During the onset of the COVID-19 pandemic, the global economy was in jeopardy.
As stocks fell and consumer confidence dropped, financial analysts projected global remittances to plummet nearly 20 percent from the previous year.
Fortunately, the experts were wrong. Very wrong.
Despite the economic setbacks induced by the pandemic, people around the world continued to send money to their loved ones. In fact, while remittances were undoubtedly affected by COVID-19, they barely fell below their pre-pandemic levels.
In 2020, people sent over $540 billion in financial support to their family and friends, only 1.6 percent below the amount sent in 2019.
The pandemic might have changed everything, fortunately, it failed to keep families and friends from supporting each other.
This remarkable feat was further enhanced by the fact that foreign direct investment (FDI) — charitable money sent from governments — dropped 30 percent during the same time frame.
As a result, the value of remittances easily eclipsed the value of government aid in 2020. This unexpected development has since motivated policy workers to prioritize the wide-ranging reach of remittances
According to Michael Rutkowski, World Bank Global Director for Social Protection and Jobs,
“Facilitating the flow of remittances to provide relief to strained household budgets should be a key component of government policies to support a global recovery from the pandemic.”
The message is clear: each time you send money home, you contribute to the global fabric of financial security.
Here’s why remittances are so vital:
The Financial Lifeline of Remittances
Over one billion people participate in the remittance economy. That’s over three times the United States population.
According to the World Bank, over 200 million people send money to over 800 million people around the world.
While the numbers are staggering, their implications are far more practical.
In fact, studies show that the vast majority of remittances — roughly 75 percent — is used to feed families and help buy groceries.
After all, these remittances are more than an occasional financial gift. They often represent a primary source of income for many families.
According to Gilbert F. Houngbo, President of the International Fund for Agricultural Development (IFAD),
“The small amounts of $200 or $300 that each migrant sends home make up about 60 percent of the family’s household income. This makes an enormous difference in their lives and the communities in which they live.”
While helping put food on the table, remittances are also instrumental in providing access to health care, to building more sanitary living conditions, and even to promoting educational opportunities for children.
From an international perspective, the United Nations General Assembly has been very clear on the world-building potential of remittances.
In fact, when the United Nations introduced their seventeen Sustainable Development Goals (SDGs), they highlighted seven categories remittances can directly support.
These essential goals include:
- The reduction of poverty (SDG 1)
- The elimination of hunger (SDG 2)
- The support of better health and well-being (SDG 3)
- The increase of quality education (SDG 4)
- The promotion of clean water and sanitation (SDG 6)
- The facilitation of economic opportunity and growth (SDG 8)
- The reduction of inequalities (SDG 10)
From a purely financial perspective, remittances comprise more than 5 percent of the gross domestic product (GDP) in 54 countries. In fact, in nations like Nepal and Honduras, remittances account for over 25 percent of the GDP.
Remittances are a powerful engine in the global economy, and studies suggest that the global remittance market will only continue to grow.
In 2021, remittances surged to nearly $590 billion, up 5.5 percent from 2019. Almost every corner of the globe experienced this positive trend, from East, South, and Central Asia, to Latin America and the Middle East.
While many countries gained financial resources, Mexico saw especially sharp increases in cash flow. For example, remittances to Mexico in November 2021 were nearly 38 percent higher than they were the previous year.
These hopeful trends continue to affirm the United Nations’ expectation that over $8.5 trillion in remittances will be sent between 2015 and 2030.
Remittances are truly a lifeline for countless people around the world.
And while these studies and statistics citing “millions and billions” may be impressive, they all share a fundamental truth: the remittance economy is built one payment at a time.
That’s why the process of sending money must be as convenient, accessible, and affordable as possible. After all, it’s no accident that remittances have increased as our digital economy has expanded.
In fact, mobile remittances increased over 65 percent in 2020 alone.
That’s why uLink makes sending money overseas easier than ever. Whether using a computer, a tablet, or a smartphone, you can send your love home in just a few quick clicks.
Click below to get started!