Power of remittance in enhancing personal and societal development

Worldwide remittances received in the year 2016 was only 0.7 percent of the Global GDP. Despite the low number, it plays a vital role in the progress of many developing and underdeveloped nations. Although such nations are losing its citizens to migration, the remittances are helping their families by increasing the net income and standard of living.


According to a World Bank Report, in the year 2016, the total personal remittances received hit a staggering mark of 532 billion USD which is more than three times the Official Development Aid (157 billion USD). In fact, for many nations, it has become a mighty contributor to financial aid, stability, and overall economic development.

In over 30 nations remittance contributed to more than 10% of their total GDP(2016), which supported their national GDP on a massive scale. For example, Nepal is a nation with a small economy but sizeable diaspora across the globe. Which means their emigrants are aiding the economy of their homeland through remittance. To be precise, Nepal received only 6.6 billion USD, yet it amounted to 31.2% of their nation’s GDP.

Not only the smaller countries but even big giants like India and China enjoy the fruits of remittances. India and China top the list with 62 and 35 billion dollars respectively, followed by the Philippines which received 31 billion USD. These three nations itself receive around 23% of the total global remittances.

Remittances are surely a major source of income to their direct families, but it can also boost the societies to prosper in various sectors which remitters are not aware of due to lack of awareness.


Remittance and its impact on their families

Firstly, a large percentage of remitters send money to help their direct families come out of poverty or have a better standard of living. This very type of remittance accounts for around 80%-90%. The funds are used for consumption of food, medical care, housing, education, repayment of loans, savings, and short-term financial goals. Primarily, it increases the demand for daily consumption goods and useful products. The increase in demand for products increases the supply-demand chain in the nation. It thus creates new employment opportunities, revenues for new businesses and markets, facilitating the growth of the economy. All these factors also succour the developing and small economy nations in building strong business environment, which increases the income of households, and followed by an increase in GDP, at the end benefiting the government with taxes to better the conditions of the society.  All these aspects can be long drawn out or with slow results but are significant in its own right.

Economists consider remittances as countercyclical, meaning the remitters send money even during economic downturns. This alleviates the recipient families from any suffering as a result of the economic downturn.

All these factors are good for the recipient families, but economists believe there is a lot more these underdeveloped and developing nations can achieve through remittances.


Remittance and Economic development

According to some researchers, only 10-20 % of remittances go towards investments, funding, credit build-up, businesses, and other kinds of wealth promotion. A mere 5% or less goes towards the advancement of local communities or the nation.

The main reason is the lack of awareness or knowledge both in the sender and receiver side. So how do we solve this?

Organisations can run awareness programs to help both remitters and their families/friends by creating platforms and teaching them ways to put their money to achieve sustainable development and betterment of their nation.  

As aforementioned, the recipient families spend nearly 80-90% of the remittance money on immediate or short-term financial needs. Obviously, the government or organizations cannot regulate on how the recipients spend their remittances. However, establishing an environment with adequate measures, rewards, and yielding projects or policies with holistic approach can have some positive impact and provoke them in taking bigger responsibilities.


Improving personal wealth

First and foremost is the task of helping the remitters in building personal wealth and assets which plays a huge role in the growth of individual GDP and overall economy (especially in countries with smaller economies). This is especially essential in rural areas where both senders and receivers lack resources or platforms for development. Individuals can build their personal income from many sources like establishing a new business, investments, or by improving the existing business. Here, government or organisations must take initiatives to help the remitters and recipients with support systems, training programs and facilitations.

  • Governments or local organisations should create a trustworthy and scalable base for new businesses
  • Awareness about the essential expenditure on short-term finance and future investments
  • Train the recipient families and communities with necessary skills which helps them in starting their own SMEs
  • Attract remitters to invest or co-found SMEs(which yields profits for themselves and their families in future)
  • Providing a sustainable ground for remitters to implement the ideas or techniques in improving the existing business(the skills which they gained by living in the developed nations)
  • Enlightening remitters and their families on the importance of financial stability and investments
  • Maintaining good credit limits and how it can help them in acquiring loans or economic stature
  • Guiding with the policies in health, insurance, retirement, and best practices to maintain financial stability
  • Buying real-estate as a means of savings which also increases in value over time
  • Need for quality education to their children and its impact on their future

These are few of the many ways a remitter can help in building personal wealth, which is high-yielding to both themselves and for the economy of the society.


According to a report published in Science Direct, 10% growth in the international migrant share will help 2.1% of people (living with less than $1 a day) come out of poverty, whilst 10% increase of per capita international remittance helps nearly 3.5% of the people to come out of poverty.


Development aid for the society

Foreign aid or donations are in the hands of policymakers or organisations, wherein the development is fairly slow paced. But direct remittances enhance the economy of the recipients or the dependents. So, here the organisations or government can play a key role in setting up solid grounds for the remitters to trust, believe and invest for the welfare of the communities.

  • Bringing together the remitters and their families by organizing events or festivals and building relationships
  • Explaining them about the significance of investing in the amelioration of the society
  • Investing in local health care and education and how it helps their families, friends, relatives, and societies as a whole
  • Persuade remitters to inspire the local communities of how they can collectively improve the society (as generally people to tend to believe that people who work in developed nations have a higher knowledge or have seen better conditions)
  • Establishing technological or innovative businesses to encourage and provoke the remitters to get involved in the development
  • Making them aware of how the betterment of their local community will benefit themselves and their societies in long-run

In order to achieve all the factors mentioned above, organizations should closely work with both the remitters and their families. A point of need and responsibility should be created in the minds of remitters, which fosters patriotism and the desire for the development of their nation.

The remitters or families who take part in such services must be acknowledged with the activities, rewarded for their support, and be given some higher responsibility or roles depending upon their interests or availability. It must be made sure that the assets or resources are put to the most valuable use and mitigating wastage at all costs.


One of the best examples is Link for Philippine Development or LINKAPIL developed by the Filipino Commision. It a platform where the overseas Philippines help and be a part of local causes. Below are some key points or agendas they work on.

  • Creating awareness and understanding of existing procedures and for the management of donations
  • Promoting confidence in the overseas donors with a constructive mechanism and regular updates
  • Valuable usage of the donated funds and resources
  • Embracing the collaborations between Filipinos living abroad and those living in the Philippines with the objective of enhancing the nation’s development.

The LINKAPIL is truly a great example of how to promote the welfare aid of the homelands, especially in developing countries. Organizations or even remitters can take this as a model and work for the rectification of their society which in turn furnishes with more fruitful results.

At the end of the day, everyone must be aware that the well-being of an individual depends on both developments of the self and the society.

Remittances are one of the most influential sources of development for the underdeveloped and developing parts of societies. So by creating a congenial environment for remitters in their homeland, this can help elevate their nation’s social and economic standing. Needless to say, this will be a slow process and any visible change is not likely to happen overnight; however what can be assured is that it will stir a positive impact in the communities.

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