Remittance Flows: Trends and History

The average immigrant sends around ten percent of their income through remittances, yet the lack of good and consistent data about immigrants’ remittances have often proved to be an impediment for definitive research and results. Both how many individuals remit and how much of their income is devoted to remittances are unsure, with surveys yielding significantly different results. On the higher end, one survey estimates sixty percent of immigrants remit, while on the lower end the National Immigration Survey finds only seventeen percent remit. Based on a data set from 2006, current remittance habits were shown to vary significantly by country of origin. That same data set shows that immigrants only remitted about five percent of their income. The data had a negative skew, with the top quartile of remitters accounting for three-fourth of total remittances from the United States. Creating an accurate picture of the current remittance market is difficult, since many data sources rely on unreliable interviews where a fifth of respondents either don’t know how much is given or refuse to answer outright (Meckel 2008, pg. 2-15). Additionally, informal networks compose a significant amount of global remittance flows, complicating estimates even further (Freund & Spatafora 2008, pg. 357). These confounding factors blur the potential and impact of remittance regulation.

One of the better data sets for remitters in the United States comes from the Census Bureau in 2008, when a supplemental survey on migration and migration-related matters, such as money transfers, was conducted The survey had a similar nonresponse rate to other Census surveys, though the nonresponse rate for the money transfers section was higher for foreignborn households in comparison to native households, possibly skewing the data. Additionally, interviewers reported a great degree of hesitation among respondents, especially as questions continued in the amount and frequency of remittances. They surveyed 458 American households, with 84 percent of those reporting money transfers abroad being foreign-born. More than a quarter of foreign-born households had remitted in the last year, while 54 percent reported remitting 1 to 4 times a year. At the higher end, 30 percent reported remitting over 10 times a year. The average family remitts about 6 to 7 times a year, according to their results. Additionally, 71 percent of foreign-born households reported remitting more than 500 dollars, and 11 percent reported remitting 5 thousand dollars or more. Importantly, it was concluded that only about 12 billion dollars were sent in remittances in 2008, even as other third-party estimates routinely delivered results in the range of 30 to 40 or so billion dollars a year. The Census report continues by calling for greater research into the topic to make stronger conclusions (Grieco et al. 2010). Data sources point in a variety of directions, and their disuniformity underscores the importance of greater research.

The result of an uneven American distribution conforms with other migrant groups behavior as well. For example, among Filipino rural-urban migrants:

…..the percentage of income remitted varies considerably. Among those reporting income on a monthly basis, the percent of income being remitted ranges from less than 1 percent to over 50 percent. Of the total in this group, 39.6 percent remit less than 10 percent of their income; 28.3 percent remit between 10 and 25 percent of their income; 11 percent remit 26-50 percent of income, and 6 percent remit over 50 percent of their income (Trager 1984, pg. 332).

There are notable differences between American international immigrants and Filipino internal migrants. That being said, many of those same immigrants were facing similar social pressures (such as familial obligations, origin-country financial responsibilities, etc), except without such a drastic change in other facets of life (such as culture, wage-level, or distance to their family). In previous studies of remittances, such factors as distance from their home-country and time since migration figure greatly into individuals’ propensity to remit (Perez-Lopez & Diaz-Briquets 1998, pg. 330). This disclarity underscores the need for greater measurement of such a large capital flow, especially one which is so rapidly growing.

Immigrants of differing countries of origin, gender, age, and income all vary in their remitting behavior. One recent study found that the group most likely to remit is “a male immigrant from a rural background who has been in the US for a longer period of time and is from a higher income group (to some extent.)” Further, the most-intensive remitters have a “higher English proficiency, living apart from their family, and from a lower income category and less developed region” (Trombley 2016, pg. 30). Importantly, this profile is the result of a costly and inconsistent formal remittance service market.

The current remittance service market suffers from unaffordability. Fees for such transfers averaging out across platforms at 7.62 percent. They range from as low as 3.45 percent through mobile remittance providers to a high of 11.18 percent through banks (Beaton et al. 2017, pg. 20). These transfers tend to be relatively costless for providers, yet immigrants are losing significant sums. Further, evidence points to a very elastic relationship between formal channels’ transaction costs and remitted income--with a single percentage point increase in fees reducing remittances by 16 percent. Since informal networks often offer lower costs, that may reflect the degree of substitutability between formal and informal remittance flows (Freund & Spatafora 2008, pg. 358-361). The informal market is unreliable as a mode of exchange, not least since transactions don’t have the same level of security as those covered by contracts. These high fees for the formal market drive a greater share of total remittances through informal channels, decreasing the financial security of remitters and their families as well as obscuring the scale of remittances worldwide.