Remittances – Statistics and Facts

As per the Remittances Stats, one in every ten people around the globe is directly associated with remittances. The U.S. is the largest remittance source country that witness outflow of $42 billion annually. Among the various regions of the world, the Latin America has the largest and fastest growing remittance flow. It received approx 40% of remittance sent to developing countries. In fact, the remittance to Latin America exceeds the foreign investment and development aid. The economy of the Latin America depends largely on the remittances flow. The rapid increase in Latin America is gradually slowing with more Latin American immigrants are adopting U.S. society and thus sending less money home.

Remittances - Statistics and Facts The Migrants who are earning into foreign locations remit on average 12.6 times a year. The average remit amount is in the range of $150/200/250 every time. These remittances are used by the family, friends or relatives in the home country for their daily expenses. These remittances make up to 10% of their household income. A quarter of remitters usually send money their earned money home first, prior to paying their own bills. The remittance rates have shown good growth in spite of downfall of U.S. economy.

Generally, the remittances increase at times of the slow economy of home country where it can be used as an effective anti-poverty tool. These remittances promote the economic growth, community development and increased investment in home country. Moreover, remittances can also lead to inflation and higher interest rates. As per the remittances data, nearly 46% of all Hispanics that are born outside US, send money to their home country. Nearly, 57% of immigrants from El Salvador send remittances and around 60% of U.S. remittance senders are male. Around 64% of people who are employed constitute unskilled labourers and 45% say they would go back to their home country.

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Types of Remittances

The remittances can be classified into four types including Family Remittances, Community Remittances, Migrant Worker Remittances and Social Worker Remittances.

Family Remittances: It refers to remittances that are sent by individual immigrants working in the foreign locations to their family, relatives or friends in their home country. These remittances are sent every month and they assist the families of the migrants to survive. These remittances also help the poor families to fight against the poverty. The family remittances are regarded as the major form of remittances across the world where millions of workers are working hard in distant land away from their home for earning their livelihood.

Types of Remittances Community Remittances: It refers to the remittance that is sent by individual immigrants generally and also includes the remittance sent by various hometown associations to organisations and communities in their home country. This money has been used for the developmental activities of communities such as in building infrastructure, church, parks, and roads. It also offers health care to the poor. The community remittances are also used for offering health benefits, education; and employment to big communities who need these facilities in the home countries.

Migrant worker Remittances – These remittances refers to the cash transfers done by migrant workers for sending the money to the families, friends and relatives back home. The migrant worker remittances make up a large chunk of money inflows into home country by the people who have migrated to foreign locations in the search of money, job or education.

Social Remittances – These remittances basically comprise of various ideas, practices, and social capital that make up the backbone of many remittances that flows from workers of one country to another. Thus social remittances assist the traditions and culture of one race or community, to socialize with the cultures and traditions of another community. Social Remittances help in the bonding of people and do not have money associated with them.

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Outward Remittances

The outward remittances refer to the process of sending money in foreign locations from the home country to your family members, friends or relatives. This procedure is governed by lots of regulations. The outward remittances in India are done mainly through banks. If you like to do the outward remittance, you should ensure that you are dealing with the genuine people and firms because you cannot trust any individual or a financial firm for sending your money. You need to select a bank that has international footprint and good reputation for making your job almost effortless.

Outward Remittances Once you have selected a bank to do the outward remittances for you, the next step is to select your mode of transfer. One alternative is to receive a Foreign Currency Demand Draft (FCDD) that will be denominated in foreign currency and it is drawn in favour of the recipient. In this case, the beneficiary does not require an account with the same bank. Another alternative is to send the money via wire transfer. Another word for the wire transfer is the Swift transfer that refers to the wire transfer via Society for Worldwide Interbank Financial Telecommunications. It is a secure and standardised system that allows the banks to correspond with each other. The charges of the wire transfer are higher as compared to the FCCD, however it is very fast and transfer can be done within 24 hours. On the other hand, a demand draft is physically sent abroad and it takes time for clearance.

You are required to complete and submit a remittance request form where you can mention the details like amount of money and the source of money. You are also need to fill the Form A2 and may need a certificate from a chartered accountant. Before the transaction takes place, the customer is told about the forex rate and you should also check the same with the forex rate card of the bank. RBI does not allow the remittances for the other purposes like gambling, margin trading and others. You need read about the rules and regulations related to the remittances of the country before sending the remittance.

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Macroeconomic Effects

There are various macroeconomic effects of the remittances on the economy of the country. The large inflows in foreign currency lead to domestic currency to appreciate. It leads to making the country’s exports less price-competitive as goods get expensive for other countries with the rise in domestic currency. With the rise in value of the domestic currency, the consumption of imports rises. The inflow of cash assists the recipient country in reducing its balance of payments.

Macroeconomic Effects The migrants usually go to that country where the likelihood of work is the highest. The jobs are mostly related to the construction-related work. A large number of workers go to countries that are developing their economies and the commodity-rich countries also have good demand for labour.

As per report by the OECD, there is approximately 3% of the world’s population that are living outside their home country in the year 2000. As the world becomes integrated and globalized, the labour movements between countries have become fluid and large number of workers moves abroad looking for better jobs and career prospects. As a result, the immigrants who earn to send their earnings for their families back home form an integrated part of the economy.

Migrant send the remittance back to home countries in many ways like wire transfer, via banks, demand draft or cheques. These funds sent by immigrants are keeping the wire transfer companies well in business and permit the home country to buy imports. The immigrants consume the goods and services offered by domestic workers. The presence of foreign workers assists in alleviating labour shortages. The immigrant workers assist the developed countries in expanding while sending part of their incomes as remittances. Moreover, the social networks created by foreign workers leads to more integrated cultural understanding by interactions between local populations and migrants.

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Inward Remittances

The inward remittances refer to the case where the money is sent from the foreign countries by the migrant workers to their friends, families and relatives in India. For sending the inward remittances, the most popular ways are via bank channels, wire transfer, foreign currency cheques as well as rupees cheques. The foreign currency cheques are issued that can be used for collecting the money by depositing it in a branch of bank in India. The rupee cheques are issued in the Gulf countries for sending money back home. There are many migrant workers that are using the services of online money transfer as offered by banks. Nowadays, banks provide a shorter turnaround time within 24 hours for sending money to India. This proves to be a major benefit of wire transfer as compare to other methods.

Inward Remittances In case, you are looking for a real time-transaction then you can use money transfer agencies that can complete the entire transaction in about five minutes. If you are going for collecting the money sent by the sender in cash, then you should carry a proof of identity and proof of residence. You may carry your passport, voter’s ID or driving licence as the proof of your identity and residence. A money transfer system generally provides a code to the sender that is required to be passed to the recipient prior to receiving the money.

The sender of the money needs to also pay for the administrative costs, transfer fees and agent commission. It basically depends on the amount of money being transferred, mode of transfer and country of transfer. The money transfer systems have a limit to the amount that can be sent per transaction and only a fixed number of transactions allowed in a year. The limitations are also set by the country of origin of transfer.

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Remittances Effects on the Country

The Remittances refer to the funds transferred by the migrants in foreign countries to their families, relatives or friends in the home country. They are basically the earnings of workers that are spent by their families in the home country for meeting their daily requirements for food, clothing and other expenditures. The remittances in a way are a major force in driving the economy of home country. The remittances sent by the citizens who are working abroad offers an import source of funds for many developing nations. In some cases these funds from remittances even exceed the aid received from the developed world.

Remittances Effects on the Country The remittances received in home countries are used for meeting the expenses of the worker’s family; however it is difficult to track the expenditure as it is form of private transfers. As per the economists, recipients may use funds for buying necessities like food, clothing and housing. It does not lead to development because these are not strictly investments. Some other economists opined that funds received from abroad are used for developing the domestic financial system. The remittances can be sent via wire transfer, to banks and other financial institutions. These funds are used for the consumption of goods and services. It can also be used for other purposes like constructing house, building or any other investments.

As per the research, migrants returning from abroad invest their funds in developing their own business and they recognize the business trends in their home country and utilise their work experience abroad for creating a company in their home country. The inflow of money from remittances is compared to commodity like oil that have high demand source. Government can spend money on poorly-planned projects and get into trouble if the demand for that commodity slows down. As the remittances are not held by the government unlike oil revenues, they are sent to individuals for spending.

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Remittances – (Foreign Inward Remittance Certificate)

Foreign Inward Remittance Certificate is a document that acts as a testimonial for all the inward remittances coming to India. This document is used as a proof of payment received by the individual from outside the country in the foreign currency. On receiving the money from a foreign country, it is credit to the account of the receiver by authorized body such as banks that are authorized by the Reserve Bank of India. The beneficiary cannot transfer money to his bank account if he does not have a bank account in an authorized bank.

Remittances FIRC is regarded as a very important document as it can be used for many purposes. If the shares are issued on the name of company or person that are outside the country then FIRC can be used as a proof of money received on behalf of share application. In case where a resident Indian transfers or sells his shares to an individual who is NRI or foreigner then FIRC can be used to testify that the resident seller has the share purchase consideration. FIRC is submitted to DGFC in case of EPCG and Advance License and is a very important document.

As per the rules of export of services, there is no service tax is levied when services are exported and in such cases, FIRC can be used as an important proof of export of services and remittances that are received. FIRC is a crucial document that contains various details like the beneficiary’s name, address and name of remitter, mode of payment, exact amount of foreign currency, Cheque/DD/TT no , amount of money, purpose for the remittance and prevalent rate of exchange. Person, who is receiving the remittance from outside India, should also reveal the purpose of remittance. It is asked by the bank as a proof of purpose at the time of receipt of the money.

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Various Ways Of Making Payment

You can make payment for the remittance in your bank in many ways as mentioned below.

(a) Certified Personal Check or Personal Check – This check needs to be drawn on the account and should be payable to the branch of bank from where you are sending money.

Various Ways Of Making Payment (b) Cashier’s Check – This payment method involves the check to be purchased from your account and it should be payable to branch of bank from where you are sending money. You should ensure that your name is printed on the check.

(c) Wire Transfer – This method involves the wire transfer from your account. The account number and routing number are used for sending money in this case.

(d) ACH Debit Authorization – This method involves the debit of money from account upon the authorization through the Automated Clearing House (ACH). ACH refers to an electronic processing facility that allows the bank to debit (or credit) an account with another bank. It acts as an electronic substitute for checks in the banks. The form used requires you to fill the information related to the bank account including the bank’s routing number and account number that is available on the check.

(e) Account Debit – In case user has maintained an account with the branch of the bank, he can authorize the bank to debit that account.

(f) Cash – Customer can also make the payment in person up to $2500.

(g) Debit or Credit Card – Banks can also charge the valid debit or credit card up to amount of $5000 if customer comes in person for sending money and up to $1000 when customer applies by mail or fax. Banks usually accept only Visa and MasterCard. Customer can consult with the card issuer and get the details of cash advance charges incurred.

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Sending Remittances Using Credit Card

Most of the remittance service providers accept deposit or remittance using only the bank accounts or by using online banking. In case, a customer does not have any bank account, he/she can still send money to the relatives online by making use of credit cards. You need to apply for a free account with PayPal as it is very popular payment method that is accepted everywhere in the world. It is easy to send and receive money with PayPal; however you should ensure that you are not sending the remittance illegally. Once your application for opening the PayPal account is approved, the banking information or credit card information is added to it.

Sending Remittances Using Credit Card After that, you need to search for a third party payment method and then apply for free account. You are required to add your credit card or banking information which should be the same as provided while creating the PayPal account. You may set your credit card or banking account as the primary source of payment in the PayPal account and you can also set the similar information in your third party account. Once you have set up your third party account and PayPal accounts with the similar information, you can start add your recipient name in your third party account. Now you can initiate sending money to your added beneficiary. The PayPal can be your source of payment if you have good enough balance in the PayPal account and you can also select any other form of income source if you have no balance in your PayPal account.

You can also read the charges applied carefully before considering any online transaction. The credit cards in particular charges high interest rate if you are sending remittances overseas as compared to the bank account. You should know the details of all the charges and make comparison by yourself.

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Facts Related to Remittances

The facts related to the remittances are mentioned below:

(1) As per the report submitted by the World Bank, almost US$250 billion was sent through remittance throughout the world in the year 2006. The amount of money sent via remittance has been increasing steadily with thirty percent growth every year

(2) The share of the global remittances sent to the developing nations rises from fifty seven percent in 1995 to seventy two percent in 2005. It was equivalent to an amount of $167 billion in the time period of ten years.

(3) India is the leading remittance receiver globally and accounts for the maximum remittance received every year. In the year 2006, $26.9 billion was remitted to India and it increased up to $55.06 billion in 2009. India is followed by China at second position with $22.52 billion in 2006 to $40.5 billion in 2008. These two are followed by Philippines ($17.3 billion); Mexico ($21.2 billion) and Poland.

Remittances (4) A large chunk of remittances from the US is directed to Asian countries including India ( 26 billion USD), Philippines (16 billion USD) and China (23 billion USD). In the year 2003.2004, five out of seven top remittance recipient countries belonged to Asia. The Asian countries were India, Philippines, China, Pakistan and Bangladesh. Non Asian countries in the top seven include Mexico and France.

(5) The Asian countries like India, China and non Asian such as Mexico and France accounts for a third of global remittances.

(6) The remittances make up a high share of GDP gross domestic product in only two countries including the Philippines and Serbia and Montenegro.

(7) In fact, approx ten percent of the population globally is involved directly with remittances.

(8) USA tops the list of countries that offers the largest amount of remittances, with $31 billion of remittance is sent every year from USA to other countries.

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