On the International Day of Family Remittances, Renate Held, IOM Regional Director for Southeastern Europe, Eastern Europe and Central Asia, and Simone Giger, Head of SDC’s Global Program for Migration and Development, have looked at how the financial sector can contribute to an equitable recovery.
An op-ed by them, in particular, says that as borders slammed shut and migrant-dependent industries wound down, the extensive labor migration networks across Central Asia and the Russian Federation evaporated. This reportedly sucked countless millions of dollars out of economies that rely on remittances for up to 30 per cent of their gross domestic product (GDP).
The authors note that migration is not just an option in this part of the world: it is a necessity. The Russian Federation relies on the ten million migrants it hosts to fill jobs at all skill levels. Many Central Asian countries count on labor migration both as an employment strategy, and as a key contributor to their socioeconomic development through the transfer of remittances. These reduce poverty rates in the region by over five percentage points and benefit the poorest regions the most.
During COVID-19, remittances reportedly dried up just when they were needed most. Remittances in the Europe and Central Asia region fell by almost ten percent in 2020, compared to only 2.4 percent globally.
New research published by the International Organization for Migration (IOM) and the Swiss Agency for Development and Cooperation (SDC) reveals that two out of every three Central Asian migrants surveyed in the Russian Federation were negatively impacted by COVID-19. Fully 77 percent stated they had to either reduce or stop sending remittances altogether, with women migrants being the worst impacted.
COVID shockwaves necessitated an immediate and robust humanitarian response. IOM and SDC reacted with direct support to over 3,000 stranded and returned migrants and their family members, and have worked to ensure that these groups have access to safe and reliable money transfer mechanisms. Dedicated advocacy efforts were needed to raise awareness about the importance of remittances as a crucial lifeline for millions of households worldwide as well as for economies of low- and middle-income countries. Switzerland and the United Kingdom, joined by the IOM and others, launched the global Call to Action “Remittances in Crisis: How to Keep Them Flowing”, urging governments and industry to protect remittances during lockdown.
While the potential of remittances to lift people out of poverty has been known for a long time, the past year has shown just how important they are as a safety net for households and economies. The COVID-19 crisis accentuated a crucial question: What can be done to reinforce the key role of remittances as a tool for resilience and as a catalyst for development?
The digital revolution offers great opportunities to use remittances as a gateway towards financial inclusion, and thus towards achievement of the sustainable development goals (SDGs).
Almost 61 percent of Central Asian migrants who replied to their survey in the Russian Federation reportedly already use digital platforms to send remittances home. However, the vast majority of recipients in Central Asia still receive cash, either through money transfer operators or banks. This often excludes them from other services such as financial literacy programs, insurance programs, or savings accounts.
Digital identity cards and financial services can help address this by making sending and receiving money easier, and the infrastructure needed for this to flourish is largely in place. Four out of five Central Asian migrants interviewed in the Russian Federation have a smartphone and access to internet, and own bank cards.
But there are behavioral challenges to overcome, as recipients need to feel comfortable using new services. The research reportedly showed that only 29 percent of people in the region who could receive remittances digitally, actually did so. This is a significant gap that needs to be bridged.
Crucial allies in this will be the banks and other financial institutions, who will have to grow to understand the needs and circumstances of migrants and their families in order to develop appropriate products and services. During lockdown, IOM and SDC started to build these alliances, working with Central and commercial banks.
IOM and SDC believe that financial ecosystems must be improved for the benefit of migrants, their families, and their communities, so that remittances can work more effectively towards creating sustainable livelihoods.
The International Day of Family Remittances (IDFR) was adopted by the United Nations General Assembly and is observed on 16 June. The IDFR recognizes more than 200 million migrant workers, women and men, who send money home to over 800 million family members. This day further highlights the great resilience of migrant workers in the face of economic insecurities, natural and climate related disasters and a global pandemic. The IDFR is now globally recognized and is a key initiative in the Global Compact for Safe, Orderly and Regular Migration (Objective 20), which urges the reduction of transfer costs and greater financial inclusion through remittances.
Remittances, or “cross-border person-to-person payments of relatively small value,” serve as a vital lifeline to the developing world.
