C HAPT E R
2 Migrant Remittances
R
emittances are the central and most tangible link between migration and development (Russell 1992; Ratha 2007). Remittance inflows to Africa quadrupled between 1990 and 2010, reaching nearly $40 billion in 2010, equivalent to 2.6 percent of Africa’s gross domestic product (GDP) in 2009 (see table 2.1). After foreign direct investment (FDI), remittances are the continent’s largest source of foreign inflows. Migrant remittances contribute to international reserves, help finance imports, and improve the current account position of recipient countries. They are associated with reductions in poverty, improved health and education outcomes, and increased business investments. Although the limited reach of intermediaries in rural areas, lack of effective competition, and inadequate financial and regulatory infrastructure contribute to high remittance costs and the prevalence of informal channels (especially for intra-African remittances), the rapid adoption of innovative money transfer and branchless banking technologies are increasing access to remittances and broader financial services for the poor. This chapter draws on extensive literature and new surveys of households, central banks, and remittance service providers conducted in select African countries and key migrant-destination countries as part of the Africa Migration Project.1 It discusses the economic implications of migrant remittances for African countries and recipient households, examines the challenges and opportunities for remittance markets in Africa, and makes policy recommendations for better leveraging remittances and thus promoting development in Africa. The chapter presents three main findings. • At the macro level, remittances are a large and stable source of external finance for African countries that improves their creditworthiness and access to capital. In many African countries, these flows exceed
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