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Facilitating the flow of remittances

Remittances are multidirectional, voluntary, and private international monetary transfers from migrants to their families and contacts in their countries of origin. In the Monterrey Consensus, reference was made to reducing the costs associated with transferring remittances, the issue was elaborated further in the Doha Declaration. In 2009, the G20 committed to reduce the cost of remittances by 5 percentage points in 5 years. The Addis Ababa Action Agenda and 2030 Agenda have taken this a step further in committing 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, mindful of the need to maintain adequate service coverage. The Addis Agenda also emphasizes the role inclusive finance can play in intermediating remittances, thus enhancing their impact on the local economy, and commits to remove obstacles for non-bank remittance providers, exploit new technologies and improve data collection.

Volume of remittances
The total volume of financial remittances sent by international migrants back to their families in origin countries amounted to USD 581.6 billion in 2015 and contracted by 1.2 per cent to USD 575 billion in 2016. The level of official international remittances has grown sharply since 2000 when it totalled around USD 127 billion. In some cases, earnings remitted by international migrants constitute a significant portion of a country’s GDP - e.g. about 34 per cent for Liberia, Nepal and Tajikistan, and almost a third for Moldova and Kyrgyz Republic (World Bank, based on remittance inflow data in 2015). Middle-income countries receive, by a large margin, the lion’s share of all remittances. Remittances received in middle-income countries and LDCs are still growing in 2015 and amounted to USD 402 and USD 37 respectively. 
 
In absolute terms, remittances to developing countries fell for a second consecutive year in 2016, a trend not seen in three decades. The World Bank estimates that officially recorded remittances to developing countries amounted to $429 billion in 2016, a decline of 2.4 per cent over $440 billion in 2015. The top recipient of migrant remittances in 2016 was India (USD 62.7 billion),  though this represents a decrease of 8.9 per cent over $68.9 billion in 2015.  Latin America and the Caribbean was the only region to see growth in remittances in 2016. 
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Regional Remittance 
Remittances in Latin America and the Caribbean are estimated at $73 billion in 2016, an increase of 6.9 per cent over 2015, as a result of the strong U.S. labor market and beneficial exchange rates. Robust remittance growth was estimated for Mexico, El Salvador and Guatemala. In 2017, remittances to the region are projected to grow by 3.3 per cent to $75 billion.Remittances to the South Asia region declined by an estimated 6.4 per cent to $110 billion in 2016 due to lower oil prices and fiscal tightening in the  Gulf Cooperation Council (GCC) countries Bahrain, Iraq, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates (UAE). In addition to the decline in remittances to India and Bangladesh, Nepal also saw a contraction of 6.7 per cent, while Pakistan saw modest growth of 2.8 per cent. Remittances to the region are expected to grow by a muted 2 per cent to $112 billion in 2017.
 
The economic slowdown in the countries also impacted remittances to the Middle East and North Africa, which saw an estimated decline of 4.4 per cent to $49 billion in 2016. The decline for the region was driven by Egypt, the region’s largest remittance recipient. Remittances to the region are expected to expand by 6.1 per cent to $52 billion this year.
 
Remittance flows to Sub-Saharan Africa declined by an estimated 6.1 per cent to $33 billion in 2016, due to slow economic growth in remittance-sending countries; decline in commodity prices, especially oil, which impacted remittance receiving countries; and diversion of remittances to informal channels due to controlled exchange rate regimes in countries such as Nigeria. Remittances to the region are projected to increase by 3.3 per cent to $34 billion in 2017.
 
Remittance flows to Europe and Central Asia continued to be severely affected for a third year in a row, contracting by an estimated 4.6 per cent to $38 billion in 2016. Low oil prices and sanctions continued to impact Russia, which is both a recipient and a remittance-source country. Uzbekistan saw remittances shrink by nearly one-third since 2013, while Azerbaijan, Turkmenistan, and Tajikistan were also hard hit. For 2017, remittances to the region are expected to increase by 6.6 per cent to $41 billion, mainly due to stronger growth in Russia and several European countries.
 
Remittances to the East Asia and Pacific region declined by an estimated 1.2 per cent in 2016 to $126 billion. Flows to major recipients presented a mixed picture, with remittances to the Philippines growing by almost 5 per cent, while those to Indonesia fell by 4.4 per cent. For 2017, remittances to the region are forecast to grow 2.5 per cent to $129 billion. 
Cost of remittances


There has been a sustained downward trend in the average cost of sending remittances since 2008. The global average cost of sending the equivalent of USD 200 – as monitored by the World Bank through Remittance Prices Worldwide (RPW) –was 7.32 per cent in the second quarter of 2017. Although in the there was a slight increase from in the first quarter of 2017, the overall trend has been downward. Over the last four quarters the average cost has fluctuated between 7.42 and 7.32, having fallen below 8-per cent for the first time in 2014.

De-risking and correspondent banking
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. According to the World Bank, 28 per cent money transfer operators (MTOs) principal and 45 per cent of agents can no longer access banking services, though it hits individual countries, regions and financial services in varying degrees. See for more information: Report on the G20 Survey on de-risking activities in the remittance market
 
Correspondent banking, through which one financial institution provides services on behalf of another financial institution, facilitates cross-border flow of goods and services, and connects banks and their customers around the world. However, regulations and policies to address money laundering and financing of terrorism, have led to some banks choosing to “de-risk” their business by exiting correspondent banking in certain markets, which has led to a decline financial services, with significant implications for financial inclusion and the transfer of remittances. <