Global remittances, the hard-earned money sent by migrant workers to their family members in low- and middle-income countries (LMICs), grew by 8.6% in 2021, says the International Fund for Agricultural Development (IFAD).
Despite predictions that the Covid-19 pandemic would reduce remittance flows, the momentum was sustained due to a 48% increase in money sent through mobile channels, according to the report MobileRemit Africa launched on Thursday by IFAD.
"The digitalisation of remittances, particularly through mobile channels, is a great opportunity to boost rural development as over half of these funds go to rural areas. Digitalisation reduces fees and other transactions costs like travel time, making the process more convenient and safer while promoting digital and financial inclusion," said Gilbert F Houngbo, president of IFAD, speaking on the International Day of Family Remittances.
Remittances flow ($605 billion) tripled more than the total amount of international official development assistance ($178.6 billion).
Money sent home by over 200 million migrant workers around the world this year is expected to reach $630 billion, providing a lifeline for more than 800 million family members.
"Remittances lift people out of poverty, put food on the table, pay for education, cover health expenses, allow housing investments and many other family goals beyond consumption," added Houngbo.
The aggregated flows of family remittances to LMICs are expected to reach $5.4 trillion by 2030, a figure equivalent to twice the GDP of Africa in 2021.
The upward trend of remittances growth is likely to moderate in 2022 as inflation erodes wages while pandemic-related support programmes end in rich countries.
The war in Ukraine is expected to impact global figures, as it is triggering a sharp decline in transfers to Russia's neighbouring countries, where remittances can account for as much as 30% of their GDP.
According to the analysis of seven African countries conducted by IFAD in the MobileRemit Africa report, the use of mobile channels for remittances by migrant workers and their families has brought an overall reduction in costs.
However, the African remittance market remains the most expensive, with an average cost of 7.83% against the global average of 6%.
Reducing the cost to the 3% goal agreed in the Sustainable Development Goals (SDGs) would lead to an additional $4 billion per year being received by migrant families in Africa. Mobile transfer costs are already in line with the SDG target of 3%.