It’s not unusual for people to live and work outside their countries of origin. Globally, an estimated 270 million people, or roughly 4 percent of the total population, are doing exactly that. Although this number includes forced migration (the approximately 26 million people who leave their countries due to violence or disasters), more than 85 percent are economic or voluntary migrants.
Contrary to the assumption that most migrants leave poor countries in the global South for rich ones in the global North, most migration is actually South-South.

South-South Migration is Larger than South-North Migration (%)

People migrate voluntarily for a variety of reasons, but one major driver is the changing nature of work. Globalization, climate change, and perhaps most of all, the technology revolution have all converged to create a world where fewer people stay in one place working a steady job and more people pursue multiple opportunities. For hundreds of millions of those people, those opportunities involve living abroad for some portion of their working years.

Even when moving for work is the smart decision, migration can mean income volatility, uncertainty and insecurity. This is particularly true for migrants in irregular situations, migrant workers with precarious livelihoods, or those working in the informal economy. The same financial products which at home could help reduce vulnerability—liquid savings, lines of credit, insurance, pension, etc.—are seldom easy to access outside one’s home country. (And for low-income people, often not there, either.)


 For most migrants, a major financial priority is remittances—ways to send money back home to family and loved ones. Remittances are vitally important at the household level and beyond.
Some remittance-receiving families rely on those funds to stay out of poverty: to meet basic needs for food, clothing, housing, and healthcare. For others, that money helps them build savings and finance longer-term goals: higher education, home ownership, starting or improving a business.

At the global level, remittances are among the most important financial flows. They are projected to exceed USD 470 billion by 2021 in the world’s low- and middle-income countries. This is greater than foreign direct investment, and substantially greater than overseas development assistance.

Remittance flows to low- and middle-income countries projected to
remain higher than foreign direct investment flows

Source: World Bank-KNOMAD staff estimates, World Development Indicator, and IMF’s BOP statistics

How remittances move now

Most formal remittances are over-the-counter, cash-in/cash-out transactions. The migrant earns wages or salary in the local currency of her host country. (Contrary to another common assumption, women send as well as receive remittances.) She takes some of that cash to a money transfer outlet, and pays a hefty fee to send it to family back home. The family gets word that the money has been sent, and someone goes to the closest money transfer outlet in the home country (often travelling at considerable distance and cost), pays another hefty fee, and takes the remittance as local-currency cash. It’s all an expensive, inconvenient, inefficient hassle.

Small wonder, then, that so many remittances bypass the formal channels and move through one of the unregulated networks that are ubiquitous in many countries. These networks go by different names (e.g., hundi, hawala) but the process is essentially the same: a migrant gives cash to an agent operating in the country where the migrant works. That agent has an associate in the migrant’s home county; the home-country agent delivers an equivalent amount of local-currency cash to the migrant’s intended beneficiary.

The drawbacks

The most obvious issue is cost. Globally, remittances carry an average 7 percent transaction fee, more than twice the target of 3 percent specified in the Sustainable Development Goals. The unregulated networks have also been linked to money laundering, financing of terrorism, human trafficking, and other abuses. Even where there is no connection to criminal activity, informal remittance flows distort the financial picture in harmful ways for developing countries, making receiving countries’ balance of payments appear less favorable than it actually is. This adversely affects those countries’ sovereign credit ratings, making it harder and more expensive to finance the kinds of large-scale initiatives that their countries need to develop.

The way forward

In a word: digital. Moving remittances from the overwhelmingly dominant cash-based models and into digital channels holds the key to driving down costs, increasing access and convenience, and promoting transparency. The key is end-to-end digitization of remittances. Migrants could receive wages digitally, and send money back home digitally to their families—who in turn could also keep and use that money in digital form. Along with making remittances themselves safer, more convenient, faster, and less expensive, digitization is the key to delivering other vital financial services: insurance, credit, savings, investments. Those could be layered on and linked to digital remittances.
Remittances could and should be the gateway product for those others, both because remittances are such a universal feature of the migrant experience and due to their extensive last-mile distribution networks. But the idea of piggy-backing additional financial services onto remittances remains impossible as long as remittances themselves remain cash-based. If they are ever to become more than just a way to move money from point A to point B, remittances will require that end-to-end digitization.
The challenge is that end-to-end digitization requires a correspondingly end-to-end approach. That is the approach UNCDF is taking, with generous support from the Swiss Agency for Development and Cooperation and Sida, the Swedish International Development Agency.
* Data and references regarding remittances’ effect on the SDGs taken from Sending Money Home: Contributing to the SDGs, One Family at a Time (Rome: IFAD, 2017). Other data in this section from
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