How remittance affects a country’s economy

For anyone who follows global business, it should come as no surprise that the volume and frequency of international remittance in the past few years has grown tremendously. This is, of course, due in large part to the ever-increasing population of foreign born workers in countries around the world who are sending portions of their wages back to friends and family in their location of origin. The act of remittance, when analysed from a variety of perspectives, has proven itself to be immensely beneficial in a variety of ways.

For developing nations, remittance has proven itself to be a crucial lifeline through which foreign currency is routinely injected into their domestic economy. This, of course, often leads to substantive gains in overall economic health and an increased in speed of modernisation and other development projects occurring within the economic sphere. To put this in perspective, studies undertaken in 2014 revealed that nearly US $435 billion were being transferred as part of remittances on an annual basis. This number is likely to have grown significantly since then!

That being said, if a country is receiving a large amount of remittance income, it is quite likely that certain other indicators are becoming increasingly valid, such as a decline in the domestic manufacturing sector and thus, a dip in GDP and per capita income. While remittance may help slow this process, it is important to remember that remittance only cannot sustain an economy. If a country reaches a point where remittances have become a critical component of economic health, this is a sure sign that other domestic factors are in dire need of assistance.

Frequent use of remittance is also a sign that a country’s less wealthy population has become marginalised by their domestic banking system. Given the fact that remittances can occur without the use of a bank, many receivers are opting for third-party providers in order to avoid the lofty fees imposed by larger institutions. If such actions are occurring, it is most likely a sign that money transfer software in domestic banks is considered out-of-reach for many citizens.

Regardless of the positive or negative aspects of money transfer, it seems quite reasonable to assume that these services will become increasingly important over the foreseeable future! With that in mind, learning all there is to know about money transfer will quite likely pay large dividends for those who are preparing for a more globalised future economy.

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Isuru Karavita

He graduated from the university of Hertfordshire with a BEng(Hons) in Digital Communication and Electronic Engineering. 

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