Prospective Use of Remittances as a Development Tool, by Mitchell Sipus, International Development and Humanitarian Consultant

1. Remittances as a Development Tool
Mitchell Sipus
December 15, 2008

2. Introduction
Clearly remittances are a significant aspect of the migration dynamics within the Middle
East and North Africa. Although economic policies among various governments within
North Africa, such as Morocco, have integrated remittances from Europe within their
own planning, it is certain that much of the role of remittances within development
initiatives remains unexplored. Most importantly, as large quantities of remittances are
through informal channels, or exist in non-monetary forms, new approaches to integrate
these forms of remittances into the economic interest of the nation must be determined.
Existing Methods Using Remittances for Development
Remittances are a significant contribution to the socio-economic landscape through the
direct impact of monetary transfers and the strengthening of relations between migrant
families and individuals. Yet there are certainly opportunities for the mobilization of
remittances by involving local society within the broader policy decision framework
within source and destination countries. However such a task remains excessively
challenging to implement as local governments thus require a great deal of support and
enhancement to enable such broad sweeping process of communication to take place
(Sorenson 2004).
One methodology pursued, within Nations such as Morocco, is the establishment of
Town Home Associations linking diasporas communities to particular sending areas with
the purpose of carrying out mutually beneficial development projects (Newland and
Patrick, 2004). In addition, micro-finance systems have been established to channel
remittances toward the establishment of local business investments. Tying remittances to
micro lending has prompted development by enhancing local markets and allowing
financial intermediaries to utilize remittances as deposits and to channel them into
widespread community business creation rather than migrant specific programming
(Sorenson 2004).
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3. Prospective Opportunities for Using Remittances
As remittances transfer by means of a dense web between diasporic communities and
their origin communities, I think it is important that attempts to capitalize on remittance
flows for community development focus more upon the individually of the medium. As
existing attempts to utilize upon remittance based, or remittance-oriented schemes for
development discuss linkages between migrant communities and government, I find the
approach toward development to be somewhat contradictory. Future attempts toward
integrating remittances within develop should be consequently based on the individual
rather than further government intervention.
One method of enhancing the development potential of remittances is through the
integration technology into the migrant communities. In this manner, development can
occur through business development, improved public services to the poor, increased
connectivity, and job creation. Within situations where there is a high demand for
connectivity, but a lack of infrastructure, the integration of wireless communication
systems could provide opportunities where computer use is not high. An example can be
found within the distribution of ATM machines for banking services where banks have
otherwise disappeared, providing international banking services to the poor, allowing a
more streamlined distribution and procurement of remittance flows. Furthermore,
increased distribution of mobile phones, such as within Grameen Bank’s project Grameen
Phone, can increase connectivity allowing individuals to procure information regarding
travel conditions, market prices, and potential buyers while circumventing a middleman
(Spencer 2002). Increased communication can consequently allow individuals to access
resources outside of the immediate location/society, thus tightening the bonds between
migrant communities but on the micro-scale of an individual consumer basis.
If any government initiatives should take place to enhance to development potential of
remittances it should be to provide universal access to communication systems within its
population. As a continuous key objective within government policy is to increase public
education for children and youth, the reduction of the digital divide allows individuals the
capability to better integrate education and knowledge production within migrant
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4. communities (Sanyal 1999). Ideally this process must take place within the origin and
the host country to create a fluid process wherein widespread knowledge production may
transform into entrepreneurship and stimulated remittance flows.
In general, improved telecommunications investment leads to growth, within economic
returns higher than telecommunications returns. Furthermore, enhanced
telecommunications allows better management efficiency, thus reducing costs and
improving outputs, prompting important spillovers in the local community (Roller and
Waverman, 2001). As improved telecommunications is a clear winner in terms of
economic growth, it is reasonable to suspect that remittances would likewise increase in
volume and consistency among migrant communities for the same reasons of increased
connectivity, reduced costs, and greater spillover in the local community.
Conclusion
Remittances are a well-established source of capital for communities and families with
migrant members within the Middle East and North Africa. Thus far, it appears that
government policies attempting to enhance the development prospects of remittance
flows have focused on the financial linkages within the transaction process or have
focused upon the relationship between the community, the local government, and the
state. However, as the essence of remittances is rooted within the tight composition of
migrant and family ties, I argue that a better system of policy would look improve these
bonds rather than redirect or profit from the capital flow. With a more efficient
infrastructure for communication and capital transfer, such as through the improvement
of communication technology, the remittance flow should increase in volume and
consistency leading toward enhanced investment at the family level. The positive
spillovers and externalities of this process will allow a form of development occurring
from the ground up, rather than from the top down, as determined by the spending and
investment patterns of the remittance receiving family.
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5. Works Cited
Newland, Kathleen and Erin Patrick. 2004. “Beyond Remittances: The Role of Diaspora
in Poverty Reduction in their Countries of Origin. A Scoping Study by the Migration
Policy Institute for the Department of International Development.
Roller, Lars Hendrick and Leonard Waverman. 2001. “Telecommunications
Infrastructure and Economic Development: A Simultaneous Approach,” The American
Economic Review, Vol. 91, No. 4), pp. 909-923
Sanyal, Bish ed. 1999. “Information Technology and Urban Poverty: The Role of Public
Policy.” High Technology and Low-Income Communities: Prospects for the Positive Use
of Advanced Information Technology. MIT Press; Cambridge, Massachusetts.
Sorenson, Ninna Nyberg. 2004. Migratn Transfers as a Development Tool: The Case of
Morrocco. Danish Institute for International Studies, Working Paper 2004/17.
Spencer, James. 2002 “Technology and Urban Poverty: Understanding the Barriers to
Equality,” Projections MIT Student Journal of Planning, V
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