A hobby horse of mine in international development matters has been the lack of focus on or coverage of remittance flows to the developing world – that is, the money transfers from migrants working in the developed world to their countries of origin. For example, in a normal London high street the newsagent offering money transfer services probably provides a bigger flow of cash to the developing world than your local Oxfam shop does. And up to a fifth of GDP in countries like Jamaica, Lebanon and Jordan is made up of remittances from their ex-pats.
So l am glad to see that the World Bank has begun to do regular research into this unsexy area of the world economy and that the Economist in its 19 February edition (‘Trickle-down economics’) has taken notice of this, in the context of the slump in the world economy. The Economist notes that flows from remittances are themselves likely to fall, maybe up to 6 per cent globally, but that private-capital flows such as equity and lending by foreign banks have already dropped by 50 per cent. With official development assistance also likely at best to be capped by developed countries cutting their public expenditure, this clearly suggests that remittances are a much more reliable source of cash for the developing world.
In the meantime, the main transmitters of these critically important cash flows, the money transfer agents, find themselves facing over-regulation by the Financial Services Authority, if the presentations and discussions at the annual conference of the UK Money Transmitters Association that I attended today are anything to go by. It’s a real pity that the FSA did not keep a better eye on our banking friends in the City over the past decade or so, and then just maybe we would not be where we are with the economy at this moment. Surprise, surprise, instead of going for the big players in the money markets the FSA has gone for small players instead – the money transfer agents who have played such a crucial role in providing cash to the developing world.