As the COVID-19 pandemic continues to ravage economies globally, nearly half of the global workforce could lose their jobs.
In a statement during the release of the International Labour Organization’s report – COVID-19 and the World of Work, ILO Director General Guy Ryder said “For millions of workers, no income means no food, no security and no future,” adding that these were the real faces of the world of work and that many will perish unless something is done to help them.
Some of the sectors most affected by pandemic losses – construction, the hospitality industry, tourism, agribusinesses, transport and domestic work – employ the highest percentage of the world’s 200 million migrant workers. This means that remittances – the money that workers send home to their families from abroad – are dramatically declining.
Lizzy Obonyo, a Kenyan who has been working in the United Arab Emirates for the past six years, says things have turned bad quickly. She had been working in holiday homes management for a multinational real estate firm but was recently declared redundant. Forced to survive on her savings, I asked what it would mean if she stopped sending money home. “That is like taking oxygen off the nostrils of a patient, that is how it feels literally,” Lizzy said. “There are students who would not go to school. We have retired parents who would not have money for almost everything.”
Lizzy sends money home once or twice every month and now even a job loss is not stopping her. “We have no first or second option, we have just one option: send money home” she says.
Migrant workers like Lizzy regularly send money to an estimated 800 million family members, guaranteeing them access to food, healthcare and education. In 2019 alone, remittances to low and middle-income countries totalled US$554 billion, with about half of that going to rural areas where the world’s poorest live.
According to the World Bank, remittances are now the largest source of external financing in low- and middle-income countries, more than three times larger than official development assistance (ODA), and Foreign Direct Investment – FDI – combined. In more than five developing states including South Sudan, remittances make for more than 25% of GDP. These flows are however projected to make their sharpest decline in history, falling by 20 per cent in 2020 to US$445 billion, as indicated by a recent World Bank forecast.
According to Pedro de Vasconcelos, the coordinator of the Financing Facility for Remittances (FFR) at International Fund for Agricultural Development (IFAD), remittances usually go up during a crisis and that the exception at this time of COVID-19, exposes the achilles’ heel of remittances. “About 85% of remittances are still cash to cash. You send cash on one side and cash is received on the other side. That has a direct impact on what you do with that money,” he said.
Lockdowns and a limited window
With many countries initiating lockdowns and social distancing measures, millions of migrants either have only a limited window within which to send money or none at all. The situation is not any different for many of their families as most markets have been closed and transport disrupted.
This is the situation for Gladys Ochoko, another Kenyan working in the UAE. She is grateful to her employer for what she describes a thoughtful arrangement that retains employees on a percentage of their regular pay while on lockdown. With seven out of every ten of her colleagues being migrants, “the situation could have been dire,” she says.
“We currently have the best exchange rate we have had in a long time; it is a good time to send money home, but there is no one to send the money. Moving around the city is hectic and when you do, many businesses are closed,” Gladys said. She has been sending money home regularly to support her siblings since 2014.
An essential financial service
A number of countries led by Switzerland and the United Kingdom in collaboration with the World Bank and the UN have launched a call to action to keep remittances flowing through the pandemic. Their call seeks to have the provision of remittances declared an essential financial service and for service providers to extend relief to migrants, such as reducing remittance transaction costs, free cash pick-up and delivery, and other value-added services, among others.
Reducing the cost of remittances is not just a relief for pandemic strained workers and their families back at home; it is a major development issue. The Sustainable Development Goal number 10.C seeks the reduction of transaction costs of migrant remittances to less than three per cent of the value of money transferred, and elimination of remittance corridors with costs higher than five per cent.
While these costs vary from country to country, the global average cost of sending $200 remains high at 6.8 percent in the first quarter of 2020, only slightly below the previous year. Sub-Saharan Africa still has the highest average cost, at about nine percent.
It will be remembered that in July 2009 the leaders of the largest economies (G8) pledged to reduce the cost of remittances to five percent – a commitment endorsed by the G20 in 2011 and 2014, and included in the UN’s Sustainable Development Goals in 2015. Eleven years on, remittances are big business for large operators. Western Union, for example, completed 268 million customer-to-customer transfers in 2016, with a value of $80 billion. Total revenue for the year exceeded $5 billion, with net profits surpassing $250 million.
Huge profits from the most vulnerable
In 2017, the huge profits earned by Western Union and other money transfer service providers was funded by a $30 billion cost to the migrant workers sending money back home; that was the estimated aggregate transfer costs of sending remittances – monies so hard earned.
In the words of Lizzy Obonyo, “We work as though our lives are dependent on it. Really, it’s not just our lives but also that of everyone else at home. Every penny matters.”
While it is important to bring down transaction fees in line with SDG 10, it is even more important to leverage remittances for the resilience of the receiving families; the very reason for which these funds exist in the first place.
Mr. De Vasconcelos explains this as a roadmap to achieving the SDGs one family at a time. Having dedicated almost his entire career to issues of migration, remittances and development, “this is personal,” he tells me.
“Remittances support family SDGs – food, education, bills and so on. If you stop remittances what happens to the recipients of the SDGs? Well, they cannot achieve them. So, the point is, beyond just facilitating the flow of remittances by lowering the cost, can we maximise them by linking them to financial services?”
When migrants send money back home, they contribute to several of the goals set in the 2030 Sustainable Development Agenda. In particular: SDG 1, No Poverty; SDG 2, Zero Hunger; SDG 3, Good Health and Well-Being; SDG 4, Quality Education; SDG 6, Clean Water and Sanitation; SDG 8, Decent Work and Economic Growth; and SDG 10, Reduced Inequality
And that is why according to Mr. De Vasconcelos, the urgent thing is to ensure that these funds address the resilience of remittance families.
“The fact that people can already receive money in e-wallets means we can link them to financial services like credit, emergency savings, insurance. If people have these services in times of crisis, it would be a different story. That is what has been the reality for remittances, this crisis has shown that it is time to fast track this.”
