A remittance is a money transfer made by an expatriate back to their home country. The recipients are usually the family, friends or community of the sender.
How important are remittances?
Families around the world depend on remittances to survive. According to the World Bank and the Migration Policy Institute “in 27 countries, remittances were equal to more than 10 percent of gross domestic product (GDP) in 2014; in ten countries they were equal to more than 20 percent of GDP.” Globally, total remittances amounted to over US$580 billion last year.
Remittances are considered to be an important part of international development. They allow workers to earn money from better paying jobs in rich countries and send a portion of their income back to developing countries. The money is used to support friends, families, and even entire communities. It is often also invested into education, businesses, and health services, all of which are vital to helping their country grow.
Low Cost Remittances
Remittances are considered so important to international development that the World Bank established a database to compare the cost of remittances around the world. The aim, according to the World Bank, is to try to reduce the cost of remittances globally by 5% over 5 years.
Bill Gates is another proponent of low cost remittances. His eponymous foundation estimated that if the World Bank’s initiative works and global fees dropped from an average of 10% to 5% then that could translate into an additional $15 billion of investment in developing countries per year. The World Bank puts this figure higher at $16 billion.
Global Remittances average cost
According to the World Bank the global average cost of sending remittances is US$7.60.
Remittance exchange rate
Although the world bank estimates that the average cost of remittances is just $7.60, this does not include the exchange rate. According to the World Bank, “an important portion of the remittance cost is the exchange rate spread, which is not quoted in the transfer fee.”
Most remittances are sent in the form of USD but they must first be converted from a local currency. The spread or margin on the exchange rate pushes the total cost of remittances higher. Unfortunately, many remittance services purposefully conceal the cost of the currency exchange, pushing the total cost of sending the remittance much higher than $7.60.
How much money do Canadians send in remittances?
Canadians send over $24 billion in remittances every single year, but they could be losing a considerable amount of that through high exchange rates.
Most common destinations for remittance from Canada
The most common remittance destination from Canada are:
- $3.9 billion remittances to China
- $3.5 billion remittances to India
- $2 billion remittances to the Philippines
Other common destinations that receive remittances from Canada include:
- South Korea
Which countries receive the most remittances globally?
According to the World Bank the global top ten remittance recipient countries are:
- India ($72.2 billion)
- China ($63.9 billion)
- Philippines ($29.7 billion)
- France ($24.6 billion)
- Mexico ($25.7 billion)
- Nigeria ($20.89 billion)
- Egypt ($20.4 billion)
- Pakistan ($20.1 billion)
- Germany($17.5 billion)
- Bangladesh ($15.8 billion)
Want to learn more about remittances and how to send them?
If you want to to know more about remittances, learn how to send remittances from Canada, or where to find the best rates, visit your nearest Continental branch.
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