Remittances are multidirectional, voluntary, and private international monetary transfers from migrants to their families and contacts in their countries of origin. The Addis Ababa Action Agenda and 2030 Agenda have committed to reduce the average transaction cost of migrant remittances by 2030 to less than 3 per cent of the amount transferred and to ensure that no remittance corridor charges higher than 5 per cent by 2030.
The level of official international remittances has grown sharply since 2000 when it totalled around $127 billion. In some cases, earnings remitted by international migrants constitute a significant portion of a country’s GDP - e.g. 37.1 per cent for Kyrgyz Republic, 31.2 per cent for Haiti, 28 per cent for Tajikistan, 27.2 per cent for Nepal and 25.9 per cent for Liberia (2017 World Bank estimates). Middle-income countries receive, by a large margin, the lion’s share of all remittances.
Remittances could have a greater positive impact if the transaction costs were reduced in line with the 3 percent target set by the SDG and Addis Agenda. This would result in savings of about $27 billion a year. While the average cost of remittance transfer has declined by 2.7 percentage points over the last decade, there was no improvement in 2018, with the global average still about 7 per cent. Forty-one per cent of corridors surveyed do not have any services available for 5 per cent or less.
There has been a sustained downward trend in the average cost of sending remittances since 2011 as monitored by the World Bank through Remittance Prices Worldwide (RPW), which estimates the global average cost of sending the equivalent of $200 expressed as a percentage of the total amount sent.
SIDS, LDCs and LLDCs consistently exhibit higher total average costs than middle-income countries and developed regions, although it has also shown an overall downward trend.
De-risking is the phenomenon of financial institutions terminating or restricting business relationships with clients or categories of clients to avoid, rather than manage, risk. There has been an increase in de-risking, in part due to anti-money laundering (AML) and counter-terrorist financing (CFT) measures, which has affected correspondent banking services and impacted the flow of remittances. See the 2015 Report on the G20 Survey on De-risking Activities in the Remittance Market for more information.