The world has become so connected that it is now possible for people to move to a different country than the one they thrive and were born in. Those who do this leave their friends and families behind, but they typically send remittances back home. These remittances are welcome because those who leave often move from a less developed country to a more developed one.
Sending money back home impacts local communities in different ways, and this is what we will discuss in this article.
What are International Money Transfers?
An international money transfer is where an individual sends funds from one account in one country to another account in a different one. Various reports say about a billion people are involved in international money transfers, with 200 million people sending and over 800 million people benefiting from these funds.
There are numerous reasons why people send money back home. Typical reasons include paying medical bills, tuition fees, and overseas travel. Some people also send money as gifts and to either buy property or pay rent for loved ones.
There are several ways a person can send money back home. Those wishing to do this can complete an international money transfer from the US and numerous other countries using an online money transfer service. They can also use an international money order, send cash, or use a bank transfer.
International Money Transfers Help Alleviate Poverty
Online money transfers can impact local economies and communities positively by supporting the people most in need. They do this by making it possible and even easy for people living abroad to financially support friends and loved ones in less developed countries.
Such funds can help local economies by increasing how much money circulates in that economy. The main challenge with these remittances is the high cost associated with sending them, but most money transfer companies have reduced their fees to make them affordable.
They Help with the Development and Growth of Businesses
Many developing countries have a low supply of jobs but a high demand for employment. Remittances can help encourage recipients to start businesses for self-employment or to employ others. In many cases, such remittances help ensure the growth of new or young businesses while equipping those with an entrepreneurial spirit and the financial resources to make their dreams possible. IFAD reports that about 25% of all remittances are invested in activities that encourage asset building and income generation, or savings.
Remittances Have More Impact Than Development Aid
Remittances go directly to recipient accounts or their pockets instead of going through government bodies and agencies like development aid does. For this reason, more money reaches the user in cases of remittances than in cases of development aid.
More money has a much bigger impact on the individuals receiving the funds, local economies and communities. It is crucial to remember that remittances are personal aid and should not be a reason not to provide additional development aid to communities where people receive them.
International money transfer can have a massive impact on local economies and communities because it provides opportunities for growth, starting businesses and self-employment. They also help alleviate rural and urban poverty if recipients use them well.