Money Remittance

Remittances—the money immigrants send to family members in their country of origin—have a deep tradition. But with today’s global networks of financial institutions and telecommunications technologies, the transmission of funds worldwide now takes place at a pace and volume unimaginable to earlier times.

Globally, the flow of money to developing countries is soaring, hitting $400 billion in 2012 and forecast to grow by another $130 billion by 2015Twenty-four billion dollars is leaving Canada every year.  Canadians are significant contributors to these remittance flows, a fact that should not be surprising given that one in five of Canadians (20.6 per cent in 2011, according to Statistics Canada) were born elsewhere. According to the World Bank, $23.9-billion in remittances flowed from Canada to other countries in 2012. The top destinations for remittances from Canada were China ($3.9-billion), India ($3.5-billion), and the Philippines ($2-billion).

Money transfer value continues to increase because users are transacting much more frequently (although at lower values) due to the wider availability of services and to transaction costs that are lower than those of traditional bank services.  Gartner forecasts to account for almost 69 percent of the total value in 2017 (a market worth $721 billion with more than 450 million users).

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Money Remittance from Canada to Philippines, China, Vietnam, India

It is cheapest to remit money from Canada to the Philippines, China and Vietnam, and costliest to remit money from Canada to Zimbabwe, Rwanda and Haiti. However, even for corridors where the cost to remit from Canada is relatively low such as the Philippines and Vietnam, it is still cheaper to send money to these countries from other countries such as the United States.

The largest estimates of remittance outflows from Canada are to China ($4 billion) and India ($3 billion). The total remittance outflow for Canada (to all countries including developed) is estimated to be about $23 billion in 2010-11.
In India, for example, the Central Bank recently made a landmark decision to allow non-bank entities to offer mobile financial services, recognizing the successes taking place elsewhere and the huge impact that mobile money could have in increasing financial inclusion among India’s 720 million unbanked adults.

Measuring Canada Money Remittance

Considerable work is underway both nationally and internationally to measure remittance flows. The World Bank estimates flows to developing countries at US$167 billion in 2005 (World Bank 2006). This is likely an underestimate as some remittances through formal channels, such as post offices or exchange bureaus, and remittances below a minimum threshold, are often not recorded in official estimates. Furthermore, remittances through informal channels, like family or friends, generally go unrecorded. Such unrecorded remittances could add 50% or more to the total.

Remittances represent an important revenue source for developing countries. In absolute terms, India (US$21.7 billion), China (US$21.4 billion), and Mexico (US$18.1 billion) top the list (World Bank 2006). In proportional terms, the importance of remittances to many smaller countries is evident. For example, remittances account for about 20% to 30% of GDP in Tonga, Moldova, Lesotho, Haiti, Bosnia and Herzegovina, and Jordan, and for about 10% to 19% in several others, such as Jamaica, El Salvador, the Philippines, the Dominican Republic, Lebanon and Nepal.

Cross-industry partnerships are helping to drive remittances too, both domestically and internationally. The introduction of a new model involving direct wallet-to-wallet cross-border transfers has led to a surge in international remittances via mobile money, and is helping to reduce costs for users. The median cost reported by respondents for sending USD 100 via mobile money is USD 4, less than half the average cost to send money globally via traditional money transfer channels.

The importance of remittances can also be related to national industries. For example, remittances to Mexico “…are more than the country’s total tourism revenues, more than two-thirds of the value of petroleum exports, and about 180% of the country’s agricultural exports.” (Inter-American Development Bank 2004). More broadly, in 28 countries, remittances are “…larger than the earnings from the most important commodity export.” (World Bank 2006) Remittances often also exceed overseas development aid and foreign direct investment.

Despite the ongoing interest, research on the characteristics of remittance senders in Canada remains quite limited, largely because of the absence of data. More broadly, studies are often focused on immigrants from only one or two source countries. This study uses the Longitudinal Survey of Immigrants to Canada (LSIC) to document the prevalence of remitting and the amounts remitted by immigrants from a wide range of countries (see Data source and methodology). The incidence of remitting by the 2000/2001 landing cohort ranged from less than 10% to about 60%; the average amounts ranged from about $500 to almost $3,000 per year. Financial and family characteristics were consistently significant among immigrants from all regions, but other factors, such as sex and education, were significant for only some.

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