May 04, 2009

2009 Index of Global Philanthropy and Remittances Published Amid Steep Drops in Remittance Flows

by Laura Starita

Remittances to most, if not all, of the world’s regions will decline in 2009, bringing an end to a decade in which increased global wealth has translated into a doubling of remittance flows. In most areas, remittance decreases are a direct result of the global economic crisis (as opposed to underground shifts in how remittances are sent, or economic growth in those regions which make remittances less necessary) and this is bad news for the world’s poor. Especially hard hit will be those in poor nations with steep reliance on remittances, such as Haiti. This poorest of the Caribbean nations relies on remittance inflows for around 25 percent of its income. As a consequence of double-digit declines in those funds, children will not be able to go to school, and families will cut back on meals, which could destabilize a country whose history has been marred by poverty-driven violence.

To avoid the worse outcomes and keep at least some money flowing, the Washington Post reports that the Obama administration is considering offering temporary resident status to Haitians illegally residing in the United States—a measure previously vetoed by George Bush. The fact that the idea is again on the table ideally signals an imminent reconsideration of US immigrant law, and what makes sense for both our country and the countries of origin of much of the immigrant population. What does not seem to make a lot of sense is to make immigration so difficult, and the transfer of funds so onerous, that people enter the country illegally and send funds through underground channels, both of which encourage human trafficking and money laundering, and strengthen organized criminal networks as well as isolation and disillusionment among immigrant populations. Many economists also argue that immigration and remittances are more productive development tools than foreign aid, since they have greater potential to bypass the inefficiencies and graft of government-filtered flows. The ‘more’ in that previous sentence most certainly depends on how ‘productive’ is defined, but I think we can all agree that between government aid, multi-lateral organizations and debt relief, plenty of money goes to governments, and only a portion of those funds get invested in things that truly benefit the poor. Remittances offer a balance. Insofar as recipients put those funds toward improving household well-being by buying food, for example, or paying school fees, or offsetting income ‘shocks’ from illness or economic shifts, or keeping jobs they may otherwise lose, or even saving, remittances do a lot of good for the poor.

How can policy and development help remittance recipients use their funds for those positive ends? Tim Ogden and Laura Starita, the editors of Philanthropy Action, together with Heidi Metcalf, the deputy director of the Hudson Institute, tackled that question in Hudson’s 2009 Index of Global Philanthropy and Remittances. The publication provides an overview of the size of global remittance flows from 2007, what remittance funds tend to be used for, recent trends in the use of technology (particularly mobile payments and the Internet) to enable cheaper, safer, faster remittance transactions, and how remittances can be better leveraged for development ends.