In this article, we will list countries that receive the most international remittances and discuss the dynamics of international payment companies. You can skip the details and read 5 Countries That Receive the Most International Remittances.
International remittances serve as a financial lifeline for millions of families in lower-income countries by enhancing their living standards and compensating for the lack of opportunities in the expatriates’ home countries. BBC Research projects that the global cross-border payment market will reach $238.9 billion by 2027, experiencing a Compound Annual Growth Rate (CAGR) of 5.3% from 2022 to 2027.
International remittance transfers constitute nearly 6% of the GDP in low-income countries and 2% in middle-income countries. Significantly, remittance inflows often exceed foreign direct investment in countries that receive the most international remittances, underscoring their vital importance.
For example, South Asia, home to many remittance-receiving countries, represented a remarkable 326% of Foreign Direct Investment (FDI) inflows in 2022, up from 247% in 2019. Additionally, remittances were 1036% of Official Development Assistance (ODA) to South Asian countries in 2022, an increase from 935% in 2019. However, it is crucial to acknowledge that despite these impressive figures, remittances only accounted for 4% of South Asia’s GDP in 2022, with significant disparities across different countries in the region.
The World Bank’s Migration and Development Brief indicates that international remittances showed impressive resilience in 2022, with an 8% increase in-flows to low-and middle-income countries, totaling $647 billion. This growth followed a 10.6% surge in 2021 and occurred despite challenging global economic conditions, such as slowing economies and inflation. However, in 2023, remittance flows have shown signs of slowing, with an estimated annual growth rate of 1.4%, potentially reaching $656 billion by the year’s end.
In Europe and Central Asia’s top remittance receiving countries, the deceleration in remittance growth is attributed to a combination of a high base effect, persistent disruptions in flows to Ukraine and Russia, and the depreciation of the ruble against the US dollar.
Also See: 25 Countries that Receive the Most Foreign Aid Per Capita
High Costs Of Sending Remittances Remain An Issue
Despite their benefits, remittances are often subject to high transaction costs, which poses a challenge to maximizing their potential impact. These costs are not burdensome for large remittances, typically made for trade, investment, or aid, because these fund transfer costs are negligible as a percentage of the amount sent. However, for smaller remittance amounts that are often sent to developing or underdeveloped countries, transfer costs, which can be 10% of the sent amount or sometimes even higher, are surely concerning.
In Q2 2023, the global average of remittance cost was 6.20%, slightly down from 6.25% in Q1 2023, according to the Remittance Price Analysis of the World Bank. Among remittance service providers, traditional banks remain the most expensive, with an average remittance cost of 12.09% worldwide. On the other hand, mobile money solutions were the most cost-effective for remittance senders, charging 4.11% of the transferred amount.
For instance, sending $1000 via The Western Union Company (NYSE:WU) to Pakistan would incur a cost of $7.90 to the sender’s debit card if their selected receiving option is a bank account. Conversely, the same remittance amount would cost the sender $1.99 if the recipient gets it in a mobile wallet. Similarly, sending $1000 to Pakistan via Xoom, an international remittance service of PayPal Holdings Inc (NASDAQ:PYPL), would incur no fee for a debit/card deposit. However, for a bank deposit or cash pickup, the remittance price would be $4.99 if paid via a debit card.
The World Bank suggests that a 5-percentage-point reduction in remittance costs could help save $16 billion annually. As a result, many payment companies have committed to making remittance transfers less expensive for expatriates. As previously mentioned, PayPal Holdings Inc (NASDAQ:PYPL), The Western Union Company (NYSE:WU), and other payment companies have different pricing structures for international remittances based on specifics like bank transfer, currency exchange, and cash withdrawal. Consequently, these companies allow senders to calculate their charges according to the transfer amount and other variables.
Notably, shares of PayPal Holdings Inc (NASDAQ:PYPL) fell nearly 11% in August as weak second-quarter margins overshadowed its strong forecast. The company’s Q2 earnings call reported expectations of accelerating top-line growth to low double digits in Q4.
Even though traditional remittance channels are well-trusted, digital currencies and blockchain technology are becoming alternatives for PayPal, The Western Union Company (NYSE:WU), and other payment companies. Research suggests that the global market for blockchain technology will reach around $57.64 billion by 2025, boosted by an impressive CAGR of 69.4% between 2019 and 2025. The finance sector is the main adopter of blockchain technology, as these innovations ensure faster and safer cross-border transactions. Moreover, as reliance on smartphones for purchases and money transfers increases, mobile payment solutions will become more preferred due to their affordability and ease of use.
Also Read: Top 30 Countries With The Most Immigrants
Let’s now discuss the top remittance receiving countries!
15 Countries That Receive the Most International Remittances
Our Methodology
We ranked the top remittance receiving countries based on their remittance inflows as a percentage of Gross Domestic Product (GDP). Initially, we shortlisted 15 countries with the highest remittance inflow amounts according to the World Bank’s Migration and Development Brief. Subsequently, we consulted the World Bank’s database on Remittance Inflows to GDP (%) to further inform our rankings. To provide context on these countries’ dependence on remittances, we calculated the average remittance inflows for the last five years, from 2018 to 2022, and ranked them in ascending order of their GDP shares.
Based on our research, here are the main recipient countries of international remittances:
15. Indonesia
Remittance Inflows as a Share of GDP: 0.92%
Remittance inflows in Indonesia range between $9 and $10 billion per year, predominantly from unskilled laborers, reflecting the country’s pattern of labor emigration. A significant number of Indonesian workers seek employment abroad, especially in Middle Eastern countries, Malaysia, and Singapore. Engaged primarily in domestic work, construction, and manufacturing sectors, these overseas workers send remittances back to their families, contributing to household income and national development.
The Indonesian government has implemented various policies and programs to protect the welfare of these migrant workers and maximize the benefits of remittances. While technology has made the transfer of funds easier and more efficient, challenges such as high transaction costs and limited financial literacy among recipients persist.
14. Thailand
Remittance Inflows as a Share of GDP: 1.64%
Thailand has experienced a growing trend in remittance inflows over the years, currently fluctuating between $8 and $9 billion annually. Thai migrant workers, predominantly found in East Asia, the Middle East, and Western countries, engage in agriculture, construction, and caregiving sectors. The remittances they send home are crucial in supporting families, particularly in rural areas, and contribute to community development and poverty reduction.
13. Colombia
Remittance Inflows as a Share of GDP: 2.44%
Colombia, one of the countries with the highest rates of emigration, has nearly 14 million of its citizens living overseas. The country’s remittance landscape is shaped by historical migration patterns, with a significant number of Colombians residing in the United States, Spain, and Venezuela. In 2022, international remittance in Colombia saw a 9.7% increase, partially due to a strong labor market in the US. Although the government has implemented measures to facilitate smooth and secure transactions, challenges such as fluctuating exchange rates and high transfer fees continue to impact the amount received by families.
12. India
Remittance Inflows as a Share of GDP: 3%
India receives the highest amount of international remittances in the world, averaging $90 billion a year. As the country’s GDP stands at $3 trillion, these financial inflows claim only 3% of its share. In 2022, remittances to India soared to $111 billion, marking a 24.4% increase and constituting 63% of all remittance flows to South Asia. This significant growth is primarily attributed to the 36% of remittances from highly-skilled Indian migrants employed in tech sectors across the United States, United Kingdom, and Singapore. The post-pandemic economic recovery in these countries has resulted in tight labor markets and increased wages, subsequently boosting remittance flows back to India.
11. Mexico
Remittance Inflows as a Share of GDP: 3.7%
Remittance inflows in Mexico are significantly influenced by its economic ties with the United States, where the majority of its migrant workers reside. According to the Bank of Mexico, remittances have become one of the country’s principal sources of foreign income, typical of many developing countries. In 2022, Mexico’s remittances surged to an impressive $61.1 billion, a 12.9% increase from the previous year, positioning the country second globally among countries that receive the most international remittances and first in its region.
10. Nigeria
Remittance Inflows as a Share of GDP: 4.68%
In 2022, Sub-Saharan Africa experienced a considerable increase in remittance inflows, totaling $53 billion, a 6.1% rise from the previous year. This growth follows a remarkable 16.3% surge in 2021, highlighting a trend of increasing financial flows to the region. Nigeria tops the countries that receive the most international remittances in Sub-Saharan Africa, accounting for approximately 38% of the total remittances to the region. In 2022, the country witnessed a 3.3% increase in remittance inflows, amounting to $20.1 billion.
To capitalize on these substantial remittance inflows, the Central Bank of Nigeria has streamlined processes and introduced the Nigerian Diaspora Bond to attract investment-oriented remittances. Nevertheless, the persistent black-market premium on foreign exchange in Nigeria remains a major concern. For example, in May 2023, the Lagos black market traded the dollar at 759 naira for buying and 760 naira for selling, a stark contrast to the official exchange rate of around 460 naira, according to the World Bank. Despite having the highest GDP among Sub-Saharan African countries, Nigeria is still classified among countries with the highest rates of poverty.
9. Bangladesh
Remittance Inflows as a Share of GDP: 5.16%
In Bangladesh, the future of remittance flows is shaped by contrasting forces. On the one side, challenging conditions in the Gulf Cooperation Council (GCC) countries, where many Bangladeshi migrants work, will likely impact their ability to send money home. On the other hand, newfound optimism in Bangladesh’s economy, boosted by a recently secured agreement with the IMF, is setting the stage for remittance growth. Experts predict an increase of about 3% in Bangladesh’s remittances, reaching $23.6 billion in 2024.
8. Morocco
Remittance Inflows as a Share of GDP: 6.56%
In 2022, Morocco’s remittance inflows surpassed the $11 billion mark for the first time, reflecting a modest growth of 2.4%. These funds now represent 8.1% of the country’s GDP, a slight increase from 7.6% in the previous year. Morocco ranks second among North African countries that get the most remittances and benefits immensely from robust economic activities in the euro area, home to a large community of Moroccan expatriates, particularly in France, Spain, Belgium, and the Netherlands. Their contributions are vital to the Moroccan economy, as seen in the first quarter of 2023, when remittances grew by about 7% to $2.6 billion compared to the same period in the previous year, outpacing both tourism receipts and foreign direct investment inflows into the country.
7. Sri Lanka
Remittance Inflows as a Share of GDP: 6.98%
Sri Lanka’s ongoing economic turmoil, a continuation from the prior year, has significantly diminished public trust. With external reserves on a downturn, remittance growth plummeted by a dramatic 31%, settling at $3.8 billion in FY2022, a noticeable decrease from the $5.5 billion recorded in 2021. The financial instability has had profound implications on the country’s economy and the everyday lives of its citizens, many of whom depend on remittances from family members abroad. Looking ahead to 2024, the World Bank expects similar economic conditions will persist in Sri Lanka. Still, despite these challenges, projections indicate a potential 2.4% growth in formal remittance flows, bringing them to an estimated $4 billion in 2024.
6. Pakistan
Remittance Inflows as a Share of GDP: 7.7%
Pakistan is among the countries that receive the most international remittances, owing to its over 11 million overseas diaspora. Consequently, remittances significantly contribute to the country’s economy, accounting for an average of 7.7% of its GDP. In 2022, these remittances constituted 7.9% of the country’s GDP, but the following year saw a slight dip of around 6%, bringing the total to $28 billion.
Despite this decrease, there is a sense of cautious optimism for 2024, with expectations of a modest rebound in remittances as migrants regain confidence following Pakistan’s new agreement with the IMF. The World Bank highlights that the country’s rising interest rates, which have increased the burden of debt servicing, have resulted in a growing gap between the official and market exchange rates, reaching a 4% disparity by January 2023.
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Disclosure: None. 15 Countries That Receive the Most International Remittances is originally published at Insider Monkey.
