Poor countries could do more to fully exploit the developmental
potential of remittances from migrants, according to a new IOM-UN
publication.

The publication - prepared by the International Organization for
Migration (IOM) and the UN Office of the High Representative for
the Least Developed Countries, Landlocked Developing Countries and
the Small Island Developing States (UN-OHRLLS) identifies
remittances as an increasingly important source of external finance
for the Least Developed Countries (LDCs).

Although Overseas Development Aid (ODA) remains the major source
of finance for the world’s 50 poorest countries,
migrants’ transfers have increased significantly over the
last few years and outpaced Foreign Direct Investment (FDI)
reaching US $ 10.4 billion in 2004.

For some LDCs, remittances account for a large chunk of national
income. Lesotho receives around 30 percent of its Gross Domestic
Product (GDP) from workers abroad. For Haiti, Samoa, and Nepal
remittances accounted for 24.8, 12.4, and 11.7 percent of GDP
respectively in 2004, while Bangladesh with remittances flows of
$3.6 billion ranked 14 among 20 top recipient developing countries.
The Sudan and Yemen also received over a $1 billion in remittances
in 2004.

However, the true size of remittances to LDCs could be even
larger because most remittances to LDCs are channelled through
informal channels due to high transfer costs, restrictive foreign
exchange rules as well as poor infrastructure and the weak
financial sector in LDCs. It is estimated that 54 percent of
remittances in Bangladesh and 80 percent in Uganda are sent through
informal channels.

“Access to remittance services must become more
cost-effective, fast and safe” says Mrs. Ndioro Ndiaye,
IOM’s Deputy Director General. “Good governance, stable
economics as well as a healthy investment climate are amongst some
of the factors which will create the incentives for increased
remittance flows”.

The report notes the need for LDCs to promote the use of
official transfer channels. This could be done by offering
incentives to recipients to save more within the formal banking
sector. To make formal transfers attractive, the LDCs would also
need to offer favourable exchange rates and establish efficient
banking systems. In some LDCs formal banks exist only in urban
areas, leaving rural dwellers with no choice but to depend on the
informal sector.

The challenge facing many poor countries that receive
substantial income from remittances is how to direct them into
programmes that benefit society as a whole.

“Workers’ remittances provide much-needed assistance
to impoverished households and communities in LDCs, but it is
necessary to develop a set of coherent policies so that the
benefits of these funds may be felt across societies,” says
Anwarul. K Chowdhury, UN Under-Secretary-General and High
Representative for LDCs.

The publication, which includes papers prepared by participants
of the February 2006 Ministerial Conference of LDCs in Benin, also
calls for a lowering of remitting costs through innovative
microfinance institutions such as Haiti's FONKOZE, which through a
partnership with a US based bank, offers more affordable or flat
fee for transfers.

Recommendations contained in the report to be submitted to the
High Level Dialogue on International Migration and Development
convened by the Secretary-General of the United Nations in New York
on 14-15 September 2006, also include the need for governments to
improve data collection on remittance flows.

For additional information:

Jean-Philippe Chauzy

Tel: 41 22 717 9361

Mobile: 41 79 285 4366

E-mail: "mailto:pchauzy@iom.int" target="_blank" title=
"">pchauzy@iom.int

Jemini Pandya

Tel 41 22 717 9486

Mobile: 41 79 217 3374

E-mail: "mailto:jpandya@iom.int" target="_blank" title=
"">jpandya@iom.int