If you are not familiar with the concept of remittances, let this serve as your introduction to a form of literal life support for many around the world. Remittance has been defined by the World Bank as a part of the earnings which a migrant worker sends back to family members in the country of origin. Simply put, it is money sent abroad by an immigrant or migrant in another country. For example, a person from Mexico living in the U.S. sending money to his/her family in Mexico.

Migrants and immigrants make up large populations of the developed nations around the world. Because many of these individuals sojourn from the developing countries to the developed ones for better economic opportunities, they send money “home” to support their families.

For many developing countries, remittances are a significant portion of GDP, ranging from 10 percent to over 30 percent. Remittances are an economic engine of growth for many of these poorer countries, and if it were not for remittances, their economies would be much worse off. Remittances are used for a variety of purposes, including paying family debts, building facilities, and generally for family support and upkeep.

In many developing nations such as Ghana, where there are high unemployment rates, remittances serve to support unemployed family members who would ordinarily be in dire straits. Remittances also serve to start small businesses and micro-enterprises, which then may set some on the path of economic self-sufficiency, thereby making the impact generational, and improving the local economy.

Remittances may be wired directly through financial institutions, or sent through money transmitting agencies such as Western Union, MoneyGram, and numerous others in the form of electronic transfers. Funds may also be transported directly by individuals traveling to these countries (in the U.S., any amount of cash over $10,000 has to be declared if being transported by an individual). A failure to declare could lead to the funds possibly being confiscated by Customs.

As will be seen below, remittances do not only flow from rich to poor countries, but can go in all directions. The World Bank estimates that they will grow by more than 3% in 2024 to reach $887 billion. This is more than the annual Gross Domestic Product (GDP) of countries such as Switzerland, Poland, Argentina, Thailand or Egypt. Globally, the United States continues to be the largest source of remittances. The top five remittance recipient countries in 2023 are India ($125 billion), Mexico ($67 billion), China ($50 billion), the Philippines ($40 billion), and Egypt ($24 billion). Half of all global remittances go to 10 countries.

While India tops the list of countries benefitting from remittances, its $100 plus billion received amounts to only 2.9% of its 2022 GDP. Meanwhile, low and middle-income countries around the world heavily rely on this source of income to substantially boost their economies. In 2022, for example, remittances accounted for over 15 percent of GDP for 25 countries.

The top 10 countries and the percentage of GDP accounted for by remittances are: Tonga (49.9%), Lebanon (37.8%), Samoa (33.7%), Tajikistan (32.0%), Kyrgyz Republic (31.2%), The Gambia (28.3%), Honduras (27.1%), South Sudan (24.8%), El Salvador (23.8%), and Haiti (22.4%).

These are all very small countries with a large populace living and working outside their nation in another developing nation. For example, the Gambia is literally surrounded by Senegal, and a large population of Gambians work in Senegal and send money home. Haiti is another case where the country shares a border with the relatively richer Dominican Republic; many Haitians work across the border and send money home regularly. In the case of both nations, it is fairly easy to remit funds due to proximity. In the case of South Sudan, I suspect that many work in Sudan and can easily remit funds to their families just across the border.

For some countries, remittances are an important variable in the economic development and growth equation. As an immigrant myself, I know and understand through personal experience how vital that is for families and loved ones who depend on remitted funds for upkeep and survival. For many in these countries, it is essential for everyday life support.

— Kojo Quartey is president of Monroe County Community College and an economist. He may be reached at kquartey@monroeccc.edu.

This article originally appeared on The Holland Sentinel: Kojo Quartey: Remittances as a form of life support