Remittances Continuing to Bounce Back Following Pandemic Hit — Ukraine a Cause For Concern

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Following a dip in the volume of remittances sent during the pandemic and the subsequent lockdown, global figures continue to look good according to the World Bank. Last year remittances bounced back by some 8.6% and the latest Migration and Development brief from the WB indicates that remittances could hit $630 billion by the end of this year.

 

This is positive news from a global standpoint, but certain issues around the world mean that the way in which remittances flow will change.

 

Ukraine Increase

 

Ukraine is already the country in Europe which receives the highest volume of remittances, and given the humanitarian crisis which is taking place there since the Russia invasion, this looks set to grow further. The report suggests that Ukraine could see a rise of over 20% in annual remittances this year.

 

Michal Rutkowski, Global Director of the Social Protection stated that the priority is about  “boosting social protection programs to protect the most vulnerable, including Ukrainians and families in Central Asia, as well as those affected by the war’s economic impact”.

 

Top Countries

 

Helping to strengthen the bounceback of last year were India, Mexico, China, the Philippines and Egypt, which made up top 5 countries receiving remittances last year. The brief indicates that this list is unlikely to look much different by the end of this year, especially given the damage which inflation will do to these nations. 

 

Cost of Sending Cash

 

Data with regards to remittances is critical in order to increase the volume which we see each year. Most importantly we need to look at the cost of sending remittances. Companies like Ria Money Transfer are leading the way in terms of cutting costs, but there is a lot of work to do with other agents. The UN have committed to bringing the cost of sending down to 3%, but currently we are at around double that percentage. The most expensive region to send money in was Sub-Saharan Africa, with an average cost of 7.8%. Conversely we see that South Asia averages 4.3%, notably however neither meet the UN’s goal of 3%.

 

Focus on Ukraine

 

Currently it costs an average of 6.1% to send money to Ukraine, which can be translated into cold, hard cash for those in need. Speaking about the impact of these high fees, Dilip Ratha,head of KNOMAD stated:

 

“Lowering remittance fees by 2 percentage points would potentially translate to $12 billion of annual savings for international migrants from LMICs, and $400 million for migrants and refugees from Ukraine,” 

 

As you can see, that percentage means a great deal, especially when we consider the increase in remittances which we are going to see in Ukraine.

 

Opportunity For Change

 

There is growing pressure on using Ukraine as a test case when it comes to international payment systems, inn seeking how to reduce the overall cost of sending remittances. Given the importance of supporting the Ukrainian people, now is the ideal time for international payment systems to find ways to change how they operate.