Sending Money Home: Remittance
Shirley J. Anderson-Porisch, Extension Educator, and Gabriela Burk, Community Program Assistant — Family Resource Management
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Remittance impacts families, communities, and countries. This info sheet aims to increase awareness of remittance in the United States for agency and business professionals whose clients are from cultures where remittance is common practice.
What is remittance?
Remittance is sending money to someone at a distance, most commonly between an immigrant and their homeland. The International Monetary Fund separates remittance into three categories: 1) from workers who have lived abroad more than one year, 2) from workers who have lived abroad for less than one year, and 3) from migrant transfers or the net worth of migrants who move from one country to another.
Who remits money?
The typical profile of someone who remits money to their homeland is a young adult male (although the number of females is increasing) connected to a job opportunity in the United States or other country that provides more income potential than employment available in the homeland. Because of the differences in how countries report the process and fl ow of remittance, it is difficult to identify the variety of people who remit money to another country.
Why do people remit money?
In most cases, money is remitted because of homeland circumstances or family situation although the circumstances/situation will vary. A spouse/parent/child may send money to family members in the homeland to cover basic need expenses (i.e., food, housing, clothing, transportation, and/or health). A family member/friend may send money for special needs (holidays/events, unexpected crisis, cost of transportation for moving family members to the new home country, etc.). A person may also send money to a financial account for future use upon return to their homeland.
When and how much money do people remit?
People remit money at various times in varying amounts. Remittances may often occur on days when a worker receives their paycheck. Amounts of money remitted are commonly between $100-500. Remittance, as a result of migration, usually represents a major economic impact to the homeland. In 2005, U.S. Hispanic Chamber of Commerce data showed that Latinos working and living in the U.S. remitted over $30 billion annually to family members in Latin America. A 2005 University of Oxford study suggested that over $1 billion was remitted to Somalia annually from the U.S.
What are financial patterns of those who remit and receive remittance?
Even though basic living expenses in the new home country may leave little discretionary money, many immigrants may remit money to their homeland even to the point of putting themselves in financial jeopardy. In the homeland, remittances usually put more money into the hands of those who might not otherwise have the opportunity to enhance their financial and social obligations to family and household.
In rural areas, remittances may reduce the effects of poverty. Research studies describing homeland "remittance multipliers" show numerous positive impacts especially in many economies of Mexico. Today, remittances represent the largest source of income for many nations, including Mexico, where it is second only to petroleum.
How is money remitted?
Current Mexican surveys of North American migrants show that 75% use non-bank money transfer methods, 10% use banks, and the remainder use other methods including individuals carrying cash to the homeland. Informal business surveys in southern Minnesota estimate that a majority of Latino and Somali immigrants remit money by non-bank methods or money transfer services in discount, grocery, or convenience stores.
What are the challenges for people remitting and receiving money?
In rural areas, remittances may reduce the effects of poverty. Research studies describing homeland "remittance multipliers" show numerous positive impacts especially in many economies of Mexico. Today, remittances represent the largest source of income for many nations, including Mexico, where it is second only to petroleum. How is money remitted? Current Mexican surveys of North American migrants show that 75% use non-bank money transfer methods, 10% use banks, and the remainder use other methods including individuals carrying cash to the homeland. Informal business surveys in southern Minnesota estimate that a majority of Latino and Somali immigrants remit money by non-bank methods or money transfer services in discount, grocery, or convenience stores. What are the challenges for people remitting and receiving money?
Recent informal business surveys in southern Minnesota provide new understanding of the factors that help people be successful at remitting money to their homeland. To be successful, remitters need to:
- Know what method of payment is necessary for remitting money.
- Be familiar with the charges for remitting money. (Remittance charges are usually by increments, for example a fee of $10-15 to transfer $100-$500, a fee of $20-$25 to transfer $500+, etc.)
- Have the necessary forms of identification needed to remit money. (Remitting money in Minnesota usually requires name and address only.)
- Know if remitted money is available in homeland currency as cash and if it will be available at the current exchange rate. (In the home country, money may be available as cash — at the current exchange rate — or as credit.)
- Use a bilingual money transfer service provider (if necessary).
Remitters need to be aware of these factors in the country where the remitted money is to be received:
- Know the location of where the money will be received and what action should be taken by those receiving it. (Cash or credit may be received through a financial institution, retail store, trusted liaison — especially if there are no banks in the home country, or electronic means such as a kiosk in a retail store.)
- Know how long it will take for remitted money to reach its destination. (Remitted money is almost always received on the day of transfer.)
- Know what identification forms are needed to receive remitted money. (identification forms for receiving remitted money usually include a driver's license, worker identification card, voter card, passport, and/or national identity card.)
What are some recent developments in the remittance market?
The Mexican matricula consular card provides a new form of identification for an immigrant to open a bank account and increase their opportunity to remit money through a financial institution. Remitting money through a prime financial institution may reduce the chance of fraud. In the late 1990's, money transfer businesses were criticized for exploiting immigrants who did not have a bank account by charging high fees for remittances.
Today, with a matricula card (or other acceptable form of identification) and a bank account, immigrants may have more alternatives to choose an economical remittance service. As competition between banks increases and lower fee remittance options become available, the cost and options for money transfers to one's homeland should become more reasonable for immigrant families.
Amuedo-Dorantes, C., Bansak, C., & Pozo, S. (2005). On the remitting patterns of immigrants: Evidence from Mexican survey data. Atlanta, GA: Federal Reserve Bank of Atlanta.
Burk, G. (2005). Remittance market research in southeast Minnesota communities. Unpublished.
Canales, A. I. (2003). Living off the North — Socio-demographic profile of households receiving money remittances in a high-emigration rate area. Technical Cooperation of Latin America Economic Systems.
Hispanic Resource Center — Credit Union National Association. (2005). U.S. born Hispanics more likely to use financial services. Madison, WI: Hispanic Resource Center — Credit Union National Association.
Hossain, A. (2005). Recent developments in labor migration and remittances to Mexico. San Diego: School of International Relations and Pacific Studies.
Lindley, A. (2005). Somalia country study. Oxford, England: University of Oxford.
Migration Policy Institute. (2003). Remittance data. Washington, D.C.: Migration Policy Institute.
Minnesota Department of Employment and Economic Development (DEED). (2004). Learning the language of money. Minneapolis, MN: Minnesota Department of Employment and Economic Development (DEED).
Terry, D. F. (2004, Fall). Sending dollars home. WorldView Magazine,17(4).
United States Hispanic Chamber of Commerce. (2004). Statistics. Washington, D.C.: United States Hispanic Chamber of Commerce.
Zarate-Hoyos, G., & Anderson, S. W. (2005) GIS tracks earnings sent home by Mexican migrants. Cortland, NY: State University of New York.