German activities Facilitating remittances to developing countries

Many people with a migrant background support family and friends back home. Experts refer to these private money transfers as “remittances”. They tend to be single transfers involving amounts of between 200 and 300 US dollars.

Three women using a smartphone 
Three women using a smartphone 

According to the World Bank, in 2021, remittances amounting to around 773 billion US dollars were transferred globally, with 605 billion US dollars being sent to low- and middle-income countries. That is over three times the amount committed for official development assistance. Nearly one in seven people worldwide either sends or receives such cash transfers.

Remittances help with satisfying basic needs such as food, clothes and accommodation. That way they reduce poverty. They are also a way to protect households in case of crises, such as illness, unemployment or natural disasters. In spite of the social and economic crisis that ensued, during the COVID-19 pandemic, remittances only decreased slightly in 2020 and even started to rise again in 2021. These payments are also invested in health and education, and they are used for business investments and start-ups.

However, migrants often face huge obstacles when trying to send money to their families in their countries of origin quickly, safely and inexpensively. 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 has committed itself to the goal of, by 2030, reducing the transaction costs of cash transfers to less than three per cent of the amount transferred and eliminating remittance corridors with costs higher than five per cent (Target 10.c). Germany is one of the countries which have set themselves the goal, as part of the Global Compact for Migration, of creating possibilities for quicker, safer and cheaper cash transfers and of fostering the financial inclusion of migrants and their families (objective 20).

German activities

In order to achieve these goals, encourage an exchange between relevant actors and work together with its partners on finding solutions, the BMZ is engaged in these and in other relevant international fora and processes. They include the G20 Global Partnership for Financial Inclusion (GPFI) and the Global Forum on Remittances, Investments and Development (GFRID).

In addition, the BMZ specifically promotes innovations which make remittances safer, faster and more affordable. In 2021, as part of the Migration & Diaspora programme, support was provided through a so-called RemTech Pilot Accelerator for start-ups in and from remittance receiving countries focused on solutions to help reduce costs, improve transparency and speed-up transfers.

Complementing this support, the BMZ is also assisting partner countries with the development of sustainable finance systems, for instance by advising central banks and by offering financial literacy programmes.

In Jordan, for example, the BMZ has been supporting a project (Digi#ances) since 2015 which facilitates making money transfers by mobile phone. Digi#ances advises the Jordanian central bank, cooperates closely with the private sector and carries out information campaigns and training courses for Syrian refugees and local people. As part of a co-financing agreement with the Swiss Agency for Development and Cooperation (SDC), an additional component has been added to this project which is focused on the financial inclusion and resilience of migrant workers in the Jordanian textile sector. In addition, an e-learning product called Remittances Online Toolkit is also being piloted under the Migration & Diaspora programme. To start with, the Toolkit will be on offer only in Ghana, Kosovo and Jordan.

Furthermore, the BMZ creates incentives to mobilise remittances for sustainable investment in its partner countries. For instance, the contribution made by remittances from the African diaspora in Europe towards strengthening companies in the informal sector in Cameroon, Ethiopia, Ghana, Kenya, Togo and Tunisia has been increased via the platform (External link).
In addition, the BMZ works to get more consideration given to gender-specific inequalities in relation to the sending or receiving of remittances.

Any activities undertaken by the BMZ in this context are fundamentally aimed only towards facilitating remittances that are the senders’ and receivers’ private money. Remittances cannot replace funding in the form of official development assistance. However, development policy can support the contribution remittances make to sustainable development by helping to devise ways to optimise their use and by facilitating transfers.

As at: 03/08/2022