Dilip Ratha: The hidden force in global economics: sending money home

Summary

The speaker, originally from India and now living in Washington, D.C., shares his journey and the broader narrative of international migrants. Highlighting the significance of remittances, he emphasizes how these financial lifelines support families and economies, with $413 billion sent to developing countries annually, surpassing development aid. He discusses the high costs and barriers migrants face in sending money home, such as exorbitant transfer fees and recruitment costs, and proposes solutions like relaxed regulations and nonprofit remittance platforms. The speaker also touches on the potential of diaspora savings and giving, advocating for safer and cheaper remittance options to empower migrants and their home communities.

Takeaways

• 🌐 The speaker grew up in India and migrated to the U.S. for higher studies, highlighting the commonality of migration for millions seeking better opportunities.
• 🏦 The importance of remittances is underscored, with 232 million international migrants sending $413 billion back to their home countries, surpassing development aid threefold.
• 💼 Remittances are a lifeline for many countries, with significant impacts on economies and poverty reduction, such as in Nepal, El Salvador, and Mexico.
• 🏦 Remittances offer stability and act as an insurance for families during crises, unlike other forms of financial aid or investment.
• 💼 The high cost of sending remittances, averaging 8% globally, is a critical issue, with fees structured in a way that disproportionately affects the poor.
• 🚫 Barriers to remittances include exorbitant fees, restrictive regulations, and exclusive partnerships that limit competition and drive up costs.
• 🌟 Innovative solutions like M-Pesa in Kenya and U.S. Fed's program with Mexico demonstrate the potential for cheaper and more efficient remittance systems.
• 📉 The speaker advocates for policy changes to reduce remittance costs, such as easing regulations on small transfers and promoting competition among money transfer services.
• 💼 The potential for mobilizing diaspora savings and giving is highlighted, suggesting that migrants could be encouraged to invest in their home countries' development.
• 🌱 The speaker's personal narrative ties into the broader themes, expressing a continued connection to their home country and the desire to contribute to its progress.

Q & A

Where did the speaker grow up and what was their childhood aspiration?

The speaker grew up in Sindhekela, a village in Orissa, India. They aspired to be a poet when they grew up, inspired by their mother's words about the universal respect for poets.

How did the speaker finance their higher education in the United States?

The speaker crossed two oceans with borrowed money for airfare and only a $20 bill in their pocket. They worked part-time in a research center while taking graduate classes in economics to finance themselves and also sent money back home to their brother and father.

What is the global number of international migrants, and what does it signify?

There are 232 million international migrants in the world, which is a population larger than Brazil and an economy larger than France if they were to form a country.

How much money do migrants from developing countries send back home annually, and how does it compare to development aid?

Migrants from developing countries sent 413 billion dollars in remittances to their home countries last year, which is three times the size of the total development aid money.

What is the significance of remittances in countries like India, Egypt, and Tajikistan?

In India, remittances received were larger than its IT exports. In Egypt, remittances are three times the size of revenues from the Suez Canal. In Tajikistan, remittances constitute 42 percent of GDP.

How do remittances act as a form of insurance for families?

Remittances increase when the family is in trouble or facing hardship, acting like an insurance. Migrants send more money home during such times.

What are some barriers to the flow of remittances?

Barriers to the flow of remittances include exorbitant costs of sending money, money transfer companies structuring fees to charge the poor more, and regulations that hinder faster and cheaper remittance options.

What is the global average cost of sending money and how does it affect the family receiving it?

The global average cost of sending money is eight percent, meaning if 100 dollars are sent, the family receives only 92 dollars.

What are some suggestions the speaker gives to reduce the cost of sending remittances?

Suggestions include relaxing regulations on small remittances, abolishing exclusive partnerships between post offices and money transfer companies, promoting competition, and large nonprofit philanthropic organizations creating a remittance platform.

How much money could be saved annually if remittance costs were reduced to one percent?

Reducing remittance costs to one percent could save 30 billion dollars per year, which is larger than the entire bilateral aid budget going to Africa per year.

What is the potential of diaspora savings and giving in the context of remittances?

Migrant savings are estimated at 500 billion dollars annually, most of which is parked in bank deposits with zero percent interest. Offering higher interest rates on these savings, with the promise of using the money for development projects in their home countries, could engage migrants and contribute to their country's development.