Migrant Remittances and Development Cooperation

This report has been commissioned by the Norwegian Agency for Development Cooperation (Norad). Migrant remittances are transfers of value by emigrants or their descendants to their country of origin. Registered remittances to developing countries are will be close to 100 billion USD in 2004, or roughly one and a half times official development assistance. In addition, a large, unknown amount is transferred through informal channels or to countries that do not report statistics on remittances. The effects of remittances on development are often complex and contradic-tory, but seen in a positive light by the majority of analysts. In a handful of developing countries, remittances from emigrants account for more than 10 per cent of GDP. Remittances are of high importance to the national economy of eleven of Norad’s 25 partner countries, and of considerable importance in another eight countries. Remittances are transferred through a variety of channels that differ with respect to cost, speed, convenience and other factors. From a policy perspective, it is desirable to reduce transfers costs, discourage the use of informal channels, and promote transfers that enter financial institutions in the receiving country. The latter has come to be seen as a principal strategy for increasing the benefits of remittances. Rather than relying on entrepreneurship by migrants or their relatives, it is possible to encourage saving in financial institutions, thereby increasing access to credit for entrepreneurs who may or may not be migrants themselves. Other strategies for increasing the development effects of remittances include financial incentive schemes to increase the volume of remittances, matching the development investments of migrant associations with government funds, and improving the investment climate for small and medium enterprises. In many cases it is possible and desirable to implement policies that do not involve positive discrimination of migrants or their families. Several of Norway’s partner countries are represented with sizeable immigrant populations in Norway. Other European countries increasingly see policies on immigration and integration on the one hand, and development cooperation on the other hand as linked. This could also be fruitful in Norway.