How Caribbean Governments Work to Use Remittances As a Development Tool
The consistent growth in remittances has further drawn the attention of policy makers and researchers to study the positive impact remittances have on a nation's GDP and well being. Remittances are in many cases the main financial support for millions of families spurred by global migration and underpinned by an increasingly mobile international labor market.
The Caribbean is a region with significant migration flows. These flows both inbound and outbound, help shape development throughout all the constituent counties within the Caribbean. It’s safe to attest that remittances form a critical foreign currency flow in the Caribbean and directly affect the regions development.
The volume of the Remittances
Caribbean countries receive remittances from different countries. Of these, the Dominican Republic is the Caribbean country with the highest remittances; In 2014, it received $4.65 billion of remittances. Subsequently, Jamaica receives 2.26 billion USD in remittances, followed by Haiti with 1.9 billion USD. According to World Bank data, the United States is the most significant source of remittances to the region, followed by the European Union. Within the EU, Spain, and Italy are the top two European remittance sources to the Caribbean.
The report "Sending Money Home," published by the MIF remittance program in 2003, documented transfers to the Caribbean region and their costs, showing that they are significantly higher than in other parts of the world. The MIF report stated that with an average cost of 12%, sending to the Caribbean was about 50 percent higher than the costs of sending money to other "major receiving countries."
The Latin American Center for Money Studies (CEMLA) and the Inter-American Development Bank (IBD) published a report in 2017 titled "Money Transfer to Latin America and the Caribbean: A New Record." According to the report, it has shown that remittances to the Caribbean had a positive impact on the living standards of many households in 2016. According to the results of the report, it is understood that the 7.2% increase in 2016 vs 2015 was the highest growth rate achieved in the previous ten years.
Despite restrictive immigratio policies in the U.S, experts still predict that migration will continue it’s upward trajectory and conversely remittances to the Caribbean should see material growth in the next five to ten years. At current growth rates, the projected average remittance tally for the next decade into Latin America and the Caribbean is likely to approach US $ 500 billion.
Impacts of Remittances on Development
Remittances have a direct impact on the development, socioeconomic, and employment structure of the Caribbean region. On a macroeconomic level, they can create a positive stay at home feeling for people living in the Caribbean, as a significant portion of their needs are being met by overseas support, and could make up some ground on the losses due to "brain drain". For all these reasons, the Caribbean needs to implement policies to increase the positive effects of remittances on development.
Governments have a significant role in promoting policies and programs that create favorable environments for remittances and regulate development planning policies. In this context, there are policies implemented by the Caribbean government to ensure development with positive effects.
Remittances as a Development Tool
Before talking about the policies implemented by the government, it is necessary to understand what MIF is. MIF was established in 1992 to encourage and strengthen the private sector in Latin America and the Caribbean.
MIF provides grants to certain key areas in the private sector: Human resources & Micro-SME development
At the conference "Workers Money Transfer as a Development Goal" held in Peru in 2004, the Caribbean governments committed to implement a portion of the MIF program focused on reducing costs and facilitating money transfer with the following objectives:
- Reduce costs by 50 percent on money transfers to the Caribbean area by 2020
- Increasing the number of recipients receiving remittances by 50 percent through official financial institutions
Governments, foreign, and other relevant organizations should devise policies and strategies to increase the positive effects of remittances and ensure improvement in service and delivery. We wish to reinforce the message that remittances directly affect the social, financial, and employment conditions of countries. All these situations have a significant impact on the development and economy of the country.
In short, according to the MIF strategy, the financial resources of remittance beneficiaries are increased, lessening the pressure on the State to provide for all welfare needs of its citizenry. Consequently, the MIF's ultimate goal is to reduce the average cost of remittance transactions in the Caribbean by 50% by promoting increased competition, and as a result, to increase the number of families receiving money transfers through the financial system to 50%.