Good afternoon. I am happy to be here with you today in recognition of the “International Day of Family Remittances.” Before I share a few words with you on the importance and impact of remittances, I would like to first thank IFAD both for taking the initiative to draw global attention to the importance of remittances for billions of people around the world and for implementing innovative and sustainable initiatives like the Financing Facility for Remittances. The facility benefits migrant workers and their families and represents a creative way to advance economic and social development through remittance flows.
So often when we think about remittances, we focus on those countries whose citizens toil abroad and the cash they send home – a global total of $542 billion in 2013 according to the World Bank, of which $404 billion went to developing countries. But remittances are also important to the countries where this wealth is earned, and in the United States, they provide a direct benefit to our citizens as well as to our residents, and contribute to our shared desire to see a world free of poverty.
The United States is a nation of immigrants, and they play a crucial role in the economic growth and prosperity of our country. We are proud of our long history of diverse, ambitious, and hard-working people who come to the United States and contribute in so many ways to their newly adopted communities and to our nation as a whole. It should therefore come as no surprise to hear that the United States is the world’s largest single national source of migrant remittances. In 2013, individuals in the United States sent more than 52 billion dollars back to their countries of origin as remittances.
We know that the bulk of the remittances sent to developing countries is used to meet basic needs, such as food, clothing, and shelter, and that without these flows, poverty rates in many countries would be higher—and development outcomes would be worse. We also know that these remittances improve family health and educational opportunities, with household surveys showing that school drop-out rates fall and enrollment rates rise for households that receive remittances. It is evident, and we appreciate the fact, that remittances have become a major source of external development finance for developing countries. With that in mind, I would like to take a few moments to highlight the role of remittances in promoting financial inclusion—for both migrants and their families back home.
Many migrants send a significant share of their earnings—sometimes half of their incomes or more—to family members in their home countries. We believe there is much untapped potential to increase the development impact of these remittances by using them to increase awareness and use of formal financial services.
We see remittance transactions as an opportunity for financial institutions to responsibly engage new customers and educate them on how to effectively use and trust financial services to build and protect their assets and livelihoods, as well as an entry point for migrants to the United States to begin their economic assimilation. Accessing the full range of services provided by the formal financial sector provides migrants with opportunities to start and grow small business, invest in home ownership and retirement savings, and insure against financial and other risks. Importantly, these opportunities benefit both migrants and the communities where they settle.
And in countries benefitting from remittances, particularly developing countries, these inflows can serve as an entrée to savings and other financial services for the receiving family members, providing similar benefits to them and their communities, and helping to break the poverty and migration cycle. By mobilizing savings, building assets, and investing in microenterprises and local socioeconomic development projects, remittances can boost economic activity in migrants’ home communities, create jobs, and build resiliency.
In short, there are a lot of very good reasons to promote the transfer of remittances through formal channels. But while the volume of remittances channeled through licensed money service businesses, banks, and other legitimate or formal channels has been increasing over the past decade, a large proportion of remittances is still sent through informal channels, which are unfortunately vulnerable to becoming sources of illicit finance such as for money laundering, terrorism, and other illegal activities.
The U.S. government is committed, along with the multilateral development banks and our development partners, to working to ensure that migrants can continue to send remittances to family members back home through safe channels in a reliable, fair, and efficient way. We know that while we have made progress, much remains to be done to ensure that remittance markets are transparent, efficient, and cost-effective. This is why the U.S. government has been expanding its work with central banks and finance ministries to build supervisory and regulatory capacity in many remittance-receiving developing countries.
We also believe that the G-20 can serve as an important platform for pushing the remittances agenda, and the G-20 is already demonstrating progress in this area. Last year, the G-20 endorsed a U.S. proposal to accelerate progress on the G-20 Plan to Facilitate Remittance Flows by asking G-20 members to develop their own country plans to enhance migrants’ access to less costly remittance services and advance financial inclusion. We hope that the G-20’s agreed list of possible actions countries can take to strengthen their remittance markets, improve market competitiveness, and bolster customer protection will inspire policy actions and interventions that greatly increase the development impact of remittance flows.
In closing, I want to reiterate our support for IFAD instituting an International Day of Family Remittances. We believe that having IFAD set aside this day to commemorate migrants and the hard-earned support they send their families furthers IFAD’s mandate by boosting global awareness of remittances as a means of spurring more effective economic and human development—including by combating rural poverty in many remittance destination countries.