Remittances: the unsung investment factor?

KEYNOTE ADDRESS BYMARK T. JONES

International Conference on Investment & Retail Management (ICIRM) - Istanbul – Turkey

23rd – 24th April 2012

Co-hosted by:

Academy of Business & Retail Management and the Journal of Business & Retail Management Research

Remittance n. 1 money sent, especially by post. 2 the act of sending money

Definition courtesy of the Oxford English Dictionary

Four key types of remittance

Family Remittances

Community Remittances

Migrant Worker Remittances

Social Remittances

The impact of remittances

Negative

Can creative a culture of dependency

Often results in “dollarisation” Often leads to increased inflation A way to launder money Negatively affects the balance of

payments

Positives

Facilitates trade Helps economic pump priming Provides essential seed capital Is a ‘lifeline’ for people and

countries outside or on the margins of the credit system

Remittance flows to developing countries are estimated to total $351 billion in 2011, an increase of 8% over the previous year, according to figures contained in the latest issue of the World Bank’s Migration and Development Brief.

·         Global remittance flows, including those to high-income countries, were an estimated $483 billion in 2011.

·         The top recipients of officially recorded remittances in 2011 were India ($58 billion), China ($57 billion), Mexico ($24 billion), and the Philippines ($23 billion). Other large recipients included Pakistan, Bangladesh, Nigeria, Vietnam, Egypt and Lebanon. However, as a share of GDP, remittances were larger in smaller and lower income countries; top recipients relative to GDP were Tajikistan, Lesotho, Nepal, Samoa and Tonga.

www.worldbank.org

http://blogs.worldbank.org/peoplemove/remittances-data-watchhttp://blogs.worldbank.org/peoplemove/remittances-data-watch

http://blogs.worldbank.org/peoplemove/remittances-data-watch

Courtesy of Dilip Ratha, lead economist at the World Bank

Haiti Aid Facts, David Roodman - Centre for Global Development (2010)

How remittances are being used

"In poorer families, remittances are often used for consumption. But after basic consumption needs are met, remittances are also used to finance education, health, housing and small business investment."

Dilip Ratha, economist at the World Bank.

“Lower income families spend a major part of their remittances on food, while the more well-off overseas worker households use it to finance the children’s education or put up a business.”

Kelly Bird, economist at the Southeast Asian department of the Asian Development Bank

Factors that drive remittances towards investment

“ Countries which recognize a dual-citizenship status receive  more remittances than others. Moreover, the results also highlighted that remittances are strongly channelled into investment in these countries compared to the others.”

Does the dual-citizenship recognition determine the level and the utilization of international remittances? Cross-Country Evidence

Christian Ebeke (2011)

The jury is still out on the overall impact of remittances in remittance-receiving countries and on receiving households. Some of the evidence suggests that remittances have beneficial impacts on receiving countries and households. For instance, at the household level there is evidence that remittances increase human capital acquisition (Cox and Edwards 2003). Receiving remittances may relax the budget constraint of the receiving household potentially allowing the household to send children to school.

Remittances may also provide the capital necessary to start a small business (Woodruff and Zenteno 2007) or may simply cover household expenses during the period when the business is not generating profits. Receiving remittances may allow the household to enter more profitable but riskier businesses, given that remittances can be used as a source of support for the household. This role of remittances is especially important in those countries where credit markets are not well developed.

http://www.migrationobservatory.ox.ac.uk/policy-primers/migration-and-development

Useful resources about remittances

www.ifad.org/remittances/projects/

www.remittancesgateway.org

www.iadb.org/en/topics/remittances/remittances,1545.html

www.bbc.co.uk/news/business-30192220

Thank you for your attention

Feel free to contact me: marktjones500@gmail.com Twitter: marktjones500