DEFINITION of 'Foreign remittance'
A transfer of money from a migrant worker to their families or other individuals in their home countries. In many countries, remittance constitutes a significant portion of the GDP (up to a third in some cases). The United States is the leading source of foreign remittances, followed by Russia and Saudi Arabia. The top recipients are India, China and the Philippines. So much money is being remitted, the G8 and the World Bank are attempting to monitor and regulate remittance costs.
BREAKING DOWN 'Foreign remittance'
According to social scientists, since it's so widespread, remittance has implications that extend beyond individual finance. For example, since remitting involves financial institutions, people who send and receive remittance are likely to have bank accounts, which promotes economic development. Remittances can be lifesaving in emergencies, such as natural disasters and armed conflicts, when the recepients' other sources of income disappear. Remittance payments are difficult to track, and there is some concern that they can be used in terrorist financing or money laundering.