Remittance or the money that the migrant workers send back to their homes forms a major portion of the GDP and total income of a developing country. These generally account for about 200 billion dollars including all the associated estimates which give a boost to the country’s economy. In addition to all these direct benefits, remittance also provides a basis to judge the complex migration whereabouts in detail. Remittance only falls short to the FDI as one of the sources of external finance for the developing countries and is generally more than double of the officially recorded receipts. The workers adopt several ways to send money home. These may include transfer agencies, banks or any other informal sources as well which charge a specific part of the money as an additional charge.
DOMINANCE OF INFORMAL WAYS TO SEND MONEY ABROAD
Out of the multitude of ways to send money home from abroad, the informal channels were found to be the most preferred ones, all credits to the vast economy of the home country. The money is also transferred using money transfer agents which levy a heavy charge on the money which are recorded to be as high as 20%. The informal ways to send money home from foreign countries include carrying the money on one’s own as well or even the less regulated ones which are called as ‘hawala’.
CUSTOMARY WAYS TO SEND MONEY HOME
The widely adopted ways to send money home include the following:
- REGULAR MAILING SERVICE
Though risky, this one among the most adopted ways to send money home to the migrant workers. As per a survey conducted, this method of sending money accounts for about 7% of the total remittances to a country.
- CARRYING THE CASH BY HAND
As odd it might sound, the migrant workers mostly prefer carrying the money on their own since this does not require any additional charges to be paid. This also includes using a courier service for the transfer. Since these remittances are not mentioned in the official records, surveys suggest that this method may account for about 50 percent of the total remittances which is much higher as compared to other ways to send money home.
- HAWALA OR HUNDI SYSTEM
This way to send money home from foreign is generally adopted in Asian countries and especially Pakistan (Hawala) or India (Hundi). This also refers to the practice called ‘fei ch’ien’. The agents involved in the transfer are called hawaladar’s who are present in both the home country along with the country where the person is working. The fund transfer is immediate, where a person pays the amount to be transferred to the hawaladar in his own country and the home country correspondent of the hawaladar pays the equivalent amount to the relative concerned. The liability between the hawaladar is decided to base on the various factors which are often indirect. This way to send money home has some amount of risk associated with it.
- BUSINESS AGENCIES
The transfer through the business agencies that operate specifically for the purpose is one of the most widely adopted ways to send money home. These are also called as ethnic stores in the United States and carry out transfers to India, Bangladesh, Philippines etc. These agencies are bound by the US regulations and thus face stiff competition from the traditional informal systems. The net share of remittances using this method has shown a decline from about half to 40% in the past few decades. However, this way to send money home is one of the most trusted ways of money transfer.
- POSTAL OFFICES
Since the 1990s, international money orders have been one of the most chosen ways to send money home. Additionally, there are companies who operate in association with the Universal Postal Union and provide the migrant workers a way to send money home. A similar example is a company called EuroGiro.
- MONEY TRANSFER COMPANIES
In the present days, it is these companies who rule the game. Prominent units include the Instarem, Western Union and Money Gram. These companies are authorized to do the necessary transfers. The Western Union is the most widespread money transfer agency with about 170000 agent locations and a huge market share of about 26%.
- BANKS AND CREDIT UNIONS
This way of sending money home requires the remitter to have a full functional current account in the bank or credit union. The receiver can withdraw the amount from a branch at the home country or use an ATM. However, the lower wages have been a constraint for the people to use this way to send money home.
Almost all of these ways to send money home involve charging a notable amount of money to carry out the transfers which have led to the eagerness of the remitters to try out new transfer strategies. For example if you want to transfer money to Vietnam you can do an electronic fund transfer from Australia using services from an online remittance company. Stricter rules regarding security have been pushing the majority of remitters towards the international money transfer companies even though they charge a lot.