Remittances, a crucial financial support system for millions in developing economies, surged to nearly $800 billion in 2022. Approximately 80% of these funds, sent by migrants to their home countries, were directed towards low and middle-income nations.
LINKING REMITTANCES TO POVERTY REDUCTION
Studies show that a 10% increase in international remittances can lead to a 1.6% drop in poverty rates
This substantial amount, surpassing last year’s official development assistance from all advanced economies by fourfold, underscores the significant role remittances can play in reducing poverty. Research indicates that a 10% increase in international remittances as a share of a country’s GDP can result in a 1.6% reduction in poverty rates.
COSTLY TRANSACTIONS: A BARRIER TO EFFECTIVENESS
Despite their potential impact, high global transaction costs, averaging around 6.2%, significantly diminish their effectiveness. Moreover, vulnerable migrants often encounter exploitation and financial losses during the remittance process.
Rebeca Grynspan, the Secretary-General of UNCTAD, emphasizes the urgency for governments to enhance consumer protection for both senders and recipients. In our interconnected world, she asserts that safeguarding consumers in financial markets like remittances is of paramount importance.
CONSUMER PROTECTION AS A GLOBAL IMPERATIVE
“In our interconnected world, the protection of consumers in financial markets like remittances is a matter of great importance and urgency.” – Rebeca Grynspan, UNCTAD Secretary-General
Grynspan underscores the pivotal role of remittances in enhancing resilience, enabling housing investment, and providing stability. To maximize the poverty-alleviating potential of remittances, UNCTAD recommends five key consumer protection measures:
- Regulate transfer fees and exchange rates to reduce costs and ensure a higher proportion of funds reaches the intended recipients.
- Promote financial literacy through educational programs to empower consumers in making informed decisions.
- Encourage digital remittance services to offer more affordable and accessible money transfer options.
- Enhance transparency and combat fraud to shield consumers from hidden fees and deceptive practices.
- Develop effective dispute resolution mechanisms to address issues such as delayed transfers or discrepancies in amounts received.
These measures align with the 2015 United Nations guidelines for consumer protection, emphasizing regulatory oversight and financial education to combat fraud.
UNCTAD’s recommendations come at a critical juncture as the world grapples with the complexities of global finance and the increasing digitalization of services. The call for these measures reflects a growing trend of countries collaborating with UNCTAD to safeguard consumer rights in financial services, as highlighted by Wimonrat Wim Teriyapirom, director of international cooperation for Thailand’s Consumer Protection Board. Teriyapirom emphasizes the need for Thailand to accelerate consumer empowerment and seeks cooperation from entities like UNCTAD in this crucial area.