I have long admired and drawn inspiration from the millions of Western Union’s customers from 200 countries and territories – whom I consider heroes – as they perform a dual role of advancing their own economic prosperity while supporting their families thousands of miles away. The pandemic has brought challenges and hardships for people everywhere, but it has not stopped these heroes from sharing what they have with the people they care about on the other side of the world.
For 170 years, Western Union has connected individuals to their families and loved ones globally, virtually anytime, anywhere. Once, we connected our customers through the wires of a worldwide telegraph network; today we connect them through one of the world’s largest global financial networks, moving 130 currencies electronically to almost any point on earth in minutes.
Today, it is my honor to bestow a new title upon our customers, these global citizens and local heroes: they are world’s “Economic First Responders.” The love and money they send across the world’s borders have helped smooth the economic shocks from the pandemic, fostering stronger resilience and recovery in their home nations throughout 2020, and into 2021 and beyond, than would have been the case without these flows.
These global citizens provide an essential lifeline to their home communities by funding essential expenditures, lowering extreme poverty and supporting healthcare and education. They serve on the front lines within their host communities as medics, scientists, grocers, bus drivers, construction workers, teachers, and contribute human capital toward the functioning of a robust economy.
These actions, during an unprecedented global pandemic, serve to shine an even bigger spotlight on the criticality of remittances and those who send them. They are the resilient and inclusive global economic force. Policymakers, development experts and economists must give cross-border remittances the consideration and priority they deserve as a significant global economic engine. There has simply never been a greater need for innovation and technology that provides the on-the-ground financial support flowing instantly across borders.
A January 2021 Oxford Economics report, The Remittance Effect: A Lifeline for Developing Economies Through the Pandemic and Into Recovery, illustrates how remittances impact developing economies, both in the very short-term and in the longer-term, in a way that neither government aid nor private foreign direct investment can match given the larger value of remittances today. These economic first responders selflessly act to quickly wire money into the hands of loved ones back home, stimulating spending on housing, medical care, and other essentials; boosting savings, improving creditworthiness and funding investments; and supporting economic and financial stability – all of which promote economic growth. As Oxford Economics coins it, the “remittance multiplier effect” boosts local economic activity and, ultimately, GDP.
In the last several years, remittances overtook Foreign Direct Investment (“FDI”) as the largest external capital source in developing economies. The forecast for global FDI flows is bleak, with the United Nations Conference on Trade and Development (UNCTAD) having projected these flows to contract by up to 40% in 2020. And not only are remittance flows greater in magnitude than any other form of capital inflow into developing countries (excluding exports), but they are also more sustained. When the COVID pandemic first hit, the World Bank and others predicted dire declines in remittance flows to low-and-middle-income countries. As time passed, however, the economic support via remittances proved resilient and remittance flows have held up. The Oxford Economic report shows what we at Western Union have witnessed repeatedly: Crises make people more determined, not less, to provide support to the people they care about. When times get hard in developing economies, remittance-senders become front-line workers of economic security. Simple arithmetic shows us that the magnitude, reliability, and cascading effect of remittances make them a crucial build block in developing economies’ efforts to return to normalcy.
So, what can governments and policymakers do to support this crucial flow of capital?
In the monumental economic rebuilding of developing nations in a post-pandemic world, millions of these economic first responders will continue to step up. Join me in recognizing these heroes and understanding the irreplaceable role they play in the economies of their host and home countries. I advocate for policymakers across the spectrum to prioritize legal, smart, safe, and equitable systems of cross-border migration which will uplift the economies of developing nations. Equally important is the need to create the capacity for the funds they send home to be turned into productive investment and help pave the path for economic prosperity for all.
The past year has shown us both the power of action and the pitfalls of inaction. The World Bank estimates that the pandemic will push an additional 88-115 million people into extreme poverty, with the total potentially rising to as many as 150 million this year. Unsurprisingly, the developing world, home to many of the world’s most economically vulnerable people, will face the most extreme consequences.
Just as we stepped up for each other to answer the call of crisis, we must now step up to answer the call of economic recovery, sustainability, and inclusion for all.