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  • I live in Washington, D.C.,

  • but I grew up in Sindhekela, a village in Orissa, in India.

  • My father was a government worker.

  • My mother could not read or write, but she

  • would say to me, "A king is worshipped only in his

  • own kingdom. A poet is respected everywhere."

  • So I wanted to be a poet when I grew up.

  • But I almost didn't go to college

  • until an aunt offered financial help.

  • I went to study in Sambalpur,

  • the largest town in the region,

  • where, already in college, I saw a television for the first time.

  • I had dreams of going to the United States

  • for higher studies.

  • When the opportunity came,

  • I crossed two oceans, with borrowed money

  • for airfare and only a $20 bill in my pocket.

  • In the U.S., I worked in a research center,

  • part-time, while taking graduate classes in economics.

  • And with the little I earned, I would

  • finance myself and then I would send

  • money home to my brother and my father.

  • My story is not unique.

  • There are millions of people who migrate each year.

  • With the help of the family, they cross oceans,

  • they cross deserts, they cross rivers, they cross mountains.

  • They risk their lives to realize a dream,

  • and that dream is as simple as having a

  • decent job somewhere so they can send money home

  • and help the family,

  • which has helped them before.

  • There are 232 million international migrants in the world.

  • These are people who live in a country

  • other than their country of birth.

  • If there was a country made up of

  • only international migrants,

  • that would be larger, in population,

  • than Brazil.

  • That would be larger, in its size

  • of the economy, than France.

  • Some 180 million of them, from poor countries,

  • send money home regularly.

  • Those sums of money are called remittances.

  • Here is a fact that might surprise you:

  • 413 billion dollars, 413 billion dollars

  • was the amount of remittances sent last year

  • by migrants to developing countries.

  • Migrants from developing countries,

  • money sent to developing countries

  • 413 billion dollars.

  • That's a remarkable number because

  • that is three times the size of

  • the total of development aid money.

  • And yet, you and I,

  • my colleagues in Washington,

  • we endlessly debate and

  • discuss about development aid,

  • while we ignore remittances as small change.

  • True, people send 200 dollars per month,

  • on average. But, repeated month after month,

  • by millions of people,

  • these sums of money add up to rivers of foreign currency.

  • So India, last year, received 72 billion dollars, larger than

  • its IT exports.

  • In Egypt remittances are three times

  • the size of revenues from the Suez Canal.

  • In Tajikistan, remittances are 42 percent of GDP.

  • And in poorer countries, smaller countries, fragile countries,

  • conflict-afflicted countries, remittances are a lifeline,

  • as in Somalia or in Haiti.

  • No wonder these flows have huge

  • impacts on economies and on poor people.

  • Remittances, unlike private investment money,

  • they don't flow back at the first

  • sign of trouble in the country.

  • They actually act like an insurance.

  • When the family is in trouble,

  • facing hardship, facing hard times,

  • remittances increase, they act like an insurance.

  • Migrants send more money then.

  • Unlike development aid money,

  • that must go through official agencies,

  • through governments, remittances

  • directly reach the poor,

  • reach the family,

  • and often with business advice.

  • So in Nepal, the share of poor

  • people was 42 percent in 1995,

  • the share of poor people in the population.

  • By 2005, a decade later, at a

  • time of political crisis, economic crisis,

  • the share of poor people went down to 31 percent.

  • That decline in poverty, most of it,

  • about half of it, is believed to be

  • because of remittances from India,

  • another poor country.

  • In El Salvador, the school dropout

  • rate among children is lower

  • in families that receive remittances.

  • In Mexico and Sri Lanka,

  • the birth weight of children is higher

  • among families that receive remittances.

  • Remittances are dollars wrapped with care.

  • Migrants send money home for food,

  • for buying necessities, for building houses,

  • for funding education, for funding

  • healthcare for the elderly, for business

  • investments for friends and family.

  • Migrants send even more money home

  • for special occasions like a surgery

  • or a wedding. And migrants also send

  • money, perhaps far too many times,

  • for unexpected funerals that

  • they cannot attend.

  • Much as these flows do all that good,

  • there are barriers to these

  • flows of remittances, these

  • 400 billion dollars of remittances.

  • Foremost among them is

  • the exorbitant cost of sending money home.

  • Money transfer companies structure

  • their fees to milk the poor.

  • They will say, "Up to 500 dollars

  • if you want to send, we will charge you

  • 30 dollars fixed."

  • If you are poor and if you have only 200 dollars to send,

  • you have to pay that $30 fee.

  • The global average cost of sending

  • money is eight percent.

  • That means you send 100 dollars,

  • the family on the other side receives only

  • 92 dollars.

  • To send money to Africa,

  • the cost is even higher:

  • 12 percent.

  • To send money within Africa,

  • the cost is even higher:

  • over 20 percent.

  • For example, sending money from Benin to Nigeria.

  • And then there is the case of Venezuela, where,

  • because of exchange controls,

  • you send 100 dollars and you

  • are lucky if the family on the other side

  • receives even 10 dollars.

  • Of course, nobody sends money to Venezuela

  • through the official channel.

  • It all goes in suitcases.

  • Whereever costs are high,

  • money goes underground.

  • And what is worse,

  • many developing countries actually

  • have a blanket ban on sending money

  • out of the country.

  • Many rich nations also have a

  • blanket ban on sending money to specific countries.

  • So, is it that there are no options,

  • no better options, cheaper options, to send money?

  • There are.

  • M-Pesa in Kenya enables people to send money

  • and receive money at a fixed cost of only

  • 60 cents per transaction.

  • U.S. Fed started a program with Mexico

  • to enable money service businesses

  • to send money to Mexico

  • for a fixed cost of only 67 cents per transaction.

  • And yet, these faster, cheaper, better options

  • can't be applied internationally

  • because of the fear of money laundering,

  • even though there is little data

  • to support any connection, any significant

  • connection between money laundering

  • and these small remittance transactions.

  • Many international banks now

  • are wary of hosting bank accounts

  • of money service businesses, especially

  • those serving Somalia.

  • Somalia, a country where the

  • per capita income is only 250 dollars per year.

  • Monthly remittances, on average, to Somalia

  • is larger than that amount.

  • Remittances are the lifeblood of Somalia.

  • And yet, this is an example of

  • the right hand giving a lot of aid,

  • while the left hand is cutting the lifeblood

  • to that economy, through regulations.

  • Then there is the case of poor people from villages, like me.

  • In the villages, the only place where you can

  • get money is through the post office.

  • Most of the governments in the world

  • have allowed their post offices to have

  • exclusive partnerships with money transfer companies.

  • So, if I have to send money to my

  • father in the village, I must send money

  • through that particular money transfer company,

  • even if the cost is high.

  • I cannot go to a cheaper option.

  • This has to go.

  • So, what can international organizations and

  • social entrepreneurs do to reduce the cost

  • of sending money home?

  • First, relax regulations on small remittances under 1,000 dollars.

  • Governments should recognize that

  • small remittances are not money laundering.

  • Second, governments should abolish exclusive partnerships

  • between their post office and the money transfer company.

  • For that matter, between the post office

  • and any national banking system that

  • has a large network that serves the poor.

  • In fact, they should promote competition,

  • open up the partnership so that

  • we will bring down costs like we did,

  • like they did, in the telecommunications industry.

  • You have seen what has happened there.

  • Third, large nonprofit philanthropic organizations

  • should create a remittance platform

  • on a nonprofit basis.

  • They should create a nonprofit

  • remittance platform to serve the money transfer

  • companies so that they can send money at a low cost,

  • while complying with all the complex

  • regulations all over the world.

  • The development community should

  • set a goal of reducing remittance costs

  • to one percent from the current eight percent.

  • If we reduce costs to one percent,

  • that would release a saving of 30 billion dollars per year.

  • Thirty billion dollars, that's larger than the entire

  • bilateral aid budget going to Africa per year.

  • That is larger than, or almost similar to,

  • the total aid budget of the United States government,

  • the largest donor on the planet.

  • Actually, the savings would be larger

  • than that 30 billion because remittance channels

  • are also used for aid, trade and investment purposes.

  • Another major impediment to the

  • flow of remittances reaching the family

  • is the large and exorbitant

  • and illegal cost of recruitment,

  • fees that migrants pay, migrant workers

  • pay to laborers who found them the job.

  • I was in Dubai a few years ago.

  • I visited a camp for workers.

  • It was 8 in the evening, dark, hot, humid.

  • Workers were coming back from

  • their grueling day of work,

  • and I struck a conversation

  • with a Bangladeshi construction worker.

  • He was preoccupied that he is sending

  • money home, he has been

  • sending money home for a few months now,

  • and the money is mostly going

  • to the recruitment agent, to the labor agent

  • who found him that job.

  • And in my mind, I could picture

  • the wife waiting for

  • the monthly remittance.