German activities Facilitating remittances to developing countries
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Copyright© Goethe-Institut Südafrika
According to the World Bank, in 2021, remittances amounting to around 781 billion US dollars were transferred globally, with 597 billion US dollars being sent to low- and middle-income countries. The World Bank estimates that this figure rose to 626 billion US dollars in 2022. Nearly one in seven people worldwide either sends or receives these kinds of cash transfers.
Why are remittances relevant to development policy?
Remittances help people to satisfy basic needs such as food, clothing and accommodation. In doing so, they help to reduce poverty. They protect households in times of crisis, such as illness, unemployment or natural disasters. These payments are also invested in health and education, and are used for business investments and start-ups.
Despite initial predictions, and in spite of the social and economic crisis that ensued in 2020, remittances only decreased slightly during the COVID-19 pandemic, and have risen again since. This demonstrates how resilient remittances are, even in crisis situations.
However, sending money quickly, safely and inexpensively to countries outside the EU is often difficult. For example, in many countries there is no nationwide banking system, which makes it difficult to access financial services.
In the 2030 Agenda, the international community set itself the goal of reducing the average transaction costs of remittances to less than three per cent of the amount transferred by 2030 (sub-goal 10.c). Germany is one of the countries that have set themselves the goal, as part of the Global Compact for Migration (GCM), of creating possibilities for quicker, safer and cheaper cash transfers and of fostering the financial inclusion of migrants and their families (objective 20).
German development cooperation initiatives
Remittances are the private income of the sender and the recipient. However, development policy can enhance the contribution remittances make to sustainable development by devising ways to optimise the use of this private income and by facilitating transfers. The BMZ is actively pursuing these goals on a global level as part of the G20 Global Partnership for Financial Inclusion (External link) (GPFI) and the Global Forum on Remittances, Investments and Development (External link) (GFRID).
The BMZ is thereby specifically promoting innovations that make money transfers safer, faster and more affordable. In 2021, as part of the Migration & Diaspora programme (External link), support was given to start-ups in and from remittance-receiving countries that focused on solutions to help reduce costs, improve transparency and speed up transfers. The programme also developed e-learning courses (External link) on financial literacy in Kosovo, Jordan and Ghana.
Furthermore, the BMZ is creating incentives aimed at mobilising remittances for sustainable investment in its partner countries. For instance, via the WIDU.africa (External link) platform, grants are provided to supplement remittances made by the African diaspora in Europe that specifically support businesses in the informal sector in Cameroon, Ethiopia, Ghana, Kenya, Togo and Tunisia.
In addition, the BMZ is also assisting partner countries with the development of sustainable finance systems, for example by advising central banks and by offering financial literacy programmes (see, for example, Digi#ances in Jordan (External link)). When it comes to financial literacy programmes, gender-specific inequalities with regard to sending and receiving remittances are also taken into account, for example by creating content specifically for women and offering this separately.
As at: 11/07/2023