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Effect of Remittance on Global Financial Health

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In the developing countries, the amount of remittance that is received from the migrants has gone up extensively during the past few years.  The study shows that from it has gone up from $ 3 billion to $ 340 billion as recorded in the year 2008 in the US. After foreign direct investment, this has become one of the largest sources of external finance for the developing countries. Remittance increases do not get affected by natural calamities like as it has the possibility to increase also during economic downturns.

Several policymakers note that remittance is stable and is growing considerably in developing countries. However, it is usual to ask whether it develops the commercial segment of the country. The issue related to this is important their financial system help to reduce poverty.

How Remittances Affect the Development Financially

Wondering how to transfer money overseas without fees? Money that is transferred with the aid of institutions like Instarem, Western Union and MoneyGram  usually paves the way for the recipients in order to demand and get access to financial product and the services. Those who are unbanked recipients provide the advantage to the bank of letting them know and thus helping them to reach out.

However, a remittance is slump financial products are often required by the recipient enabling them for the safe storage of the funds as most of this money are not received from the bank. The household has the priority of getting remittance through the bank.

Remittance May Create Damping Effect

Remittance has the possibility of a damping effect on credit development as they can help an individual in contributing to relax financing constraints result in weak demand for credit. However, a price of it may not ensure any credit for the private sector.

Effect of Remittance on Poverty

The household income may increase due to remittance that is why they are called anti poverty force in the countries that redeveloping. For instance, studies show that in Nepal due to the growth of remittance the poverty rate reduced to one-half by one-third.  Evidence from the different source says that remittances that are received from the households are better financially across many dimensions.

If you take the example of the Philippines, they use remittance for savings and for productive use which helps the country to strengthen the growth of their economy thus helping them to oppose the factors like brain drain and syndrome related to remittance.

Effect on Educational Health

Remittance income is not sustainable that is why this often criticized as the funds are squandered by the recipients. However, study shows that family who spent emittance not proportionally on human capital or building of areas compared to how they spend in other fields of income. Survey from different places says that the household invests in health care education much higher compared to other who do not get this priority of receiving remittance.

Impact on Sustainable Development

As income from remittance help to bring families out of poverty, the beneficiaries of it may exert less time as well as energy for scrambling for the sustenance enabling them freely to engage in stimulating sustainable growth of the economy.The remittances may create greater risk for the household but are much more profitable. The recipients who are from developing countries must have their own resources and maximize it also executing the governance reforms. If the remittance is harnessed properly with discipline and savings could serve as a long term economic reform the migrant countries.

The governance reforms must involve dealing with economic political and other social reforms as well as eliminating g corrupt leader and official which help the government to implement a stable policy for protecting the banking interest and not favoring the power groups as well as the elite group.