REMITTANCES IN CRISIS

HOW TO KEEP THEM FLOWING

75%

of the world's migrants work in countries where three-quarters of the globe's COVID-19 cases have been reported.

90%

of global remittances are sent by migrants from these countries.

20%

projected slump in 2020 remittances. That equates to US$110 billion.

(Data Source: KNOMAD & World Bank)

A CRUCIAL LIFELINE

As the world suffers the socioeconomic repercussions of the COVID-19 pandemic, the flow of global remittances to low- and middle-income countries (LMICs) is projected to decline sharply by about 20 percent in 2020. Remittances to LMICs are estimated to fall by US$110 billion, representing a loss of a crucial lifeline for many vulnerable households. With cross-border remittances to LMICs being higher than either foreign direct investment or official development assistance, the rapidly intensifying socioeconomic effects of the crisis are expected to be devastating to the local economies of migrants’ countries and communities of origin, individual households and the overall achievement of the Sustainable Development Goals (SDGs).

THE IMPACT ON
MIGRANTS AND THEIR FAMILIES

Migration creates new livelihood and income opportunities, including through remittances. Interruptions to cross-border financial flows related to the current pandemic particularly hit migrants and their families. Migrants in most cases have limited safety nets, due to often being in informal employment, engaged in jobs that cannot be done remotely and excluded from government measures to mitigate the impact of job losses, resulting in limited to no income. In this crisis, many migrant workers face unemployment or reduced income, are stranded in their host countries with little or no support and are unable to support their families at home.

Migrants’ families in their home countries depend on incoming remittances for basic necessities such as purchasing food, and paying for housing, education and healthcare. Without remittances, families face the risks and acute consequences of not being able to afford these basic needs.

On both ends of the remittance channel, remittance service providers have had to close or reduce their service hours while mobility restrictions and limited public transportation make it difficult for people to reach branches and cash-in/out agents. These access restrictions are critical challenges to many migrants’ and their families’ abilities to send and receive remittances as there is limited awareness and adoption of digital channels. A reduction in remittances has the potential to reverse the development progress made on the 2030 Agenda for Sustainable Development and the SDGs.

THE IMPACT ON
LOCAL ECONOMIES AND COMMUNITIES

Remittances account for more than 5 percent of GDP for at least 60 LMICs. For Least Developed Countries and Small Island Developing States, this share is often even larger. As foreign direct investment is expected to decline by more than 35 percent in 2020, remittance flows are expected to become even more important as a source of external financing for LMICs.

A reduction in remittances can have major ripple effects across entire local economies and communities, resulting in a decrease in productive investment, consumption spending and access to education and health services. As such, it is critical that action is taken to ensure that remittances – from migrants and from wider diaspora communities – keep flowing, including through supporting greater access to and use of digital technologies.

THE IMPACT ON
REMITTANCE SERVICE PROVIDERS

When migrants’ income is reduced, remittances fall and so the revenues of remittance service providers in sending and receiving countries also decline. Unexpected flows and volatile exchange rates make it difficult for remittance service providers to manage their liquidity. Forced closures and remote working pose challenges to providers’ ability to continue operating.

Remittance service providers are worried about their customers’ health and safety, but face challenges in transitioning clients to digital channels due to lack of digital readiness in the market and face-to-face customer verification obligations. In addition, the lack of identification documents, adequate financial awareness, access to digital technology and digital literacy amongst migrants and families can mean that when access to formal channels declines, there is an increased reliance on informal remittance channels. Higher rates of digital financial inclusion can mitigate this, and help keep flows in formal channels.

A CALL TO ACTION

With a view to leaving no one behind in the current crisis, the following call to policymakers, regulators and remittance service providers should be considered for the benefit of migrants, their families and local communities in line with the 2030 Agenda for Sustainable Development.

Policymakers

  • Declare the provision of remittances as an essential financial service

  • Establish economic support measures that will benefit migrants and remittance service providers

  • Support the development and scaling up of digital remittance channels for migrants and families

Regulators

  • Advise banks to apply risk-based due diligence measures with a view to continuing to provide banking services to remittance service providers during the crisis

  • Consider clarification of compliance and licence renewal requirements for remittance service providers during the crisis

  • Provide regulatory guidance for proportionate Know-Your-Customer (KYC) requirements that are critical to scale digital financial services, especially for unbanked and undocumented individuals

Remittance Service Providers

  • Explore measures to provide relief to migrants, such as reducing remittance transaction costs, free cash pick-up and delivery, and other value-added services

  • Invest in financial education and awareness, including on digital remittance channels and available agent locations

  • Promote inter-operable open systems that can enable a foundation upon which migrant-centric financial products can be offered

STATES

INTERNATIONAL ORGANIZATIONS

Knomad World Bank Group UNCDF IOM - UN Migration UNDP

INDUSTRY

Others

EVENTS

Webinar

REMITTANCES IN CRISIS: HOW TO KEEP THEM FLOWING

On the occasion of the International Day of Family Remittances, Switzerland and the United Kingdom in partnership with World Bank/KNOMAD, UNCDF, IOM, UNDP, the International Association of Money Transfer Network, and the International Chamber of Commerce would like to invite you to a webinar to build on the recently launched Call To Action "Remittances in Crisis: How to Keep them Flowing"

Time:
8:00-9:00 ET / 14:00-15:00 CET Tuesday, June 16 2020

Please register for the webinar at: https://bit.ly/RemittanceWebinar

MEDIA

Press releases

Switzerland:
https://www.eda.admin.ch/eda/en/fdfa/fdfa/aktuell/news.html/content/eda/en/meta/news/2020/5/22/79217 https://www.eda.admin.ch/eda/en/fdfa/fdfa/aktuell/newsuebersicht/2020/05/remittance-call-to-action.html
UK: https://www.gov.uk/government/news/uk-calls-for-global-action-to-protect-vital-money-transfers UNCDF: https://www.uncdf.org/article/5649/uncdf-and-undp-join-forces-in-initiative-to-improve-flow-of-remittances-and-counter-socio-economic-impacts-of-covid-19 UNDP: https://www.undp.org/content/undp/en/home/news-centre/news/2020/UNCDF_UNDP_to_improve_remittances_and_counter_impacts_COVID19.html https://twitter.com/UNDP/status/1263836530113761280?s=20 IOM: https://www.iom.int/news/iom-joins-call-action-socioeconomic-impacts-covid-19-remittances ICC: https://iccwbo.org/media-wall/news-speeches/icc-joins-forces-with-un-and-governments-to-improve-flow-of-remittances/ https://twitter.com/iccwbo/status/1263818654887575552 IAMTN: https://www.linkedin.com/feed/update/urn:li:activity:6669625403109335040

Media Articles

Switzerland: https://avenue.argusdatainsights.ch/Article/AvenueClip?artikelHash=8f28b39f21dd49509839fc53be0c26ba_881AFA04257167C7A8D1C6915B483EA0&artikelDateiId=252573295 https://bit.ly/2LUbRy4 (Swissinfo.ch) https://www.20min.ch/fr/story/la-suisse-lance-un-appel-en-faveur-des-transferts-de-fonds-496187098176 https://www.rts.ch/info/economie/11343994-la-suisse-lance-un-appel-en-faveur-des-transferts-de-fonds-des-diasporas.html https://www.tagblatt.ch/news-service/inland-schweiz/schweiz-will-migranten-helfen-geld-in-die-heimatlaender-zu-schicken-ld.1222677 International: https://www.mobileworldlive.com/featured-content/money-home-banner/uk-switzerland-call-for-global-remittance-action/ https://www.sunnewsonline.com/covid-19-uk-swiss-govts-make-case-for-global-action-to-protect-money-transfers/ http://m.theindependentbd.com//post/246870

Call to Action Remittances in Crisis: How to Keep them Flowing

Frequently Asked Questions

  1. What is the purpose of the Call to Action?

    The Call to Action aims to raise awareness about the importance of remittances for low- and middle-income countries. It also aims to identify key measures that could mitigate the significant impact of the COVID-19 crisis on remittances, highlight them for the attention of policymakers, regulators and remittance service providers, and generate momentum for action.

    The Call to Action encourages policymakers, regulators and remittance service providers to improve access for migrants and wider diaspora communities to physical or digital remittance services. Facilitating the sending and receiving of remittances without obstacles will enable hundreds of millions of people globally who rely on these flows, particularly those in vulnerable situations due to the current crisis, to cover basic necessities such as food, education and healthcare. This will prevent millions of people from falling into poverty, which would negatively impact the achievement of the SDGs. Maintaining the flow of remittances is vital for the resilience and recovery of local economies and communities in many low- and middle-income countries heavily affected by the health and economic crisis caused by the spread of COVID- 19.

  2. How is COVID-19 impacting remittances?

    The current global crisis related to COVID-19 affects all regions of the world, all generations and all segments of society. Besides health vulnerabilities, migrant workers and their families are also hit hard by the economic effects of the crisis. Many migrants have lost their jobs and are compelled to return home, others are stranded without pay in their countries of destination, leaving them without income to support themselves or their families back home.

    One crucial aspect of how the COVID-19 crisis is affecting migrants, members of diaspora communities, as well as the families, communities and economies that rely on receiving remittances, is the severe disruption to those remittance flows. The secondary impacts of COVID-19 include migrants having less or no income, closure or reduced operating hours of remittance service providers, challenges for migrants in accessing remittance transfer services due to lockdown restrictions, and difficulties for their families who cannot receive the remittances.

    The current global crisis related to COVID-19 affects all regions of the world, all generations and all segments of society. Besides health vulnerabilities, migrant workers and their families are also hit hard by the economic effects of the crisis. Many migrants have lost their jobs and are compelled to return home, others are stranded without pay in their countries of destination, leaving them without income to support themselves or their families back home.

    One crucial aspect of how the COVID-19 crisis is affecting migrants, members of diaspora communities, as well as the families, communities and economies that rely on receiving remittances, is the severe disruption to those remittance flows. The secondary impacts of COVID-19 include migrants having less or no income, closure or reduced operating hours of remittance service providers, challenges for migrants in accessing remittance transfer services due to lockdown restrictions, and difficulties for their families who cannot receive the remittances.

    This is particularly urgent as remittances provide a vital lifeline for hundreds of millions of people round the world, and yet the World Bank has projected that as a consequence of the crisis, flows to low- and middle-income countries will decline by about 20% – roughly US$110bn – in 2020. This significant reduction will not only cause hardship for families and communities directly dependent on remittances and may drive further migration, it also carries the risk of adverse macroeconomic impact in many developing and emerging countries. In various low- and middle-income countries, total remittances correspond to more than 10% of their GDP, and remittances to low- and middle-income countries as a whole exceed both foreign direct investment and ODA. Given that in past crises remittances have typically acted as a countercyclical and stabilising factor, the impact of a drastic slump in remittances will be significant.

  3. Who are the initiating countries and organisations behind the Call to Action?

    The Call to Action “Remittances in Crisis: How to Keep them Flowing” is an initiative jointly launched by the Governments of Switzerland and the United Kingdom on 22 May 2020, in partnership with the World Bank, UNCDF, IOM, UNDP, the International Association of Money Transfer Networks (IAMTN) and the International Chamber of Commerce (ICC).

  4. Will the Call to Action be undertaking specific interventions or programmes to support the flow of remittances?

    The Call to Action aims to raise awareness about the importance of remittances for low- and middle-income countries. It also aims to identify key measures that could mitigate the significant impact of the COVID-19 crisis on remittances, highlight them for the attention of policymakers, regulators and remittance service providers, and generate momentum for action. Because of the nature of the Call to Action, it is not set up with either the intention or the funding to implement specific programmes (for example to provide technical assistance, or capacity-building).

  5. Is there a deadline for joining the Call to Action?

    An invitation to join the Call to Action was issued to all countries and a range of other stakeholders on 22 May 2020. Interested countries and stakeholders are encouraged to join the Call to Action ahead of the United Nations International Day of Family Remittances on 16 June, but this is not a hard deadline – we would welcome others joining at any time to indicate their support for this critical issue.

  6. What is expected of countries and stakeholders that join the Call to Action? What is the benefit of joining?

    The Call to Action is designed to highlight the vital role that remittances play in supporting hundreds of millions of people round the world, and to generate momentum around a number of important measures that can keep remittance flows moving in the crisis. Countries and stakeholders joining the Call to Action are expected to contribute to the promotion and implementation of the Call to Action.

    The Call to Action identifies a number recommendations for policymakers, regulators and remittance service providers that should be considered for the benefit of migrants, diaspora communities, and the economies, communities and families that rely on receiving remittances.

    It is not the expectation that all recommendations will be equally applicable in all countries. Some will be more relevant in some places than others, in particular depending on whether a country mostly sends or receives remittances. In addition, the expectation is not that by joining the Call to Action a national government necessarily undertakes to fully implement all those measures in its territory – not least because there may well be other stakeholders involved (including in many countries state or provincial governments).

    By joining, stakeholders endorse the Call to Action, but they can also expect to benefit from actions generated. For example, countries who mostly receive remittances will benefit from those flows being maintained. Remittance service providers will benefit from efforts by policymakers and regulators to keep businesses operating and keep remittance channels open. The more stakeholders join, the greater the impact and the more effective the call to action will be.

    In addition, access to existing global platforms on remittances can be facilitated for all who join the Call to Action, to support the promotion and implementation of its recommendations. Countries and other stakeholders who join are invited to share contact details for their focal point.

  7. What are the next steps of the Call to Action?

    The Call to Action is designed to highlight and promote measures that will generate action from key stakeholders – in particular policymakers, regulators and remittance service providers – to mitigate the impact of COVID-19 on remittances. Any direct activities that the Call to Action may initiate will depend both on demand, and offers of resources/capacity, from those who join. It is well understood that there are other initiatives that also work in this area, and it will be important to join forces to ensure that any activities complement other work being undertaken.

    Subject to the points above, activities of the Call to Action could include:

    • a) collating and sharing examples of initiatives taken to address the impact of the crisis on remittance flows;
    • b) webinars to facilitate discussions on key topics and the sharing of best practice / lessons learned;
    • c) information gathering (surveys / questionnaires); and
    • d) action-oriented working groups to discuss how to address specific issues.

ACTIONS & INITIATIVES TAKEN