Migration and Motivation

When considering the growth of global remittance flows over the last few decades, it’s important to mention the reasons behind migration, and the benefits that international payment capabilities bring to migrants and their families. People have migrated for over a million years going back to the movement of Homo erectus (‘upright man’) populations out of Africa 1.75 million years ago into Eurasia, and Homo sapiens (‘humans’) who moved out of Africa into Australia, Asia and Europe by around 40,000 BCE. Since then, humans have spread their wings worldwide and today occupy most corners of the world, with the exception of extremely desolate locations where living conditions are too harsh to inhabit. The number of international immigrants in the world today — persons living in countries other than where they were born — stands at approximately 250 million.

The reasons behind migration thousands of years ago rings true for migrants today. Social, economic, political or environmental reasons can all contribute to the motivation behind migration.

o Social — e.g. escaping oppression, poverty, poor healthcare, poor education, bad sanitation, human rights issues

o Economic — e.g. low incomes, lack of employment opportunities, unreliable financial infrastructure which lacks savings and investment opportunities, low prospects for career development

o Political — e.g. political turmoil and uncertainty, internal conflict and war, grouped persecution — one must only look to the middle east to witness the profound effects of refugee crises on domestic citizens and surrounding nations

o Environmental — e.g. natural disasters and climate change affecting previously inhabitable land. The effects of rising sea levels are expected to displace millions of people living on low lying land, as soon as the next decade

Over 90% of migrants move for economic reasons, not just for themselves but for their family and their community, and this brings me to remittances and why we believe they’re so important. When people migrate, it is rare for an entire family to make the journey overseas or overland, and so the responsibility often lies with one person. The primary goal for these courageous first movers is to improve the livelihoods of their family by working, earning and sending money home, while simultaneously benefitting personally from improved living standards offered by the host country. Remittances enable receiving households to smooth consumption and invest in human capital such as education and health care — all key components of economic development, improved living standards and reduced poverty. It provides households with money with which to buy food and clothes, and presents an opportunity to invest in physical capital such as land or home improvements. It also gives people who might normally be affected by seasonal cycles or abnormal income flows, such as farmers, a more reliable source of income. Furthermore, and perhaps the most progressive by-product of remittances is that it encourage receivers to seek and demand financial services, be it for receiving remittances directly or saving them. This incentivizes and encourages financial institutions to offer more accessible products and services and has positive knock on effects in the form of more developed financial infrastructure. More savings means more credit availability, and more credit means investment and development opportunities, which leads to more jobs, higher incomes, faster growth, and so on.

For this reason, it’s fair to say that immigrants have been the unsung heroes of less economically developed countries over the last 40 years and have undoubtedly contributed to their significant growth and development from afar. Remarkably, global remittances (approximately $600bn) are three times that of global aid contributions, 75% of which is sent from developed to developing nations.

World Bank Data

Remittances have also outstripped inflows of foreign direct investment (FDI) in the least developed countries of the world. To name a few, remittances make up approximately 30% of Nepal, Liberia and Tajikistan’s individual GDP. There is therefore no denying the role remittances play in supporting developing countries. Remittances making up such a large portion of GDP could indicate dependence, and critics often use this as an argument against financial inflows that aren’t FDI. They would argue that growth derived from remittances and foreign aid is unsustainable, and in fact leads to unproductive spending on consumer goods, and financial complacency and idleness in the receiving household. To this end, it’s important for families to adopt and governments to encourage a transition from spending on consumption, to investment in health, education, enterprise, and physical assets.

Critics also argue that remittances increase inequality within communities since those families sending a family member abroad typically have more money than those who don’t and so the disparity becomes greater as income flows in from overseas. To this I would say that all members of the community benefit since higher average incomes in the region boost local trade for all. There is also an argument for reduced global inequality since wealth is redistributed from developed countries to developing countries.

Migrants provide much needed resources to their loved ones and give them the ability to pay for amenities such as utilities, healthcare, food, education, and more. In doing this they single handedly support their family and their community. Whilst there are some concerns around modern day immigration and remittances, it’s difficult to denounce the positive effects of widespread improvements in living standards, economic development and poverty alleviation. With this in mind, it’s important for migrants to have easy to use, inexpensive, time efficient money transfers capabilities in the palm of their hand so they can continue to support friends and family as they have done for many years. Fortunately, the cost of remittance payments have come down significantly in last decade and so billions more in finance is making it back to the desired destination every single year.

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