Remittances are crucial for improving the lives of people in the developing world. When migrants send money back home, they not only contribute to the financial stability of the receiving household, but also to the economy of their home country. In this regard, the importance of small ticket remittances cannot be emphasised enough as they can be a major source of income for millions of households around the globe.
A few months ago, we recounted the story of one of our customers who wanted to send $11 to his family. That story showed us how important small value transactions can be for these migrants and their families. Here is a excerpt:
“Mr. E told me that he has just landed in UAE from Tanzania 6 days ago. He had come along with 16 other people to work in the hospitality sector in UAE. 100 Dirhams ($27) was all that he could spare so far and this is the maths that he could do- He would incur $11 to send $11 to send money back to his wife in Tanzania to “put food on the table for a week or so” and still keep $5 for any emergency. Food for a week or so!!!! That is how much the money mattered to him and his family back in Tanzania!”
The households of migrants living and working in other countries, especially in developing countries, depend a considerable deal on remittances to meet their daily expenses. More often than not, the flow of income in such households is unstable and fluctuates frequently. Therefore, it is challenging for them to shoulder their daily expenses and support their families on this income alone.
According to the World Bank “sending remittances costs an average of 7.09 percent of the amount sent” which discourages people from sending money more frequently. People remitting money back to their home countries usually wait a few months until they have bigger amounts to send in order to minimize the fee that they have to pay. This means that their families back home have to wait months before they receive enough money to meet normal expenses like school fees, utility bills or buying household necessities.
When money is remitted more frequently in the form of smaller value transactions, it is much easier for them to meet their expenses. These small value remittances help in stabilizing the flow of income, allow for better spending and prevent the household from getting into debt. Remittance can thus be said to provide shelter, food security, clothing and various other basic needs to the receiving household.
In a majority of the developing countries, the cost of education tends to be pretty high. With the domestic income alone, it is rather hard for the households to afford education. This is another area in which small ticket remittances help in boosting the quality of life of the receiving households. The money received from remittances can be used in the payment of school fees. It also gives children the opportunity to attend school rather than work for the family’s survival.
Small ticket remittances also contribute to the betterment of housing and living conditions for the people in the receiving locations. For example, most of these households are completely dependent on money received through remittances from their relative abroad. As a result, they are unable to make any upgrades to their homes or improve their living conditions on their own. However, if they receive small value remittances every month, they could use this money to construct, repair or upgrade their homes thus ensuring not only an upgrade in their lifestyle but also enhancing the security of their families.
The health sector is yet another area in which small-ticket remittances can assist in enhancing the lives of remittance receiving households. Healthcare is expensive almost everywhere in the world and receiving quality care is especially costly in the developing world. Families that receive money every six months or, as is often the case, once a year, frequently find themselves at the mercy of money lenders when faced with a medical emergency like the illness of a child or parent. However, if migrants are able to send money in smaller values as and when needed by their families, it can help to ensure that these people receive quality healthcare.
One of the factors that make remittances a great source of income for the receiving households is the fact that the $2 earned by the migrant can literally be $200 in the country that receives it and may feed the household for a week as in the example of Mr. E that we cited at the beginning. This is possible due to the varying exchange rates. The value of $2 dollars can even be higher in countries with weak currencies. It is thus easier for the migrant to support their families if they work in countries with strong currencies and remit to those with weaker currencies.
As can be seen, remittances have a significant impact on the lives of the receiving household in a migrant’s home country. It not only makes it possible for them to afford healthcare and food but also allows them to live in decent environments with dignity.
About TerraPay: TerraPay is the world’s first mobile payments switch – a B2B transaction processing, clearing and settlement service for mobile wallets. Our best-in-class technology serves as the interoperability engine that enables our partners’ customers to send and receive real-time transactions across diverse payment instruments, platforms and regions.