Luis Toapanta wants to move back to Ecuador to be with his two children, his wife and his parents. Unfortunately, if he were to leave New York, Luis would no longer be able to afford to send his children to school.
“I want to give them the best that I can, I want to give them the things that I didn’t have,” he says, but adds: “I am starting to think that the love of a father can be much more valuable to them than material things.”
Luis’s situation is not at all uncommon in the migrant worker community. Workers like Luis leave their families behind in their home countries and come to the United States to work and send home money for education and necessities. Many of these migrants work seven days per week to maximize the amount that they can send back through remittance agencies.
The price that they pay to send the money varies greatly depending on the amount of competition among agencies that serve a particular country. In many cases, the immigrants themselves pay more than necessary because they are unaware of other options, or they are uneasy about patronizing traditional financial institutions such as banks.
Transnational remittances were a negligible piece of the world economy until the late 1990s, but globalization and relaxed immigration laws in countries like the United States have led to tremendous upward trend. The World Bank estimates that migrants around the world remitted $414 billion dollars in 2009. The vast majority went to developing countries.
Remittances from expatiates, like foreign direct investment, are one of the principal sources of foreign currency for developing countries. In some countries such as the Dominican Republic, El Salvador, Jamaica and the Philippines, remittances amount to a huge portion of gross domestic product.
According to World Bank estimates, if just the price of sending remittances were to be reduced by just 5 percent, another $16 billion dollars would be going into the pockets of the receivers. A reduction in fees could free up more money for development.