UN agency says COVID-19 an opportunity to fix remittance systemThursday, June 04, 2020
ROME, Italy (CMC) — The International Fund for Agricultural Development (IFAD) says that the COVID-19 pandemic is both a challenge and an opportunity to fix the remittance system in the Caribbean and other places.
“With a euro here and a dollar there, remittances — the money that migrant workers send home to their families — have been adding up in a big way to contribute to the (UN's) Sustainable Development Goals and lift tens of millions out of extreme poverty,” said IFAD.
“Then came the COVID-19 pandemic — and, ironically, a chance to improve a unique segment of the global financial system that accounts for more than five per cent of gross domestic product for at least 60 low- and medium-income countries — more than the total of foreign direct investment or official development assistance handed out by governments,” it added.
IFAD's President Gilbert F Houngbo said that “regardless of whether or not the [post-coronavirus] recovery will be faster than expected, the global pandemic has exposed the vulnerabilities of the global remittance system.
“That is why now is the time to fix these vulnerabilities, no matter what the economic scenario will be,” he said in the run-up to the International Day of Family Remittances on June 16.
Last year, remittances to low-and medium-income countries hit a record US$554 billion, according to the World Bank, with 200 million migrant workers in 40 rich countries sending home funds to support 800 million relatives in more than 125 developing nations.
Half of those receiving families live in rural areas where remittances count the most, Houngbo said.
But with the onset of the novel coronavirus pandemic, the World Bank projects that cross-border remittances will fall by 20 per cent, or US$110 billion, to US$445 billion, potentially pulling tens of millions below the poverty line while undermining progress towards fulfilling the 2030 UN Agenda for Sustainable Development.
With no V-shaped recovery likely in 2021, Houngbo said savings will be depleted and local conditions will worsen, as remittances are not expected to return to pre-pandemic levels for some time.
“While the reduction in remittances will not fall evenly on all families, nor across all continents, societal impacts will be substantial and sustained,” he said.
In response, the UN said Switzerland and the United Kingdom, joined by several other member states, the World Bank, the United Nations Development Program, and other UN agencies and industry groups, issued a global “call to action” on May 22 to ensure that migrant workers and diaspora communities can keep sending back money in ways that can also improve the remittance system.
The UN said the call to action urges policymakers not only to declare the provision of remittances as an essential public service, but also to support the development of more efficient digital remittance channels.
To regulators, it asks that they provide guidance for “know-your-customer” requirements, “that are critical for scaling up digital financial services, particularly for undocumented persons with no access to a bank account.”
The call to action also urges remittance service providers to explore ways to ease the burden on their migrant customers by lowering transaction fees, which now average 6.8 per cent worldwide, more than half the target set in the Sustainable Development Goals, according to the World Bank's most recent Migration and Development Brief.
“Remittances are a lifeline in the developing world, especially now,” said UN Secretary General António Guterres. “Countries have already committed to reduce remittance fees to three per cent. The crisis requires us to go further, getting as close to zero as possible.”
For its part, the IFAD says it is partnering with financial technology firms, mobile operators, commercial banks and postal networks to integrate digital solutions to improve remittance transfers to rural areas.
Now you can read the Jamaica Observer ePaper anytime, anywhere. The Jamaica Observer ePaper is available to you at home or at work, and is the same edition as the printed copy available at https://bit.ly/epaper-login