MICROFINANCE WRAP-UP: “Resilience: COVID-19 Crisis Through A Migration Lens;” Published by Global Knowledge Partnership on Migration and Development (KNOMAD)

This brief provides an overview of recent trends in migration and remittances globally. Overall, remittances to low- and middle-income countries (LMICs) remained relatively stable through the onset of the COVID-19 pandemic, decreasing from USD 548 billion in 2019 to USD 540 billion in 2020. Many countries used “counter-cyclical fiscal policy” to stimulate their economies, which moderated the extent of recessions and kept incomes high enough so that remittances did not fall precipitously. Countries with oil-based economies experienced larger dropoffs in remittances due to the decrease in oil prices. In Russia, the dual effects of lower oil prices and depreciation of the local currency led to a 10-percent dropoff in remittance flows to Central Asia and Europe. At the same time, a “shift in flows” from unrecorded, informal channels to formal channels, including financial technology (fintech) providers, may have moderated the decrease in measured remittance flows.

Large economies’ stimulus programs helped personal incomes and consumption remain stable while also allowing businesses maintain employees during periods of lower revenue. As a result, economies across North America and Europe with high migrant populations fared better than had been expected, significantly moderating the effects of the pandemic on remittances.

World Bank and KNOMAD staff have projected that remittances to LMICs will increase 2.6 percent to USD 553 billion in 2021 and similarly to USD 565 billion in 2022. However, these figures may be sensitive to the extent of current and future COVID-19 outbreaks, fiscal stimulus and the shift from informal to formal channels.

The authors comment positively on certain policy responses, including the inclusion of migrants in economic relief and vaccination programs in some countries. They advocate for the expansion of such assistance in other countries, perhaps via international donor funding.

Meanwhile, the authors advocate for efforts to reduce the cost of remittances, which averaged approximately 6.5 percent during the last quarter of 2020. While these costs may be reduced via new technologies, innovation can be thwarted by “anti-money laundering and countering of financing for terror (AML/CFT) regulations and de-risking practices by banks.” Among the common barriers for migrants is a lack of the identification documents that are required to use financial services.

This is a summary of a paper published by KNOMAD as Migration and Development Brief 34; May 2021; 56 pages; available at https://www.knomad.org/sites/default/files/2021-05/Migration%20and%20Development%20Brief%2034_1.pdf

By Bradley Shulman, Research Associate

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