The economic implications of global remittances for SMEs

The author observed in the Republic of Hungary a similar trend after the change of the political systems in Eastern Europe. In Tajikistan, remittances from its cheap unskilled labour force abroad in countries like Russia, Kazakhstan, and Uzbekistan has helped the country rebound from the failures of a planned economy and government instability, contributing around 50 percent of Tajikistan’s GDP in recent years. For example, Somaliland, a breakaway region of conflict-devastated Somalia, receives an estimated $500 million a year in money sent home from abroad, four times more than the income from the main export, livestock, according to a study by the researcher Ismail Ahmed reported in the Financial Times. In the case of Mexico, remittances have become the country's second most important source of foreign exchange, after oil. The income is so large that Mexicans working outside of the country were able to gain the right to vote after threatening to withhold remittances.


Migrants make significant sacrifices to send an average of US$200 eight or more times per year to their home country. Several studies indicate that permanent migrants send about 15 per cent of their salary home, whereas temporary migrants may remit up to 50 per cent of their income. Cost of remittance transfers: Globally, the average cost of sending remittances was about 12 per cent of their value in 2004 (World Bank 2006, 137). However, costs may range from a low of 0.2 per cent to about 20 per cent, depending on the remitted amount, type of service used, destination and transfer location. Costs tend to be highest for small transactions, since most transfer services charge a minimum fee. A comparative study of the transfer costs to 11 low-income countries in Africa, Asia and Europe demonstrated that banks have become considerably cheaper than international money transfer companies over the last several years. The value of remitting through banks was 7 per cent, compared with 12 per cent for companies such as Western Union (Orozco 2003c, 9). A recent study of the corridors between France and the Comoros, Mali, Morocco and Senegal shows that money transfer costs are still quite high. The cost of transferring € 300 varied from €10 to € 29. Bank transfer was the cheapest, while transfer through Western Union was the most costly (BAfD 2007, 27).


A resolution on international migration and development was adopted by the United Nations General Assembly in 2004. It calls upon all relevant entities of the United Nations system – and other relevant intergovernmental, regional and subregional organizations – to adopt policies and undertake measures to reduce the transfer costs of migrant remittances to less privileged Countries. Further, one item of the action plan to achieve the MDGs (Millennium Development Goals), agreed upon at the 2004 Group of Eight (G8) Summit, is to facilitate remittance support to families and SMEs. In 2007, the First Global Forum on International Migration was organized, with the participation of 155 countries.The forum is a global process designed to enhance the positive impact of migration on development (and vice versa) by adopting a more consistent policy approach, identifying new instruments and best practices, exchanging know-how and experience and establishing cooperative links among the various actors involved. Participating governments agreed that migration should not become an alternative to national development strategies in developing countries. It is important that migrants and recipient communities gain a better understanding of the various options for remitting and receiving. In particular, migrants and recipient communities need access to local financial institutions, not only because of the lower remittance costs, but also because of the greater opportunities to initiate or increase their savings and their access to other financial services such as housing loans. New technologies may also help lower the cost of remittance transfers and allow migrants and their families at home to send and receive remittances with greater ease. One of the popular techniques in the Americas is the use of automatic teller machine (ATM)/debit card transfer services, which are being offered by a growing number of private banks. When migrant workers enrol in such programmes, they are issued a debit card to be used by a designated person in the home country. The cost of this type of transfer can be less than half the cost of a traditional transfer.


Date of birth: 27th March 1941, originating from the South Tyrolian family, The Barons Knoll von Dornhoff since 1585. Austrian nationality. Married, three children. Studied jurisprudence and national economics at the Universities in Vienna, Austria and St. Gallen, Switzerland. Graduated Dr.jur. (LL.D)and Dr. phil. and Mag.rer.soc.oec (MBA). Professor (adj. associate) of Economic and Fiscal Policy of the International University for Entreprenology, Hawaii, USA. Languages: German, English, French,...

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