Blog post written by Dr Tugba Basaran (University of Cambridge) and Professor Nicola Piper (University of Sydney) and forms part of a series of blog posts analysing the final draft (objective by objective) of the UN’s Global Compact for Safe, Orderly and Regular Migration.


International Convention on the Protection of the Rights of All Migrant Workers and Members of Their Families Article 47: 1. Migrant workers shall have the right to transfer their earnings and savings, in particular those funds necessary for the support of their families, from the State of employment to their State of origin or any other State. Such transfers shall be made in conformity with procedures established by applicable legislation of the State concerned and in conformity with applicable international agreements.



Objective 20 commits in its title to work toward “faster, safer and cheaper remittances” and “financial inclusion of migrants and their families”. It endorses SDG target 10.c, that stipulates that by 2030 countries are to “reduce to less than 3 per cent the transaction costs of migrant remittances and eliminate remittance corridors with costs higher than 5 per cent”.


The first five action points listed in the GCM take as their focus reducing remittance costs. To this purpose, the first one (a) endorses a roadmap for SDG goal 10c, and the following ones explore the steps to be taken: (b) support the platform of IFAD Global Forum of Remittances, Investment and Development; (c) harmonize remittance markets and avoid encumbrances hereof due to securitization measures; (d) conducive policy and regulatory frameworks; (e) innovative technological solutions. The remaining four action points are broader in their outreach, encouraging (f) increased transparency and financial literacy; (g) the establishing of a link between remittances and local development as well as entrepreneurship; (h) the consideration of the role of migrant women and (i) realization of migrants’ financial inclusion, in terms of their ability to open and hold bank accounts, make deposits and receive loans. Objective 20 and its action points have not been modified throughout the negotiation process.


Objective 20 largely amounts to an affirmation of the SDG Goal 10.c on remittances and does not add further points or qualifications hereto. The issue of remittances is approached from a sole monetary perspective. While the last four points touch upon the complex relationship of development and financial inclusion, insufficient detail is provided hereto and no clear guidelines for further action are given. In the SDGs, target 10.c. contributes to the wider SDG goal 10, that is to “reduce inequality within and among countries”. We suggest that it is important to keep this broader objective of addressing socio-economic inequalities in mind beyond the sole focus on monetary remittances only.


Our commentary proceeds as follows: (a) remittance costs; (b) financial inclusion; (c) cost of migration; (d) the future.


Remittance costs


The Global Compact for Migration correctly highlights that the cost of remittance transfers is too high and, in sync with the SDGs, needs to meet the 3 percent target. The World Bank reports that in 2018 sending 200 USD cost on average of 7.1 percent, equivalent to 14.20 USD. Significant variations across migration corridors can drive up remittance costs to almost 20 percent in some of the highest cost corridors, such as Sub-Saharan Africa and the Pacific Islands. Given that many migrants (and most who move intra-regionally in a South-South context) are low-wage workers, the high costs of remittance transfer in and between many countries effectively rob individual migrants and their families of significant portions of their earnings. These are unnecessary losses which have serious implications for migrants’ ability to serve as the much acclaimed ‘agents of development’.


The cost of remittances, therefore, needs to be reduced. The above action points correctly emphasize on the one hand the need for deeper penetration of remittance markets through conducive policies, regulations, competition and technologies in an effort to lower unitary transaction costs, but on the other hand also acknowledge the adverse effects of securitization measures on remittance markets. The remittance sector is still perceived as high risk and low return by the principal financial institutions. Anti-money laundering (AML) and combatting the financing of terrorism (CFT) measures (FATF Recommendations 2018) have led to de-risking strategies (i.e. restriction of business relations with high-risk clients) of major global banks. This had an important impact upon remittance service providers, particularly cash-based money transfer providers, such as Western Union and MoneyGram, that presently cover the vast majority of remittances in the global market (FSB 2018). Considering money transfer operators as high-risk clients, has led to a widespread closure of their correspondent banking accounts without individual differentiations (Amicelli 2018). Through action points (b) to (e), the Global Compact for Migration correctly highlights a number of bottlenecks that continue to keep remittance costs at twice the SDG target level.


Financial inclusion


Questions of remittances cannot be delinked from broader questions of financial inclusion. It is important to take into account why many migrants and their families resort to expensive remittance transfers and rely on cash-based money transfer providers (such as Western Union) or informal channels in the first instance. The widespread exclusion of migrants and their families from regulated financial service providers and services, both in home and host countries, is well established . Many do not have access to a range of financial services (i.e. accounts, loans and deposit mentioned in GCM point i), but also lack access to insurance products. Major bottlenecks for using the services of banks, for example, include the lack of legal identification documents, high administrative burdens associated with opening an account, lack of proof of residency requirements, and the cost of a banking account, just to mention a few. Further, financial infrastructure is uneven, largely dependent upon location and the availability of technologies. The lack of financial infrastructure is particularly evident in rural areas, where almost half of the money that migrant workers earn is sent to.


These forms of financial exclusion generally marginalize poorer and rural segments of society. They particularly penalize those migrants who reside or work on an irregular basis (without proper documents), in isolation (i.e. in the private sphere of employers such as domestic workers,  on construction sites or in rural areas on plantations), or are not settled but have seasonal or project-related movement patterns (i.e. agricultural workers or construction workers). These lead to cost of remittances dependent on the legal status, type of work and working place of the remitting person. Given widespread gendered differences in relation to level of pay, working conditions and remitting behavior (and expectations), women’s specific situation has to be considered too. The GCM only underlines the importance to consider “gender-responsive distribution channels to underserved populations, including for persons in rural areas, persons with low levels of literacy, and persons with disabilities”, but it needs to go further than this and demand the full financial inclusion of (male and female) migrants and their families, both in their home and host countries.


Cost of Migration


It is important to look beyond the cost of remittance transfers to guarantee fair remittances and to ensure that migrants can provide their families with sufficient money on a regular basis. This requires an engagement with the costs borne by migrants throughout the migration cycle. In Global Labour and the Migrant Premium: The Cost of Working Abroad, Basaran and Guild have provided a systematic overview of the premium costs that migrants shoulder in order to live and work abroad. Migrants relinquish a significant share of their foreign earnings during the migration cycle. Recruitment costs alone can amount to ten months of foreign earnings and many are likely to lose one to two years of foreign earnings, if all migrant worker borne costs are considered. These include up-front costs for recruitment, but also differentials in wage, working and social conditions, as well as return costs.


This raises the important issue of fair wages, that is to pay a decent wage so that migrants have more to remit. Practices of holding back wages or sudden deducting of amounts for services allegedly provided are still common. It is also important to address the availability and portability of social rights – pension, social security payments. As per current practices, there is a significant premium paid by migrant workers on their net foreign earnings, compared to their national counterparts in the destination countries. Reducing the cost of international labour migration, i.e. the premium that global workers pay to live and work abroad is particularly pertinent today, and supported through international laws and standards (idem: p. 6). The GCM engages with some of these in Objective 6 on recruitment and decent work, Objective 15 on basic services and Objective 22 on portability of social security entitlements and earned benefits. It is important that the discussion about remittances goes beyond remittance transfer costs and financial inclusion. Remittance transfers need to be considered within the broader context of the cost of migration and increasing available remittances to migrants and their family members.


The Future


The significant role of remittances for low and middle-income countries can hardly be denied. At US$466 billion, recorded remittance flows to low and middle-income countries are more than three times the official development assistance and, excluding China, larger than foreign direct investments. For many countries, remittances represent the largest source of foreign exchange earnings. Countries receiving the highest remittances are India (US$69 billion), China (US$64 billion); the Philippines (US$33 billion) and Mexico (US$31 billion). In terms of the significance of remittances, a number of small low-income countries are highly dependent: the remittance amount as percentage of GDP are the highest in the Kyrgyz Republic (35%), Tonga (33%), Tajikistan (31%), Haiti (29%), Nepal (29%) and Liberia (27%). Moreover, these figures are based on officially recorded data and are likely to be much higher when informal channels are included. While remittances are undoubtedly important and constitute a vital source of private capital, the GCM underlines that they cannot be equated to public sources of financing for development. Nonetheless, over the last decades, the focus on migrant remittances has tended to result in migration being treated as a ‘tool for development’ pushing migrants into the role of local development agents.


Another issue concerns the use of remittances which depends upon the specific situation each family finds itself in: its life course, composition, social and human capital networks. While poor households use remittances for immediate needs, including food, housing and education, vulnerable household may need them as an ‘insurance’ against future risks, including sickness or funeral costs, or invest them in insurance-equivalent saving mechanisms, including cash, jewelry or livestock. The amount left for long-term investments may well be overestimated by development actors. Migrants’ investment in their host countries also require at least a mention (see Objective 19). Furthermore, in light of recent discussions, it remains important to note that family remittances should be understood as person-to-person transfers: sender and receivers of personal remittances should not be disadvantaged as ‘representatives’ of a country. Particularly recent propositions to tax remittances, to collect taxes for a border wall, but also to enhance economic sanctions towards particular countries or to show other forms of disagreement with the government and/or policies of a remittance-receiving state may lead to an entanglement of individual remittances with political actions. Personal remittances should be exempted from inter-state political factors and politics of security.


Selected References

Amicelle, Anthony, Migrant Remittances in the the Face of Securitization. In: Tugba Basaran and Elspeth Guild, eds., Global Labour and the Migrant Premium: The Cost of Working Abroad, London: Routledge 2018, pp. 101-110.

Basaran, Tugba and Elspeth Guild, eds., Global Labour and the Migrant Premium: The Cost of Working Abroad, London: Routledge 2018.

Financial Action Task Force (FATF) International Standards on Combating Money Laundering and the Financing of Terrorism & Proliferation, Paris; FATF, France, 2018.

World Bank Group, Migration and Remittances: Recent Developments and Outlook (Migration and Development Brief 29, April 2018.



The views expressed in this article belong to the author/s and do not necessarily reflect those of the Refugee Law InitiativeWe welcome comments and contributions to this blog – please comment below and see here for contribution guidelines.