According to the World Bank, this year alone migrants worldwide sent a total of $440 billion to their home countries. This figure was cited in a recent publication by the newspaper Welt am Sonntag. Thanks to the existence of global financial structures that make it fairly easy to transfer money from one country to another (Western Union, Moneygram, and some others), support by emigrants for their relatives left at home is becoming an important economic factor for developing countries.
For example, in Gambia, Lesotho, Liberia, and the Comoros, private remittances account for up to 20% of gross domestic product. In larger countries, they have become a substantial part of imports: in Nigeria, for instance, their share has grown to one-third of the total value of imported goods. These funds also play an important role as a stabilizing factor, virtually independent of the actual state of the economy in the country or its development trends.
The increase in the flow of private remittances is also characteristic of Germany. Information from the financial company Moneygram indicates that in the first half of the year, at least twice as much money was sent from this country to Albania, for example, as in the corresponding period last year. Financial flows to Kosovo, Afghanistan, and Nigeria also posted double-digit percentage growth.
Interestingly, the total amount of private remittances is roughly three times the volume of funds allocated under official international aid to developing countries. Experts agree that due to the current influx of refugees, financial flows will continue to grow, but they do not see this as a major problem. Moreover, they clearly prefer private remittances over official channels of support for developing countries.
According to economist Axel Dreher from Heidelberg University, it is better when money is sent from one private individual to another. In this case, any manipulation of financial resources at the official level is ruled out: the sums go directly to where they will be spent with maximum benefit for the recipients. In this sense, their efficiency is higher than that of impersonal financial aid to the state. Funds that pass through the fine sieve of bureaucracy and traditional corruption usually do not reach the most needy.
Such comparisons involuntarily push towards completely abandoning official support programs for developing countries at the state level. However, economists warn against this. As Professor Stefan Klasen of the University of Göttingen explained, relying solely on private remittances is impossible because they do not allow building roads, schools, and hospitals, financing social programs, and dealing with the aftermath of natural disasters.
Moreover, official support programs are usually tied to compliance with human rights, which allows some influence on the political system of the state. On the other hand, the population of a country where human rights are violated loses official international support, even though they are not at fault, being essentially hostages of the situation. And in this case, remittances become the only means of survival for people. Therefore, Professor Klasen advocates that these two cash flows should not be opposed but complement each other.
As Russkaya Germaniya notes, the main problem in the area of private remittances is the size of the fee charged. According to the World Bank, transferring $200 incurs a fee of about 8% of that amount. So if someone sends $200 from Frankfurt am Main, their relatives in Africa receive $184. The top twenty industrial countries intend to reduce the average fee to 3% by 2030. World Bank experts believe that technological progress and an expanding customer base make this goal quite achievable. If the fee were already that low today, the total amount of $440 billion transferred in the first half of the year would increase by another $20 billion.