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'Cash sent home is more effective than aid'
Written by: F. Brinley Bruton
Here's a number that will knock your mittens off. I just found out that recorded remittances, or the flow money earned abroad and sent home to the developing world, hit around $204 billion last year. That's billion with a "b", and more than double what it was in 2001. Admittedly, the number was affected by a tightening of banking rules after September 11, 2001 and the falling value of the U.S. dollar against other currencies. Still, it's mighty big. The remittance figure was arrived at yesterday, according to Dilip Ratha, a senior economist at the World Bank's Development Prospects Group. Ratha is the go-to guy for all things remittance-related, according to a colleague at the Bank. As AlertNet is the first to report the final number, this constitutes a bit of a scoop for yours truly. Here's a World Bank brief from November last year with not-yet-updated numbers. For comparison's sake, Ireland's economy is around $200 billion. Compare it with aid numbers too - the 22 member countries of the OECD Development Assistance Committee, the world's major donors, gave about $104 billion in aid in 2006, the organisation said this week. Anyway, remittances are the life-blood for many communities in poor countries and very good news, Ratha wrote in March. "Remittances are large, counter-cyclical, and pro-poor," he wrote. "They are better targeted to the needs of the poor than official aid or foreign direct investment." For instance, remittances have really cut the percentage of the population below the national poverty line in several low-income countries, he writes in another recent piece. In Uganda it fell by 11 percent, Bangladesh 6 percent and Ghana 5 percent. Unrecorded flows of funds are likely to boost the $204 billion figure significantly. It's not all good news, though, and Ratha sends a cautionary message. "Remittances ... are personal flows from migrants to their friends and families. They should not be taxed or directed to specific development uses," he wrote in February.
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2 responses to “'Cash sent home is more effective than aid'”
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F. Brinley Bruton is a freelance journalist. In 2004 and 2005 she trained journalists at Pajhwok Afghan News, the country's largest independent news service. Since then she has written about Afghanistan, Iran and Yemen and focused on economics, security and humanitarian issues.
12 Apr 2007 12:39:27 GMT
impressive figures and you are quite right these are the official figures only, i reckon it really is much more. Drawing from my experience, being a zimbabwean and considering the millions of zimbabweans outside the country who cannot or do not remmit funds officially the figure certainly balloons. Figures like this ought to guide developing country officials to the levels of foreign currency potenetially available to the economy if the policies are attractive.
13 Apr 2007 07:38:21 GMT
Cash send home is more effective than aid you are right.The money send back home to the relative and friends is effective because it target the needy people and it has no condition and sometime no reimbursement compare to the aid given to particular country.The aid has some condition between the donor and receiver but the problem lies when it reached to corrupted institutions instead of being used to the aggreed program or help the targeted needy people,you find that money is used in the election campaign program in some countries,is that sounds right ?That's why the cash sent home is effective than aid