When workers abroad send part of their earnings to family back in their home countries, these transfers are known as remittances. Payments of this type have been growing rapidly in recent years, and are immensely important not only to the people who receive them, but to entire economies. In some countries they're the single largest slice of gross domestic product. For example, in 2019 remittances to Haiti were 23% of GDP. That same year, in Honduras they were 21.5%, in Lesotho 21%, in Nepal 27%, in the Kyrgyz Republic 28.5%, and in Tonga 40%.
The above nations are all classified as lower or lower-middle income, however even higher income countries can find remittances crucial. After the 2018 floods in Kerala, India, inbound remittances rose 14%. The example highlights an important aspect of these payments—they tend to be countercyclical, meaning they increase when economic activity in a country decreases.
With so much money changing hands, both senders and recipients have grown increasingly concerned with costs, taxes, restrictions, and security risks. Government policies have a profound impact on these issues, and they differ by country. The global remittance sector is generating a growing body of study. Two of the foremost researchers in the area—Sabith Khan and Daisha M. Merritt—have collaborated on a book titled Remittances and International Development: The Invisible Force Shaping Community.
As the title Remittances and International Development suggests, Dr. Khan and Dr. Merritt discuss remittances in terms of development, community building, and policy. They examine remittances as a form of soft power for nations, look at the motives behind giving, use data to argue from a theoretical standpoint that remittances should be viewed in a different way than in current discourse, and dive into other subjects too numerous to mention here.
For the second installment of GrantStation's ongoing partnership with ARNOVA (Association for Research on Nonprofit Organizations and Voluntary Action), in which we're publishing papers written by respected researchers in fields related to the nonprofit sector, I had the opportunity to ask these two esteemed scholar-researchers about their book, and a few of the forces that characterize and shape the international remittance sector. I communicated via email, and the two collaborated on their answers.
Q: How did you meet, and how did you decide to co-author this book?
SK and DM: I remember the first time we both participated in a conversation together, circa 2014, we were discussing philanthropy, the intricacies of philanthropic theories, and the impacts that philanthropy has on the common person. We then branched off into what impacts could really be measured, and shared many of hours diving into that line of inquiry. We have become friends through ARNOVA, where this first conversation occurred. And it was through ARNOVA where we first presented at a conference together, when we were both doctoral students. We complement each other in both research skills as well as personalities and have built a good working relationship over the years. Our book is just one of our endeavors. And we plan to continue this line of research as well as dissemination of information.
Q: The book focuses on the remittance connection between two pairs of countries—Saudi Arabia and India, and the U.S. and Mexico. The paper GrantStation is publishing is a chapter from the book. That chapter discusses the specific examples of Mexico and India as recipients of remittances to show how the process of sending money this way is affected by policy, and concludes that these policies should be monitored, or possibly updated and changed, in order to facilitate easier flow of cash to places and people where it's needed. Is that a fair summary?
SK and DM: Yes, we argue that there is scope for improving and bettering many of the policies that impact how easily remitters can send money. The key here is access and ease. Many vulnerable or ‘unbanked’ folks go through a lot of struggle to do something as simple as send money to their loved ones, and we suggest that this process can be made easier and simpler, and policy has a big role to play in it.
Q: Why is proper monitoring and regulation of remittance policy important to the nonprofit sector?
SK and DM: The Charity & Security Network, a D.C.-based think tank, came up with a report recently that talked about this issue. The crux of it is that international NGOs (U.S.-based ones working in conflict zones) find it nearly impossible to conduct business on a regular basis. A large part of it is due to onerous paperwork and other regulatory requirements that have hampered the flow of money for legitimate humanitarian needs. This is one example of how policies in the remittance space impede the nonprofit sector.
Remittances need to be understood and on the radar of nonprofits for multiple reasons. Nonprofits should understand about their stakeholders, those they serve, and those that are part of their larger community, and by understanding remittances NPOs can see into some of the lives of those they serve. Remittances and the policies placed on remittances impact both the sender as well as the recipient and many times the recipient is an NGO.
Q: You mention that aid of this type can be seen within the identification model of philanthropy.
SK and DM: Our argument in this paper is a theoretical one. While remittances and philanthropy are seen as two distinct spheres of human activity, we are suggesting that there are many instances when these two occur as one co-joined sphere of activities. In this type of situation, we argue that we can see the motivations to give as coming from the sender’s identification with the recipients, a theoretical notion within the philanthropic literature. It basically suggests that philanthropists give money to those they can identify with, due to shared heritage, family background, etc. Further, we assert that there is a large connection between the concept of identification and the strategic decision to remit monies in the first place, and connected to the country of one's origin.
Q: What else falls into the category of remittances besides monetary gifts? Are goods considered remittances? How about certain types of purchases?
SK and DM: Remittances include goods as well as money transfers. Though our current research does not delve into goods transfers or movement of goods.
Q: Speaking about identification as an impetus for sending remittances, you describe it as shared heritage, family background, etc. Some readers may think of disasters, when people tend to give to those they don't have any clear link to. Does disaster temporarily create wider identification?
SK and DM: We believe that disasters can create newer ways of identification. It is an argument that needs to be empirically verified, but we are suggesting that we have seen this operate in many contexts of our research.
Q: You make a point of avoiding politics, but I'm going to brush up against it slightly. Donald Trump and Narenda Modi enacted policies in the U.S. and India that alarmed some observers. Trump threatened to tax remittances to Mexico to pay for his border wall, and Modi cancelled the licenses of nearly 20,000 NGOs operating in India. Is it rare for them to be politically targeted in this way?
SK and DM: Former President Trump’s rhetoric and actions were targeted at just one audience: his base, which is unfortunately not very aware or interested in the plight of billions of people who have challenges in day-to-day living. Similarly, Modi is also appealing to the far-right in India. (He comes from a political party that is itself the far-right.) So, while both leaders have targeted remittances, one must keep in mind that they cannot change much on the ground. In the case of India, with an economy that is tanking and COVID-19 battering the states’ economies, remittances are a lifeline for millions of people.
Modi in particular targeted development NGOs, because they tried to shine a light on many of the egregious projects that were causing (and continue to cause) massive environmental degradation. With Trump, it was all about a fictitious wall that was supposed to save us from people invading the U.S. In both cases, the policies were misinformed and badly planned.
While we do skirt the politics conversation, as you mentioned, this is also a prime example of where the concept, the actions, and the use of remittances needs to be better understood and vocalized. If you were to venture out onto any street in the U.S., ask a random person what the definition of remittances is, 9:10 times (this is a guess and not backed by quantitative data) you would get a blank stare or they would pull out the phone to look up the dictionary’s answer. So while the above policies were misinformed, it is still imperative that the practitioner, the nonprofit manager, the lobbyist, and any local concerned citizen, understand what remittances are and how they are beneficial to millions. Which would then allow for better and more informed voting were other policies or proposals as mentioned above to be presented.
Q: Modi's changes hit NGOs in India to the tune of a 40% drop in foreign support between 2015 and 2018. Is there any hope of a reversal of these policies, or of improved relations with his government?
SK and DM: We are not sure about the situation in India, which seems to be regressing as far as democratic participation. NGOs are considered a part of any democratic framework, in the world we live in. Besides, the political environment has become very toxic, with dissent being criminalized and Indian media toeing the line of Mr. Modi, who has been getting more aggressive with those who disagree with him and his policies. The chauvinism that this administration represents will hopefully go away once he is out of power, which doesn’t seem like anytime soon.
Q: You mention remittance policy is not standardized globally. Is that just a matter of low priority within and among nations, or is there some actual reason it hasn't happened?
SK and DM: We believe it is because of the diversity of perspectives in how nation-states view remittances. While many sending countries haven’t paid much attention to it, more recently, some have thought of putting in place policies to tax remittances, for instance. Some conservative politicians in the U.S. have strongly favored this, while others have opposed such moves. The diversity of banking policies, regulatory norms, and ideologies of how governments think about these flows of money determines how they are responding to remittances.
Q: Last question. What would you say are a couple of the most useful aspects of your book for nonprofit workers and leaders?
SK and DM: We think the book will help readers understand remittances sending and receiving behavior in [Saudi Arabia, India, Mexico, and the U.S.], and the policy contexts in much more depth. It will be useful to both academics and practitioners interested in policy angles to remittances.
Action steps you can take today
- Read Daisha Merritt's and Sabith Khan's paper:
Policy and Remittances: Human Needs and the Shaping of Practice with Policy.
- Read Remittances and International Development, which is available from online booksellers.
- Read more articles and find out more about GrantStation’s partnership with ARNOVA.
ABOUT SABITH KHAN
Sabith Khan is Director and Assistant Professor, Master of Public Policy & Administration, at California Lutheran University. He holds a PhD in Planning, Governance and Globalization, a Master’s degree in Public Administration, and a Master of Arts in International Relations. He is a scholar-practitioner, with expertise in American philanthropy, civil society, international development, religion, and culture, and has worked across the nonprofit, for-profit, and government sectors in India, UAE, and the U.S.
ABOUT DAISHA MERRITT
Daisha Merritt is the Associate Department Chair of the Department of Management and Technology in the College of Business at Embry-Riddle Aeronautical University, Worldwide. She is a Doctor of Philosophy in Strategic Leadership: Nonprofit and Community Leadership. Her research is focused on strategy in the nonprofit world, as well as on diaspora communities worldwide and the impacts of remittance giving.