Understanding the role of remittances as a development tool

Peter Hansen from the Danish Institute for International Studies (DIIS) enriched the discussion with conclusions from his research on remittances in Africa. In contrast to the previous speakers, he rather highlighted the critical aspects of the “remittance mantra”. In the worst case, the argument of remittances is used by governments to circumvent their responsibility for development.

To start with, “we do not have a really good idea of what is going on” due to the lack of data on migrants and remittance flows, Mr. Hansen regretted. However, what we know is that North Africa is the major recipient of the African continent, while Sub-Saharan Africa only receives comparably little remittances. The Sub-Saharan countries of the top ten recipients by volume only get between 800-1200 million US dollar, while top-runner Morocco benefits from more than 60 billion US dollar annually.

According to Mr. Hansen, the importance of remittances in Sub-Saharan Africa is overestimated. In comparison with Official Development Aid (ODA) and Foreign Direct Investment (FDI), the volume of officially registered remittances is rather little (11 billion US dollars in 2007 in comparison with 22 billion US dollars FDI and 26 billion US dollars ODA). However, remittances to Sub-Saharan Africa are mostly not sent through banks, but rather with the help of informal or personal networks. Examples for this include the hawala in Somalia, and the transport sector in Tanzania and Kenya, which function as money transfer system. Moreover, urban-rural remittances and intra-regional remittances not depicted in the statistics play a prominent role in Sub-Saharan Africa.

As opportunities, Mr. Hansen identified the strengthening of the financial sector in the first place. This could be reached through the introduction of banks in rural areas, deregulation of the remittance markets to increase competition and lower costs, and the use of the internet and SMS to transfer money. Secondly, developing migration and Diaspora policies has a promising potential. Effective migration management could curb brain drain, and support co-financed development.

Despite of opportunities, Mr. Hansen keeps his skeptical view on the “remittance mantra”. The development discourse around remittances tends to turn Diasporas into instruments for development. But we have to wonder if development really lies within the responsibility of Diasporas. “What can we ask of migrants who often live in hardship and with the burden of sending remittances?”, he asked. The focus on remittances should not divert from the fact that the state has the most important role in development.

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