G20 & UN: Digital Remittances REDUCE Poverty
Remittance fees are a massive tax on the most vulnerable
Great read on how remittances significantly impact poverty and rural growth.
This report, authored by the UN's International Fund for Agricultural Development (IFAD) with contributions from the World Bank, was launched on 16 June in celebration of the International Day of Family Remittances (IDFR)!
Digital remittances significantly cut costs and are a key component for achieving the Sustainable Development Goal (SDG) target cost of 3%.
By the end of 2023, over 200 million migrants working outside their countries of origin would have sent an estimated US$656 billion in remittances to at least 800 million people in low- and middle-income countries.
80% of recipients of these remittances live in rural areas where the world’s poorest reside.
High remittance fees represent a tax on our planet’s most vulnerable and deprive rural areas of much-needed funding.
👉TAKEAWAYS
🔹 “Digitalization reduces transfer costs, speeds up transactions, and enhances security and tracking of payments.”
🔹 Sending US$200 digitally costs 4.60% compared to 6.89% for cash transfers. Mobile-to-mobile transfers are even lower at 4.11%.
🔹 Structural enablers are reducing remittance costs: enhanced account ownership, digital payment and mobile money usage and increased consumer awareness; enabling infrastructure and regulatory frameworks,
🔹 One-quarter of remittance flows are saved, invested, or used to start businesses. Around US$75 billion annually goes towards rural development.
🔹 "The digitalization of remittances is spearheading change, especially in rural and underserved areas. It is connecting millions of unbanked people to basic financial services that make a real difference in improving their lives."
🔹 "Digital remittances allow women to access funds directly and securely, empowering them to make financial decisions that benefit their families and communities.
Digital remittances are making great progress at reducing costs but still have a long way to go to attain the SDG target of 3%
👊STRAIGHT TALK👊
Digital remittances are faster and cheaper but the sad reality is that 70% of remittances are cash!
So, while the report shows remittance prices coming down, which is good for everyone, they are still high, at an average price of 6.8.% for cash transactions.
The great hope is that mobile-to-mobile transactions, like those carried between Singapore and India, will “break the bank” regarding remittance fees.
Some banks in Singapore charge NO FEE for remittances that use the new connections between the PayNow and UPI networks!
The role of Digital Public Infrastructure (DPI) in remittances is clear. The PayNow-UPI link works so well because both nations have digital ID programs and national digital payments.
This is a superb advertisement for DPI and will hopefully show just what DPI can do to make people’s lives better!
Remittance fees are a tax on the most vulnerable, and I’m delighted that digital payments are bringing these costs down!
Let’s celebrate this win, even if incomplete!
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