Remittances Rose in 2017 While Their Costs, Although Still High, Declined

Driven by growth in the United States, Europe, and Russia, global remittances grew 7% in 2017 to $613 billion from $573 billion in 2016, the World Bank reported Monday. At the same time, the average cost of remittances fell, though expenses remain more than twice as high as the World Bank would like.

Last year’s growth rate represented a turnaround from 2016 and 2015, when worldwide volume contracted by 1.5% and 2.6%, respectively, and was caused in part by currency fluctuations. “The rebound in remittances, when valued in U.S. dollars, was helped by higher oil prices and a strengthening of the euro and ruble,” the World Bank said in a news release.

Most remittances go to what the Washington, D.C.-based anti-poverty institution calls low and middle-income countries. Volumes to this countries hit $466 billion, up 8.5% from $429 billion in 2016.

The top two receiver countries of remittances were India, $69 billon, and China, $64 billion. India and China ranked well ahead of the next three leaders, the Philippines, $33 billion; Mexico, $31 billion, and Nigeria, $22 billion.

The country most dependent on remittances is the Kyrgyz Republic, a former Soviet Union republic in Central Asia where remittances account for 35% of gross domestic product. The next-highest recipient countries were Tonga,33% of GDP; Tajikistan, 31%; Haiti and Nepal, both 29%, and Liberia, 27%.

The global average cost of a $200 remittance as a percent of the payment fell to 7.1% in 2017 from 2016’s 7.5%. Costs vary widely by region, however, from a low of 5.2% last year in South Asia to a high of 9.4% in Sub-Saharan Africa. The World Bank has what it calls a Sustainable Development Goal (SDG) target for remittances of 3%.

This year the World Bank expects remittances to low and middle-income countries to grow 4.1% to $485 billion. The bank expects the worldwide total to hit $642 billion, a 4.6% increase.

Stricter immigration policies in remittance-source countries such as the U.S. and well as tighter risk and fraud-control policies have crimped the growth of remittances. “De-risking by banks and increased regulation of money-transfer operators, both aimed at reducing financial crime, continue to constrain the growth of formal remittances,” the World Bank said.

A 40-page report accompanying the release gives background about crypto-currencies and blockchain technology, a growing sector in remittances, but does not give estimates of volumes. Blockchain technology, however, “has the potential to significantly reduce remittance costs,” the report says.