Remittances are a lifeline for tens of millions of families around the world.
But as the coronavirus pandemic limits the ability of migrants to work and send their wages back home, that lifeline is drying up.
Smitha Girish lives in Kerala in south-west India with her young son Ishaan.
Her husband is in Dubai in the United Arab Emirates. Until recently he was working as a sales engineer but due to COVID-19 he is stuck in his accommodation, unemployed.
“For the last month he is simply sitting in the flat,” says Smitha. “He couldn’t join his new job; he couldn’t withdraw his money from [the] bank. It’s very difficult, because he has to pay a large amount for our flat.”
The money Smitha received every month from her husband was her main source of income.
Although she is a criminal lawyer by profession, she has had to stay at home to take care of her son, who has autism. Now, like many in Kerala, she is having to get by on a lower income.
“We all are frustrated. It’s very difficult,” she says.
Smitha’s situation is far from unique. According to the United Nations, some 800 million people benefit from funds sent home by relatives.
The amount of money flowing from developed to developing countries has increased dramatically in the previous few decades, reaching $554bn in 2019, three times the combined global foreign aid budget.
Unlike foreign aid, the income from remittances goes straight into the pockets of poor families, says Michael Clemens of the Centre for Global Development in Washington DC.
He says remittances are a “lifeline” for families around the world and that they are crucial for reducing poverty.
It’s not just about keeping families afloat. Mr Clemens says people use remittances to make the kinds of long-term investments, such as sanitation, education and healthcare that make them “healthier, happier and also more economically productive.”
This year many families won’t be able to make such investments. The World Bank is predicting global remittances will drop by some 20% because of the impact of coronavirus, to $445bn in 2020.
This decline is “unprecedented in history,” says World Bank economist Dilip Ratha. He says the Bank has only observed two drops in remittances before now: a fall of 5% after the global financial crisis in 2008, and another smaller drop in 2016.
Coronavirus affects remittances in a number of ways. In many cases, as with Smitha and her husband, the migrant worker is unable to work and send money home. In other cases, the problem is on the receiving side, as lockdowns restrict peoples’ access to transfer shops.
Arthur Beare lives in Monrovia in Liberia, West Africa. He says since 27 March it has become nearly impossible to take money out of banks and transfer shops.
“If you don’t go there early they ask you to leave. And even if you have the opportunity to enter the bank finally, you’ll be delayed for hours. You go early in the morning, maybe you’re successful to enter the bank by 10am [then it is not until] about 2 or 3 o’clock before you’re able to have access to your money.”
He says with the country in a state of emergency, remittances are more important than ever, not just for subsistence, but for keeping people in quarantine.
“You have families staying at home, brothers and sisters not going to school, and they are depending on you to help them. When people are hungry, family members are hungry, they will try to [go] out and could get infected. That’s the risk about the situation.”
In the UK, Chandra Ceeka is having his own problems getting money to his family.
An IT consultant from Hyderabad in southern India’s Telangana state, Chandra has been living in Britain for 18 years and regularly sends money back to India.
Although there are digital remittance services available, he says without the relationship he and others in his community have with their local High Street transfer shops, he doesn’t get the deals he used to.
“They try to give us some sort of discount on the exchange rate. They try to give us a good customer service. As of now, due to the Covid-19 issue, I’m forced to use only online methods and we don’t have an option for any negotiations or anything.”
But Michael Kent, chief executive of digital payments app Azimo, says mobile payments have the potential to lower the costs of transferring money considerably.
“We aim to be 70-80% cheaper in terms of the cost of sending than a traditional money transfer company on the High Street. We cut out the costs of the store, the cost of the agent, a lot of the corporate costs that some of these larger companies have.”
Mr Clemens of the Centre for Global Development says the impact of coronavirus will be seen for decades in developing countries.
He points to a landmark study in the Journal of Political Economy, which found that in the census data of 1980, the negative economic effects of the 1918 influenza pandemic could still be found in the US.
Babies not yet born during that pandemic had reduced educational attainment, increased rates of physical disability, lower income, lower socio-economic status and were more likely to receive welfare.
Likewise, he says young children now, even those not yet born, whose parents’ income is diminished by the decline in remittances, will “be much more likely to pass away, to be undernourished, to drop out of school to supplement family income. And those are things that future researchers will be able to detect, unfortunately, in the data 50 to 70 years from now.”
For Smitha in Kerala, whose husband Girish Sadanandan has been away on and off for 15 years, the sacrifice is no longer worth it. She hopes next year she can start working again and her husband can come home.
“Only for the sake of money he stays there and I am staying here. Money’s everything, you know, without which we can’t do anything. But this situation, coronavirus, changed all our hopes.”
Credit: BBC
