If handled well, migrant transfers can reduce poverty and connect small savers to the formal financial sector
Remittances flowing into developing countries are attracting increasing attention because of their rising volume and their impact on recipient countries. In 2005, they totaled $188 billion—twice the amount of official assistance developing countries received. Moreover, there is evidence that such flows are underreported. Indeed, remittances through informal channels could add at least 50 percent to global recorded flows. Most of the reported flows go to regions other than sub-Saharan Africa (SSA), but SSA has still been part of the overall rising global trend. Between 2000 and 2005, remittances to the region increased by more than 55 percent, to nearly $7 billion, whereas they increased for developing countries as a group by 81 percent.
Studies relying on household data from different countries in SSA yield some insights into how remittances are used. At their core, remittances are private intrafamily or intracommunity income transfers that directly address the single most relevant challenge for SSA countries: poverty. Their long-term development potential is determined by what is left over after basic consumption needs are met.
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