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What is a 'Remittance'

A remittance is the funds an expatriate sends to their country of origin via wire, mail, or online transfer. These peer to peer transfers of funds across borders are economically significant for many countries that receive them.

BREAKING DOWN 'Remittance'

Since the year 2000, remittances have played an increasingly large role in the economies of small and developing countries. Since the late 1990s, remittances have exceeded development aid, and can often make up a full third of a country's GDP, for example, Nepal and Maldova. Remittance payments make up for a substantial amount of the flow of capital between countries. In 2014, $583 billion in USD was transferred between countries, $436 Billion of which was received by developing countries.

The countries receiving the largest share of remittances are the BRIC nations China and India. Those countries received $69.97 and $59.49 billion dollars in 2013 by 2015 estimates.

Remittances are seen as an important part of form of disaster relief, and exceed official development assistance (ODA). Those living in a country struck by a disaster benefit from receiving money via remittances, especially when the disaster is of a kind that has temporarily put people out of work and tied up money. Remittances are also seen as a way to get those living in poorer countries to get bank accounts, in turn helping to promote economic development in a region.

G8 and The World Bank

Remittances play an important role in the growth of developing countries. In 2004, at the G8 summit held in Sea Island Georgia, member countries agreed to take on the problem of the relative high cost of moving funds across borders.

In 2008, the World Bank ended up establishing a database where people could compare prices of different transfer services, so as to make a more informed decision on how to transfer their funds back to their family and loved ones. The thinking behind the database was that, along with creating a more informed customer, it would encourage the money transfer industry to be more competitive on their pricing. 

In 2009 the G8 set the goal of reducing the cost of remittances by 5% in as many years. The World Bank responded by helping to establish smaller regional databases using clear and objective methodology to measure the price of different transfer services.

Since the World Bank’s database was set up, a good number of remittance services have emerged online, like remit2india,, and Azimo, which all provide fast and cheap services. However, many see more work to be done. At a G20 meeting in 2011, Bill Gates argued for the reduction of transfer costs. By Gates Foundation estimates, cutting fees from 10% to 5% could ‘unlock’ up to $15 billion a year in poor and developing countries.


Latin American and Caribbean countries received a total of 66.5 Billion in remittances in the year 2007, more than both foreign direct aid and development aid. Three quarters of that money came from migrant laborers working inside the United States. 

The Philippines received the second largest amount of remittances, receiving transfers amounting to 21.3 billion in 2010. President Joseph Estrada honored those working outside the Philippines, whose remittances make up nearly 9% of the countries GDP, by declaring the year 2000 the year of the "Overseas Filipino Worker." 

Remittances to countries in Africa are an important part of those economies, but the numbers are hard to track. A paper from University of Iowa’s Center for International Finance and Development put their estimate at $40 Billion USD sent from 20 to 30 million African immigrant laborers annually. Some countries limit remittances to wire transfers to banks, and banks usually end up limiting the services they use to specific money transfer companies. The 2010 World Bank study broke down the amount each country received, putting Nigeria at the top with $10 billion, Sudan at $3.2 billion, Kenya at $1.8 billion, Senegal at $1.2 billion.

Immigrant households in the United States budget 10% of their income towards remittances, which in turn make up between 50 and 80% of the household income of those receiving the money. Up to 80% of immigrants living in New York State send remittances back to their home countries, more than any other state in the U.S. California, Texas, Illinois, and New Jersey all see high rates of immigrant families sending remittances. Remittances from the U.S. to Mexico and other countries in South American have been in decline. Before the Great Recession in 2008, remittances were as high as $69.2 billion, nearly $10 billion more than 2011 where families sent $58.9 billion.


The actual methodology that countries use to record the amount of money people are receiving via remittances is rarely made public. While the majority of value transfers occur via web or wire transfers where they can be more easily accounted for, a fair amount of money is transferred in ways that are harder to track. This has raised concerns among financial intelligence units that remittances are one of the ways in which money can be laundered, or violent activities like terrorism sponsored. 

The chief legislation regarding international transfer of funds in the U.S. is in title III of the embattled Patriot Act, passed in the wake of the 9/11 attacks in the U.S., and the Money Remittances Improvement Act of 2014. The overwhelming majority or financial transfers from migrant labor are no cause for national security concern.