Developing countries got $131 billion in official aid in 2015.
And they got $431.6 billion in remittances — money sent home by migrants who are working abroad.
That’s the astounding number in the World Bank’s new Migration and Development Brief. The total has been going up yearly and is expected to keep rising, the report predicts, but the rate of growth has slowed a bit because of the drop in oil prices, which affects money earned by migrants in oil-producing countries.
So are all those remittances a good thing? Do they do economic harm to the country where the migrants are earning the money in the first place? NPR’s Ari Shapiro posed these and other questions to Dilip Ratha, lead author of the brief and head of the Global Knowledge Partnership on Migration and Development.
The way the money is spent in developing countries is a tremendous boon, Ratha says. A lot of it goes to meeting basic needs, like food, but it also is invested in “child education and health, maternal health, older people’s health” — and in local businesses.
For the family members, the money “is like a lifeline,” Ratha says. It can help break the “cycle of poverty” — and provide invaluable assistance after a disaster, like last year’s earthquake in Nepal. And when a family member is about to marry, or there is a death and a funeral to pay for, remittances are a way for migrants to help out and stay connected.
Some politicians (and regular citizens) complain about the outflow of money from the country where the migrants are working. Ratha points out that the migrants work hard at jobs that can be “dirty and dangerous” and that they use most of their earnings for consumption and taxes, sending on average only 10 to 15 percent of their earnings home. So these workers are making a much larger contribution to the economy of their new home than to the family members they left behind.
Still, a lot of money takes a trip abroad. In the U.S., for example, migrants send out over $56 billion a year. So some public figures in the U.S. have said they’d like to stop migrants from sending remittances. Ratha says there’s no legal grounds to do so: “It’s a perfectly legitimate thing to do.”
In terms of a country’s cash flow, remittances are akin to an American who buys “an imported car or shirt,” he says. That money isn’t staying in the U.S. either. Twenty years ago, Ratha adds, people complained about the way imports took dollars outside the country. Now they complain about remittances, but he predicts that “in five years, people will stop complaining.”
Ratha’s native India leads the world in remittances received — $69 billion in 2015. He knows from his own experience what a difference the money can make. After leaving India, he sent back remittances, helping his brother complete a Ph.D. and financing his sister’s Ph.D.-in-progress.
And even though remittances dwarf foreign aid, the money has very different aims. Remittances go for personal needs, Ratha says, not for paving roads, building hospitals or supplying malaria vaccines.