This brief is brought to you by the Financing Facility for Remittances (FFR) of the International Fund for Agricultural Development (IFAD)
Issue 31 March, 2020
Remittances: "A lifeline in times of crisis"
On 11 March 2020, the World Health Organization (WHO) declared COVID-19 a pandemic. As of 1 April 2020, COVID-19 has spread to around 203 countries or territories, including large cities as well as small rural villages. Lockdown measures taken up by the majority of affected countries to contain the spread are causing an unprecedented global economic upheaval due to job losses resulting from business closures and the sharp reduction in economic activity. Among the most affected groups are the estimated 200 million international migrant workers and their 800 million family members back home who rely on remittances for their livelihood. They are currently being forced to deal with the consequences of the pandemic, with little or no support.

Over the past 12 years, two major economic shocks have caused a decrease of the flow of remittances. However, unlike previous crises, the economic impact and scale of current events is simultaneously affecting international and domestic migrants who send remittances from high-income areas and their families living in developing countries.
Emergency measures currently taken by governments to mitigate the impact of job losses generally do not include migrant workers or returnees. Simply put, the majority of migrants and their families have no social safety net in either sending or receiving countries. Migrant jobs are mostly “hands-on”; their work cannot be done remotely, and lack of access to work results in no income.

As reported by the Financial Times: The crisis “… will hit on two fronts: returning workers are expected to add to swelling unemployment rolls, and the revenues they used to contribute — vital foreign currency earnings — will fall

Remittance families are enormously resourceful and resilient: they will use their small amounts of savings carefully. However, these savings cannot act as a considerable mitigating factor in this case, given the uncertainty of the current lockdown period.
As stated by S&P Global Ratings, dramatic consequences are expected in the African economies, which are highly dependent on external capital flows, and where remittances as a share of GDP exceed 5 per cent in 13 countries. Moreover, at least 100 developing countries worldwide are highly remittance-reliant (3 per cent of their GDP) and these flows count the most in rural areas.

Recent news from all continents, as well as insights collected by IFAD from its projects and partners worldwide are confirming the relevance of remittances in this crisis.
Both lack of mobility in sending and receiving countries due to lockdown, coupled with job losses, are causing immediate reduction of remittance transfers.

Limited or no access to sending mechanisms. In an increasing number of sending countries, particularly in Europe, due to government lockdown measures, migrants cannot access their usual physical remittance sending locations and many lack alternatives, such as the use of digital transfers. Similar challenges are experienced at the receiving end, as remittance recipients cannot access physical payout locations.

Financial access falls short. Remittance families generally live outside the formal financial system, therefore, the closure of brick-and-mortar remittance service providers (RSP) in most sending countries often makes it difficult to send money home.

Loss of jobs or drastic reduction of salaries. Many migrant workers abroad who have been laid off are unable to find another job or to return to their home countries. They are forced to use their savings, while maintaining their costs of living in sending countries.

Lack of alternatives to stay or to leave. Restrictions on travel and governments’ decision to stop issuing permits to migrant workers will have negatively impact remittance volume and subsequent wellbeing.
Examples from all over the world show an immediate response from the remittance industry. The first priority has been to ensure continuity of service. In order to protect staff, in many cases this has meant tele-working and a change in their overall operating environments. There have also been a number of instances where countries are strengthening their digital services and reducing transfer fees in order to mitigate losses and facilitate service to their customers. Recent news from the field are as follows:

Fee waivers. Among others,
  • MPesa in Kenya, MTN in Uganda and Zambia, and Wing in Cambodia, announced free money transfers for a limited period
  • Maybank offers free remittance services for Malaysians working in Singapore
  • Cebeuana also offers free transfers in the Philippines
  • Ukrainian Post provides its remittances at zero fee during the lock-down period

Reduction in transactions. The closing of physical agents and branches as a result of government enforced measures is impacting all types of operators. Remitters either cannot leave their homes or do not know which services are still available. Initial soundings for cash-based operators in Europe show reductions of between 40 and 85 percent in markets with a lock down, such as Italy and the UK. Even digitally based companies are facing severe challenges to volumes because remitters are reluctant to send by using savings until their own future prospects concern employment become clearer. For many, the use of a mobile wallet is still limited as they don´t have a bank account linked to the wallet, to be able to top it up digitally.

Communication. Companies which have digital offerings have been pro-actively communicating to customers about their online services. However, remitters are confused and concerned about which locations are open in both sending and receiving markets and this is further inhibiting usage.

Quick banking solutions. The International Association of Money Transfer Networks, (IAMTN) confirms that the industry is constantly developing innovative tools to serve the unbanked through digital channels. In fact, to facilitate the opening of online accounts and/or e-wallets, several remittance service providers (e.g. Valyou in Malaysia) are currently developing new ways to manage the registration process, for example through video calls. However, infrastructural changes are required in many receiving countries to accommodate digital remittances, particularly in rural areas.
In parallel with the actions taken by the private sector, a number of financial regulators are putting in place regulations to soften the impact of the COVID-19 crisis on national economies, including the promotion of cashless payments and lowering or zeroing fees for individuals.

Zero fees in specific corridors. The Central Bank of Russia has set the tariff at zero for the provision of P2P instant money transfers within the Russian Federation.

Lower Mobile Network Operators (MNO) fees to facilitate data connectivity. Several ICT regulators and telecom ministries, such as the South African Competition Commission, are intervening to ensure adequate data connectivity and lower fees of MNOs for individuals. These measures could further result in an increased usage of cashless/digital payment instruments and an increased pressure to lower fees for cross-border remittances.

Declaring the provision of remittances as an essential financial service. Countries such as New Zealand and Pakistan have taken this initiative in a bid to keep funds flowing and in order to provide clarification. This initiative would be a best practice path that could be followed by others.
> Since remittance families generally live outside the world’s financial system, lack of information on closure of RSP locations in most sending countries is making it difficult even to send money home at this time. To facilitate access to remittance channels and reduce the impact of the current events on both migrants and their families back home, governments could:
  • include RSPs in their list of essential services to keep operational
  • facilitate communication about open service offices. This would allow remittance agents to maintain their shops open to the public, along with post offices and bank branches.
> Emergency measures to waive or drastically reduce the cost of sending remittances to 3 per cent fully align to SDG 10c. A reduction in transfer fees to mitigate the negative effects on millions of migrant families is now more relevant than ever.
> The current effects of the COVID-19 pandemic should encourage governments and international institutions to support programmes for the development of digital infrastructures and connectivity in remittance-receiving countries, with an aim to accelerate the current global trend from cash to digital and more generally to cashless-based services.
27 March,
CENFRI Webinar Africa: Exploring the Impact of COVID-19 on Livelihoods in Africa: Part 1 – The Effect on Remittances [recording]
2 April, 1 PM GMT
Inter-American Dialogue Webinar: Impact of the Covid-19 Pandemic on Migrants and Remittances to Latin America and the Caribbean [to register]
2 April, 2 PM GMT
Better than Cash Alliance Webinar: Digital Payments for Ebola Response: Lessons for the COVID-19 crisis [to register]
Additional recent articles relevant to the impact of COVID-19 on remittances are listed below:
Giving a voice to remittance families 
On 24 March IFAD’s Financing Facility for Remittances launched the Remittance Community Task Force (RCTF19). The purpose of the RCTF19 is to stimulate discussions on how the worldwide COVID-19 pandemic is impacting remittance families,  impeding their ability to
reach their own Sustainable Development Goals (SDGs), and provide concerted recommendations for timely solutions.
Created in collaboration with the co-organisers of the Global Forum on Remittances, Investment and Development (GFRID), the RCTF19 also includes recognized expert organisations from the public and private sector as well as the civil society.
Scheduled to convey its first of a series of meetings this week, we welcome collaboration from all sources in four main areas including but not limited to:
  • Sharing direct accounts of the impact on remittance families in both sending and receiving countries
  • Surveying the challenges to remittance service providers
  • Assessing government actions/regulations to address the crisis
  • Providing information regarding the role of NGOs and other organizations that support migrant workers, such as diaspora groups

Additional information on the Task force initial findings, and outcomes, and partners will be shared in subsequent Brief issues.
Financing Facility for Remittances
International Fund for Agricultural Development (IFAD)
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