Remittances are a familiar concept to most, even if the word itself isn’t used much. Remittances are the sending of earned income by an immigrant to loved ones in another land, using their nation of origin. The World Bank tracks data regarding international remittances, and in 2015 estimates the total number of funds sent back and forth to over $582 million. There are many complex factors which play into what kind of money gets sent where, but in general, currency is siphoned out of large, stable economies into smaller growing economies.

India is the world’s largest receiver of remittance funds. With over 14 million citizens living and working abroad, roughly one fifth of international remittances find their way to India. However, because India is so populous, these funds ($71 Billion in 2014) are just a drop in the bucket of their overall GDP. The other largest remittance recipients, internationally, are China, Mexico, and the Philippines. Nations like Tajikistan and Nepal count remittance funds as very large portions of their GDP, sometimes as high as 40 or 50%, or even higher of a small nation’s gross domestic product.

Remittances have shown steady growth every year since they’ve been analyzed by the World Bank. Rates of about 4-5% are typical, and these rates show no sign of slowing, though recent economic influence in Russia casts doubt on this in 2015.

The reasons that remittances continue to grow are varied. First, immigration continues to increase, due to war, climate change, economic collapse, and countless other smaller factors that make one’s homeland less habitable. In some cases, it is getting easier to immigrate, as immigration policies are lax in some countries (while surely not in others). It is also getting cheaper to send this money, due to competition in the market and the improvement of digital technologies. Five years ago, it was not uncommon to have a international fund transfer service take 10% or more out of the total monies being sent (often less than $200). Today, this rate is steadily lowering, with common numbers seen at around 7 or 8%.

Today’s migrant workers are increasingly involved in digital communications. This is driving remittance channels to the mobile sphere, where even more competition threatens to drive down profits for longstanding international currency transfer services like Western Union. This isn’t a bad thing for the migrants and their families, however, though it does pull money out of the economies of host nations where these migrants are living and working.

Other markets, like CMC markets, which hang out on the fringes of international economies are similarly difficult to regulate and track. They are dependent upon digital technologies, which can never be fully regulated by world governments. No matter how much influence is enacted, funds are always slipping through. It’s through these channels that the world currency supply becomes increasingly liquid, difficult to chart and tax. It’ll be interesting to see how remittances play into the buoying of many growing economies, as many small nations continue to outsource their workforce to places with large economies.

Article by Jonny Pean – FinanceWand.com