People are sending more money abroad, but the cost to do so is still more than double what it should be, according to a new report from the World Bank.

The international financial institution reported this week that amount of money people sent to low- and middle-income countries rose by 8.5% to $466 billion in 2017, setting a new record. Remittances (regular, small money transfers) to those countries are expected to grow by 4.1% in 2018, hitting $485 billion.

Global remittances, which include money sent to high-income countries, jumped 7% to $613 billion in 2017, up from $573 billion in 2016. The World Bank said it expects them to grow another 4.6% to $642 billion in 2018.

The figures reflect only officially recorded data — the real remittance market is much larger, it noted.

“The stronger than expected recovery in remittances is driven by growth in Europe, the Russian Federation and the United States,” the World Bank added. “The rebound in remittances, when valued in U.S. dollars, was helped by higher oil prices and a strengthening of the euro and ruble.”

However, the global average cost of sending $200 was 7.1% in the first quarter of 2018, which the World Bank said was well above the 3% it hopes to attain by 2030.

“Major barriers to reducing remittance costs are de-risking by banks and exclusive partnerships between national post office systems and money transfer operators,” it reported. “These factors constrain the introduction of more efficient technologies—such as internet and smartphone apps and the use of cryptocurrency and blockchain — in remittance services.”

In 2017, the top remittance receiving countries — in dollar terms— were India ($69 billion), China ($64 billion), the Philippines ($33 billion), Mexico ($31 billion), Nigeria ($22 billion) and Egypt ($20 billion).

Shifting immigration policies around the world could slow down the flow of funds, the World Bank noted.

“Remittance flows are vulnerable to downside risks from spreading anti-migration sentiments and restrictive migration policies in most of the remittance-source countries in North America, Europe, Russia, and the [Gulf Cooperation Council]. The United States, for example, has announced a termination of the Temporary Protected Status (TPS) for migrants from El Salvador, Haiti, and Nicaragua, which over time would reduce remittance flows from the United States to these countries,” The World Bank said. “Some countries (for example, Kuwait) are considering a tax on outbound remittances, which could not only dampen remittance flows, but also encourage flows through informal channels.”

Financial institutions, countries and development agencies need to keep cutting remittance costs, Global Knowledge Partnership on Migration and Development head and lead report author Dilip Ratha said.

“Eliminating exclusivity contracts to improve market competition and introducing more efficient technology are high-priority issues,” Ratha said.

Instant Insights /

Remittances Hit New High, but Cost Still an Issue

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