Reverse Remittances At The Time of Covid Crisis

Generally, remittances are the money that migrants send back home to their families. Therefore, remittances received from migrants have a significant contribution to the economy of the country. However, recently researchers found that the employment sectors where migrants work are mostly affected due to this crisis, especially the hospitality sectors. Different sectors experienced varied effects from this crisis. Besides, it was noticed that people were sending money from Kyrgyzstan (the third most remittance-dependent economy) to their migrant relatives in Russia. Herein the role of remittance has been reversed based on the pandemic crisis.

World Bank predicted on April 2020 that, due to the pandemic, the money migrants send back to family members would decline by approximately 20 percent. However, critics commented this prediction as the most abrupt one compared to the Great Recession of 2008–2009, where global remittances dropped by around 6 percent.

As World Bank Stated on May 12, 2021, remittances flow to lower-middle-income countries dropped by 1.6 percent in 2020 compared to 2019. Many factors confronted all the predictions that include fiscal stimulus packages in migrant-receiving economies, the increased demand of labour force in the construction and agriculture sector and migrants’ desire to help family back home economically.

Different impacts across the employment sectors

Remittance flow varied across the migrant employment sectors as an impact of the pandemic. The migrants employed in essential services, such as shops, factories, or the agricultural industry, used to send a stable amount of remittances back home to their families throughout the last year. However, migrants working in the hospitality or catering sector cannot send any remittances for weeks on end. Their families were also experiencing significant fluctuations in the amount of remittances received as this pandemic left several migrants without wages and unable to pay for rent.

However, this situation did not wholly cease the worldwide remittance process. To help relatives or family members stuck in a foreign land, the families of migrants become the remitter. This pattern is termed Reverse Remittance, which also adds value to the economy and improves national development. Families made reverse remittance possible either through loans they took to support their migrant relatives or by tapping into household savings accumulated, keeping aside the rest of the remittance income received earlier. As a result, the rest of their savings helped them sustain smoothly even during the early months of the pandemic.

Fluctuation in remittance

Researchers implied that the overall share of remittances fell sharply in the second quarter of 2020 yet gradually recovered in the third quarter of the year. Several factors are responsible for the initial decline in remittance, including increased air-tickets fare and PCR tests, making the trip abroad more costly than usual. As a result, most migrants avoided their return trip home due to the high cost and extra hassle. However, as urged by their children back home, most of the migrant women returned home.

On the other hand, new and seasonal migrants did not try to leave the country either, at least in the first half of the year. However, in the latter year, remittance flow has seen an upsurge due to the increased demand for migrant labour and wages, especially for those employed in construction and agriculture.

Last Words

Remittances are the lifeline of migrants and the low-middle income countries that are entirely dependent on remittance. Hence, nothing can completely cease the flow of remittance. In this blog, I explained how remittance could be invested in a time of crisis in the form of reverse remittance. Many fintech firms have hoped to make the remittance business more superior and efficient to facilitate the remittance provider and the migrants. The remittance business is very lucrative, and it also helps people by assisting them financially throughout their life even at the time of crisis.

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