Approaches to Evaluating and Estimating Informal Remittance Flows in Developing Economies

Remittances are emerging as one of the largest sources of external finance for many least developing countries, yet their exact size often remains unknown to policymakers and the private sector because of the large portion of informal flows. Our previous blog in this series looked at how accurate remittance flow data, especially informal remittances, enable successful policies. However, accurate data on informal remittance flows is often scarce because it is difficult to gather. Methodologies to estimate informal remittance flows exist, but there is substantial room for improvement. This blog first discusses key challenges in measuring informal remittance flows. It then reviews several survey methods and models for measuring informal remittance flow to low- and middle-income countries. We suggest a dual approach consisting of a model-based approach to estimating informal remittance flows and surveys for more accurate data and insights.