Although the oil industry has contracted as oil prices collapsed, there are still many skilled UK workers sending money back home to UK accounts. For them, especially those paid in a foreign currency that’s pegged to the dollar, the plummeting pound sterling has been a payday bonus. That’s often the way currency fluctuations can have a positive impact on some and a negative downside for others. Welcome to the world of remittance where global events like the Brexit have an immediate effect on wages sent back to home back accounts. No wonder workers want to reduce transfer fees- the one arena where they have control as they move their money.
Workers abroad sending remittance home to developing countries have benefitted from the decision to reduce the cost of transfers that was made by the G8 summit of 2004. Remittance – or money transfers – made by foreign workers back to home countries account for nearly as much as the amount of money being sent into developing countries as foreign aid. In 2014 remittance transfers totalled $583 billion worldwide with $436 billion being transferred to developing countries.
Since 2008 World Bank has maintained a database recording remittance prices by region, allowing consumers to compare transfer costs. This scrutiny and market competition has driven down the high cost of transferring money to home countries at a time when the global rates of remittance have increased exponentially. Global remittance had increased by 2000, then tripled by 2012 and has steadily been on the rise since then. World Bank compared the total costs of transfers in the first quarter of 2016, which had seen its first increase since the end of 2014 up from 7.37% to 7.53%, and found that despite the slight increase the cost of remittance transfers was a third of what it had been in the beginning of 2009. These reductions in cost make a vital difference to those in developing countries, freeing billions to the benefit of those who receive remittance.
Majority of Transfers come from US
World Bank records the amounts of money transferred by country and recent data reveals the US as the number one country from which remittance is sent, not surprising given the number of foreign workers emigrating to the US for job opportunities. The sum of the transfers is a staggering $56.3 billion, making it much larger than any of the other top ten countries sending remittance.
The next largest source of remittance transfers is Saudi Arabia where $36.9 billion is transferred back to home countries. Workers in Russia remit $32.6 billion while those workers in European countries such as Switzerland sent home $24.7 billion and from Germany workers transferred $20.8 billion. The seventh largest remittance source is Kuwait with $18.8 billion, then France where remittance totaled $13.8 billion, and Luxemburg workers sent $12.7 billion. Workers in the UK transferred $11.5 billion which, using today’s dollar to sterling rate with our currency calculator, equates to an impressive £1,024,105,161.
Many are Sending Money to India
These money transfers are a major source of income for families around the world, particularly those in poor and developing countries. The World Bank’s figures for 2015 indicate that remittances grew to $431.6 billion, which is a rise of 0.4% over 2014’s figure.
Of the countries receiving remittance, India has the largest volume with $69 billion, China is in second place on $64 billion and the Philippines is third with $28 billion. The remainder of the top five is made up of Mexico with $25 billion and Nigeria with $21 billion. Compared with the figures seen in 2013, India received more previously at $69.97, but China and the Philippines have both seen increases as China had previously received $54.9 billion and the Philippines was receiving $26.7 billion in 2013.
The World Bank projects that 2016 will see an increase in these volumes, perhaps with transfers remaining slightly costlier as the trend has seen, but still far less when compared to the rates in 2013. The region where transfers are costliest is one of the poorest places on earth: Sub-Saharan Africa. Long underserved by financial institutions such as banks, those receiving remittance have been at the mercy of companies charging higher transfer fees. The most expensive transfers are bank to bank accounts, when the banks are not the same or partner banks, costing an average of 11.12 % of the amount sent. Transfers from the same bank or a partnering bank is less at 5.86%. Online transfers are not always available, but they are cheaper, averaging 5.65% of the total transfer. When available, however, the cheapest way to transfer money is with a pre-paid card with costs of only 3.53%.