deaths of at least 40,000. According to findings from the Coalition of Organizations for the Right to Health and Life, a scarcity in medicine puts over 300,000 Venezuelans in peril.

Dr. Julio Castro, director of Doctors for Health in Venezuela, says “People don’t have money to live. I think it’s probably a worst-case scenario for people in Venezuela.” Despite recent increases in aid and medicine from U.N. operations and the IFRC, the Venezuelan struggle persists.

Venezuelan Healthcare Amid COVID-19

Most of the Venezuelan population can only afford to receive aid from public hospitals. These public hospitals often experience persistent deficits in necessary supplies. A study conducted by Doctors for Health indicated that 60% of public facilities frequently face power outages and water shortages.

In response to this, the Venezuelan government authorized $20 million in healthcare aid, which will be administered by the Pan American Health Organization (PAHO), a territorial agency of the World Health Organization. They will use the capital to develop COVID-19 testing and to obtain personal protective equipment (Ex: masks, gloves, etc).

According to Luis Francisco Cabezas of local healthcare nonprofit Convite, a recent study identified a worrisome struggle. Data indicated that roughly six in 10 people had reported trouble obtaining medication for chronic illnesses. The problem has only worsened since the pandemic.

Local Nonprofits Redirect Efforts Toward Venezuelan Crisis

Numerous nonprofits in the country have responded to COVID-19 and the ongoing Venezuelan crisis by shifting their efforts. A director for Caritas, a Catholic charity, says the ongoing economic disaster compelled his organization to prioritize humanitarian work over its original mission of civil rights advocacy.

Similarly, Robert Patiño leads a nonprofit civil rights group, Mi Convive, which shifted to humanitarian work in 2016. Since its inception, the organization has directed its efforts to child nutrition. Through the group Alimenta La Solidaridad, Mi Convive has opened over 50 community kitchens in Venezuela, feeding over 4,000 kids weekly.

Although the efforts by Venezuelan nonprofits have aided thousands, it is not enough. COVID-19 and the Venezuelan crisis need to be in worldwide focus until the government can reliably provide for its citizens. The work of numerous good samaritans can only reach so many people, and their work is constantly hindered by “Chavistas,” a group of Venezuelans who are loyal to President Nicolas Maduro’s government. Mi Convive’s Robert Patiño claims the radicals have been known to go as far as withholding food boxes from areas where the nonprofit is trying to begin new programs. The humanitarian emergency in Venezuela must be appropriately addressed, for the livelihood of millions of people are at stake.

Carlos Williams
Photo: Flickr

Worker Remittances and Poverty in the Arab World
The Arab world has one of the highest proportions of migrant to local workers in the world, with over 32 million migrant workers in the Arab states in 2015 alone. In addition, the region has one of the largest diasporas in the world. This means that many skilled workers are emigrating to wealthier countries and sending money home via remittances. But what do remittances in the Arab World mean for the region and its inhabitants?

Brain Drain vs. Gain

In Lebanon and Jordan, unskilled labor is provided by growing numbers of refugees and foreign workers, totaling over five million in 2015. However, as more foreign workers enter the country, growing numbers of high-skilled Lebanese and Jordanian nationals are emigrating. This often occurs when opportunities are limited, when unemployment is high and economic growth slows. The phenomenon is dubbed ‘brain drain’ as opposed to ‘brain gain’, whereby an increasing stock of human capital boosts economies. A drain occurs while poor countries lose their most high-skilled workers and wealthier countries in turn gain these educated professionals.

Remittances in the Arab World

These expatriates commonly work to improve their own living situations while also helping to support their friends and families. This is where remittances come into play. As defined by the Migration Data Portal, remittances are financial or in-kind transfers made by migrants to friends and relatives in their communities of origin. Remittances often exceed official development aid.  They are also frequently more effective in alleviating poverty. In 2014 alone, the Arab states remitted more than $109 billion, largely from the United States followed by Saudi Arabia and the United Arab Emirates.

There is no denying that remittances can be a strong driving force for the socioeconomic stability of many Arab countries. But not all the influences are positive. Some experts argue that remittances can actually hurt the development of recipient countries. Their arguments cite potential negative effects of labor mobility and over-reliance on remittances. They emphasize that this can create dependency which undermines recipients’ incentive to find work. All this means an overall slowing of economic growth and a perpetuation of current socioeconomic status.

The Force of the Diaspora

The link between remittances in the Arab world and poverty is clear. Brain drain perpetuates and high amounts of remittance inflow and outflow persist if living conditions remain unchanged. Policymakers are therefore focusing efforts on enticing emigrants to return to their countries of origin. By strengthening ties with migrant networks, and implementing strategies like entrepreneurial start-up incentives and talent plans, the initial negative effects of brain drain could be curbed.

Overall, though brain drain and remittances can seem to hurt development in the short-term, if policies can draw high-skilled workers back, contributions to long-term economic development can erase these negative aspects altogether. Young populations that have emigrated to more developed countries acquire education and valuable experience that is essential to promote entrepreneurship in their home countries. Moreover, their experiences in advanced democracies can bolster their contribution to improved governance in their countries of origin. The Arab world’s greatest untapped potential is its diaspora, and it could be the key to a more prosperous future, if only it can be harnessed.

Natalie Marie Abdou
Photo: Flickr

Credit Access in TajikistanTajikistan, located in Central Asia, has a population of over 8 million people. Tajikistan has borders to Afghanistan, Uzbekistan, Kyrgyzstan and China. Although Tajikistan’s financial sector has made significant progress since 2000, many new advancements such as credit access are still in need of improvement. In 2017, almost 30 percent of Tajiks were living below the poverty line. Finding a solution to increase credit access in Tajikistan has become an important task for the government of Tajikistan.

Tajikistan’s Reliance on Remittances

Due to Tajikistan’s limited employment opportunities, about 90 percent of Tajiks travel out of the country for work. They often travel to the Russian Federation in search of employment. Many migrant workers send remittances back to their friends and family in Tajikistan. More than 60 percent of Tajik households reported that half of their income comes from remittances with 30 percent of Tajik households reporting that 100 percent of their income comes from remittances.

A 2010 Labor Organization study reported on how Tajik households save their income and remittances. The study found that only 23 percent of people were able to save their remittances with only 9 percent able to save at a partial amount of 21 to 40 percent of the money. When the money can be saved, it is not often for long. In fact, only 11 percent of the people were able to save their remittances for more than six months.

Income savings did slightly better. At least 63 percent reported being able to save part of their income. For example, 51 percent saved about 20 percent of their income. However, only 3 percent could save between 41-60 percent of their income. Since remittances are the main source of income in many Tajik households, money is spent on immediate needs, which results in low percentages in income saving.

Credit Access in Tajikistan

According to a 2010 International Labor Organization study, 95 percent of Tajik households do not keep their savings in financial institutions. Due to Tajikistan’s remote and unique mountainous terrain, 95 percent of Tajik households are not aware of the savings products available to them or know where financial institutions are located. Credit access in Tajikistan isn’t seen as a necessity in many Tajik households because it is very common and traditional for Tajiks to keep their savings at home. There also seems to be “a general distrust” of financial institutions.

In April 2010, the World Bank Group, with the help of the Government of Switzerland, launched the IFC Azerbaijan-Central Asia Financial Markets Infrastructure Advisory Services Project. This three-phase project is aimed at improving the financial infrastructure of Tajikistan and expanding credit for people and small businesses. This would allow for the creation of more jobs.

The project also provided financial literacy training to more than 100,000 Tajiks, which allowed Tajiks to become knowledgable about where their savings go. As a result of the IFC Azerbaijan-Central Asia Financial Markets Infrastructure Advisory Services Project, Tajikistan’s financial sector was able to establish the first private Credit Information Bureau with the help of IFC and the National Bank of Tajikistan.

These crucial advancements have led Tajikistan’s financial sector in the right direction toward improving credit access in Tajikistan as well as addressing the needs of the people of Tajikistan. With impoved credit access comes financial security, an increase in small businesses and a better economic standing.

Jocelyn Aguilar
Photo: Flickr

remittances to Mexico
Remittances to Mexico in 2017 reached the highest level ever recorded. Remittances provide many Mexican families with necessary supplemental funding and are one of Mexico’s most important sources of income. The record-breaking number of remittance payments were driven by the depreciation of the peso and uncertainty surrounding the future of Mexican exports to the U.S.

Remittances: Important Source of Income for Mexico

Remittance payments are one of Mexico’s largest sources of foreign income, with manufactured exports, oil exports and foreign direct investment. Although manufactured exports remain Mexico’s top source of foreign income, remittances outpace oil. Mexico is the largest recipient of remittance payments sent from migrant workers in the U.S.

Mexico’s poorest states tend to receive the most in remittance payments. In 2017, Michoacán received the most remittances — $2.915 billion. Michoacán is the sixth poorest state in Mexico, with a poverty rate of 54.4 percent. Remittances to Jalisco totalled $2.797 billion and remittances to Guanajuato were $2.56 billion.

According to the Bank of México, 2017 remittances from Mexican workers living abroad totalled $28.77 billion — a 6.6 percent increase over the $26.99 billion sent back to Mexico in 2016. Remittance payments to Mexico mainly come from the U.S.

Record-High Remittances Spurred by Two Factors

The record-high number of remittances to Mexico in 2017 were due to two major forces — depreciation of the peso and President Trump’s proposed tax on remittances to Mexico.

The peso dropped dramatically in 2016 after the U.S. election of President Trump. The election created uncertainty surrounding Mexican exports to the U.S., also known as Mexico’s largest export market. In 2016, the U.S. consumed 81.03 percent of all Mexican exports.

Specifically, the election of President Trump created fear that Mexican exports to the U.S. would be stifled either by the United States’ withdrawal from the North American Free Trade Agreement (NAFTA), or by the imposition of tariffs on Mexican exports. Remittances to Mexico traditionally increase when the peso is weak, as foreign currency will buy more pesos.

The ‘Wall’ of Cash

Additionally, President Trump has proposed taxing or halting U.S. remittances to Mexico to fund a border wall. Trump has threatened to prevent wire transfers between Mexican workers in the U.S. and their families back home until the Mexican government agrees to a one-time, $5-10 billion payment to fund the border wall.

Taxing remittances has also been considered an alternate measure to fund the wall. Economists argue that uncertainty surrounding the future of remittances to Mexico encouraged Mexicans working in the U.S. to send more money home in 2017.

– Katherine Parks
Photo: Flickr