The Coronavirus (COVID-19) pandemic has sent shockwaves around the world and created unprecedented economic volatility. Remittances will be significantly affected, but money transfer operators (MTOs) and other payment providers are ready to respond and mitigate against the impact.
The uncertainty surrounding COVID-19 is affecting businesses and markets in many different ways. A recent report by the World Bank estimates that remittance flows around the world are predicted to plummet by more than $100bn this year, reducing a crucial source of financing for developing countries as they struggle with the economic volatility caused by the pandemic.
The report states that there will be a 20% fall in remittance flows to low and middle-income nations from a record $554bn last year to $445bn this year. Dilip Ratha, the World Bank’s lead economist for migration and remittances, was quoted by the Financial Times, saying that the fall will be a ”major financial shock to countries depending on remittances”.
Addressing the effects of COVID-19 on remittances
The dramatic spread of COVID-19 has disrupted lives, livelihoods, communities and businesses worldwide. At IAMTN, we’ve identified the need to come together to try to minimise the impact and limit the potential for further disruption to migrants and remittances.
On 31st March 2020, at the request of IAMTN’s members and working in collaboration with public sector partners, we sent out a survey designed to identify the risks that the COVID-19 crisis poses to the international remittances sector, with the aim of helping public and private sector stakeholders to better address them.
The survey was sent out to IAMTN members, partners and stakeholders across the world, who between them provide services to tens of millions of economic migrants. The report based on the survey responses can now be viewed on the IAMTN website.
It highlights that 91% of respondents have experienced immediate changes in remittance volumes, with 69% saying that they have been significantly impacted by a sudden decrease in volumes. It also shows that countries in South Asia, East Asia and the Pacific region have been most affected by outbound remittance changes, whilst nations in Sub-Saharan Africa have been the most impacted by the drop in inbound remittances.
Veronica Studsgaard, Founder and CEO of IAMTN, said: “In light of the COVID-19 pandemic, IAMTN is working together with the public sector to address the issues and new risks faced by the cross-border payments industry. This key industry research gives us a holistic view, and will help us to bring together the public and private sectors to collaborate on solutions for everybody.”
“We want to make sure that everyone comes out on the other side of this crisis in the best shape possible. The fact is that remittances will drop in volume, but increase in importance. They are a lifeline for the emerging economies that will be hardest hit. As industry leaders, we need to make sure that we do as much as possible to capture remittance flows within formal channels.”
“I’d encourage anyone working in the industry to read the report carefully, and please do get in touch if you’d like to work with us to help create solutions. Only coordinated action can potentially mitigate the risk and impact of this unprecedented crisis. I’d also like to say how impressed I’ve been with stories of MTOs and other remittance service providers who have pivoted amidst this crisis to provide their local communities with food and other essential items. The response has been fantastic.”