REDUCING the cost of remittances is crucial, especially in trying times such as pandemics, as these transfers represent lifelines for millions of families, according to Asian Development Bank (ADB) experts.
In an Asian Development Blog, ADB experts led by Economic Research and Regional Cooperation Department Senior Statistician Stefan Schipper said there is still a long way to go to attain Sustainable Development Goal (SDG) 10 on reducing transaction costs to 3 percent.
Currently, remittance costs still represent around 5 percent of remittances sent by migrants and migrant workers all over the world. ADB said informal remittance transfers were also particularly expensive while regulatory environments are too restrictive.
“Remittance prices across Asia vary, but all are above the Sustainable Development Goal 10 global target of reducing the price to 3 percent of a transaction. Informal remittances are particularly expensive, and some regulatory environments are too restrictive,” the experts said.
“Remittances are a financial lifeline for many families in Asia. Though these transactions have proven resilient during the pandemic, greater support through policy measures and digitization efforts are needed,” they added.
During the pandemic, altruism played a key role in remittance flows. Citing results of a survey by WorldRemit in mid-2020, the experts said 84 percent of over 3,000 overseas Filipinos sent home the same amount of money or more during the pandemic.
These Overseas Filipino Workers (OFWs) were hosted in countries such as the United Kingdom, the United States, Canada, and Australia. Remittances to the Philippines increased to 9.66 percent of GDP in 2020 from 9.33 percent of GDP in 2019. Another factor that helped increase remittances during the pandemic was the greater availability of social and financial assistance to migrant workers in developed countries.
For some migrants, financial innovation that allowed them to transfer money digitally, enabled them to increase their remittances to their families.
However, in some places, remittance flows declined due to their vulnerability to the pandemic and levels of social support. In some cases, the experts said, government efforts to relax exchange controls affected remittance flows.
“Digitalization can help address some of these challenges. In addition, sending and receiving countries should address regulatory and infrastructure barriers to facilitate digital transactions,” the experts said.
“Universal financial access in receiving countries and among migrant workers in sending countries is also very important in making remittances easier, cheaper, and more widespread,” they added.
The Bangko Sentral ng Pilipinas (BSP) earlier reported that remittances sent by Filipinos abroad to their families in the Philippines increased to a five-month high in April this year. The BSP said cash remittances coursed through banks reached $2.395 billion in April 2022, some 3.9 percent higher than the $2.305 billion posted in the same month in 2021.
The Central Bank’s data showed this growth was the highest since November 2021 when cash remittances posted growth of 5.1 percent.