Resilience in the market for international remittances during the Covid-19 crisis
The COVID‑19 pandemic has highlighted the crucial role played by international remittances in building resilience during times of crisis. As national lockdowns and border controls took effect during the onset of the crisis, it was initially predicted that there would be an adverse impact on this essential countercyclical financial flow for remittance recipients in low- and middle-income countries (LMICs). Due to the lockdowns in the early stages of the crisis, declines in remittance volumes were observed as migrants struggled to find work and remittance service providers (RSPs) were forced to either limit their services or, in some instances the ceased to operate.
Yet, the flow of international remittances has proven to be resilient through the course of the pandemic, registering a small decline and exceeding the sum of foreign direct investment (FDI) and official development assistance (ODA) for LMICs.
This report examines the factors that have contributed to the resilience of remittances during the pandemic and extracts key lessons learned on consumer behaviour, market performance and the creation of an enabling regulatory environment. Chapter 1 examines the impact of the pandemic on the financial lives of migrants and their families and their use of digital remittances as an income smoothing mechanism. Chapter 2 highlights the experiences of the private sector and how their actions, in coordination with public authorities, facilitated a switch to digital remittances. Chapter 3 emphasizes the role and importance of the enabling regulatory environment in keeping remittances flowing and laying the foundations for the digital transformation of the payment system ecosystem. The report concludes with a set of lessons learned for policymakers and industry on how to ensure the resilience of remittances and its continued digitalization can be maintained in an inclusive manner going forward.