Diaspora financial resources can be mobilised for development.
A new study from Juniper Research—acknowledged as the leading analyst house in the digital commerce and FinTech sector, delivering pioneering research into payments, banking and financial services for more than a decade—has found that international remittances, including airtime top ups via mobile phones will exceed USD 25 billion by 2018, up 67% from an estimated USD 15 billion in 2015. It found that international mobile money transfers are forecast to grow in frequency in all regions as users become more accustomed to using the service. Higher value transactions are also forecast.
Previously dominated by Western Union and MoneyGram, the international mobile money transfer market is becoming increasingly competitive with new mobile remittance providers offering significantly lower prices than the established players. Mobile international remittances will also have an impact on remittances via informal channels—the “grey remittance” market, composed primarily of cash—by offering a lower-cost alternative to traditional remittance services.
International migration—the movement of people across international boundaries—has enormous implications for growth and poverty alleviation in both the countries of origin and destination. According to census data, in 2013, more than 247 million people were living outside their countries of birth. In the coming decades, demographic forces, globalisation and climate change is expected to increase migration pressures both within and across borders.
International migration boosts world incomes. By allowing workers to move to where they are more productive, migration results in an increase in aggregate output and income. Diasporas can be an important source of trade, capital, technology, and knowledge for the countries of origin and destination. Diaspora financial resources can be mobilised for development and there is a close link between migration and development. The World Bank is working to create an enabling environment for the reduction of remittance prices by helping to improve the infrastructure for domestic and cross-border payments, removing legal barriers to the development of sound remittance markets and fostering market competition.
The top recipients of officially recorded remittances in 2014 were:
- India (USD 70 billion)
- China (USD 62 billion)
- Philippines (USD28 billion)
- Mexico (USD 25 billion)
Remittances sent home by migrants to emerging countries are equivalent to more than three times the size of Official development assistance (ODA). . Furthermore, aid has often come with a price of its own for the emerging nations:
- aid is often wasted on conditions that the recipient must use overpriced goods and services from donor countries
- most aid does not actually go to the poorest who would need it the most
- aid amounts are dwarfed by rich country protectionism that denies market access for poor country products, while rich nations use aid as a lever to open poor country markets to their products
- large projects or massive grand strategies often fail to help the vulnerable as money can often be embezzled away
In view of the above, it is perhaps time to focus on lessening the dependence on official development aid. One secure and sustainable way of doing this is to focus on domestic resources and Innovative Financing for Development (IFD) to determine new sources of revenue and manage, leverage, and protect these revenues. This could be done with the assistance of the global IFD specialist LSL World Initiative and its technological partners.
Founded by Laurent Lamothe, former Prime Minister of Haiti, LSL has a solid track record of partnering with governments to set up and operate national strategic development initiatives tailored to the local context and in line with national development priorities. These initiatives operate with revenues generated by a comprehensive suite of micro-levies or micro-contributions in key globalised sectors—offering the best opportunities in terms of volumes and growth potential such as mobile telecommunications, financial transactions, airline tickets etc.
Each country is unique in its needs but almost all emerging countries have an increasing demand to finance socio-economic projects in the fields of health, education, water supply, infrastructure, electricity and security. Revenues from IFD mechanisms could be ploughed into supporting emerging governments to provide access to these areas in their countries.
There are a whole range of potential revenue-creating opportunities that could be explored
Says Laurent Lamothe: “The money is there—it just has to be unlocked from the diaspora flows like remittances. The monies come from abroad—there is little impact on local users and service providers. A great number of untapped resources can be mobilised in this way for socio-economic development in emerging countries.”
Harmless and microscopic contributions on enormous volumes of transactions, when aggregated, create significant amounts of revenue in sectors that benefit the most from globalisation. In this way, a micro-contribution could make a mega difference in upgrading infrastructure, in sending children to school or providing electricity and water supply. Most importantly, perhaps, these revenues would lessen the country’s dependence on foreign aid. LSL can make it happen in a secure, sustainable, and effective way.