The Impact of Remittances on Economic Growth and Poverty Reduction

Besides monetary gains, remittances are associated with greater human development outcomes across a number of areas such as health, education, and gender equality. There are also positive spillover effects, with some of the expenditures and investments made by remittance-receiving households accruing to entire communities. Remittances are the most tangible and least controversial link between migration and development. In this brief, author Dilip Ratha argues that much more can be done by policymakers to maximize the positive impact of remittances by making them less costly and more productive for both the individual and the country of origin. 

Beyond reducing costs, measures to ensure that the recipients of these funds have access to other financial services would go a long way to boosting development outcomes. The technology for linking remittances directly to such services exists, but practice has fallen behind because of public policy barriers. Policymakers can put in place sufficient incentives and mechanisms for migrants and their families to invest remittances in capital-accumulation projects that benefit the whole economy.