FOREIGN REMITTANCE DEVELOPMENTS THAT ARE HELPING WORKERS WHO RELY ON THEM

28th January 2021

The majority of Malaysian workers at building sites, factories, and plantations are now from countries such as Bangladesh, Indonesia, Myanmar, and Nepal. The remittances carried out by migrants (ie: the money they send home) are important for their families, as well as the economies of their home countries. This is even truer now as so many migrants lose their jobs overseas and may even take a hit from the pandemic in their own economies.

In reality, technology and FinTech may play a key role in promoting creative solutions, both for the integration of migrants at work in their host countries and for the facilitation of financial access.

Mobile technology improves remittance solutions

In Malaysia, a silent revolution related to the use of mobile tech, such as e-wallets is underway. It does not typically make headlines, topple governments, or topple conventional philosophies, but it is ready to alter lives. Approximately 1.7 million lives, to be precise. At any given moment, that's how many migrant workers work in Malaysia. In countries such as Bangladesh, Cambodia, and Indonesia, their job constitutes 15 percent of Malaysia's workforce and leads to a superhighway of remittance transactions to workers' families.

The conventional remittance infrastructure requires these employees to travel to a bank or some other brick and mortar financial agent with their cash, which is a dangerous and costly journey of 30 km or more for many. The cost of this trip is exacerbated by the recipient's transaction fees, foreign exchange costs, as well as fees owed (who may also face a journey from an institution to claim their cash).

The revolution lies here: mobile technology.

Mobile technology can be used to remove the big remittance pain points, to better understand consumer behavior and needs, and to deliver a meaningful remittance experience to customers from the very beginning.

A June 2019 Juniper Research report indicates that by 2024, the mixture of blockchain remittance networks and progress with regard to mobility-mobile payment systems are projected to account for 41 percent of global remittances. This can help reduce the high cost of sending foreign remittances. With foreign remittances being people’s main source of external funding in low- and middle-income countries, it would likely be a relief for them to find faster, safer mobile payment systems that are affordable.

COVID-19's impact on migrant workers

In Bangladesh's economy, migrant workers play an important role, pouring roughly USD15 billion into an economy that contributes directly to Bangladesh's socio-economic growth every year. Because of the dire consequences of COVID-19, these workers including their dependents are in a socially disadvantaged and economically challenging situation. In other countries, migrant workers from Bangladesh face adverse effects such as unemployment, reduced working hours, loneliness, poor quality of life, social prejudice, and mental strain while their dependents back home are facing a financial crisis due to their working relatives' limited or diminished cash flow.

COVID-19 intensifies multiple socio-economic crises, such as unemployment, the consumption of family members' reserve funds, and the diminishing inflow of remittances from the region. In this situation, the most immediate and important need is to provide staff abroad or those who have returned to Bangladesh with financial protection and social safety.

A significant fact regarding remittances is that they are sent in limited quantities by people to their families. Remittances often act as a form of insurance: More money is sent whenever a family back home is in trouble.

Malaysia fights back against remittance inefficiency

BNM has recognized FinTech as a catalyst for the growth of progressive financial services by implementing the Financial Technology (FinTech) Regulatory Sandbox Framework. This system allows financial firms and FinTech companies to be allowed regulatory flexibility to innovate with FinTech solutions in a live-controlled environment for a brief amount of time. Through this initiative, BNM will ensure that Malaysia's financial services sector continues to follow a fundamental change in the use of technology in financial services and, as a result, continues to be of regional and global importance.

The cost to send remittances from Malaysia to neighboring countries is projected to drop further due to this form of initiative. Also, thanks to the use of their smartphones, an increasing number of migrant workers working in plantations as well as other remote locations will be able to send money home via financial institutions. Therefore, a greater amount of remittance outflows can be channeled to both senders and recipients via financial institutions in a secure, reliable, and cost-effective manner.

For financial well-being, remittances are key

In some of the poorest areas of the world, such as South Asia, sub-Saharan Africa, and South America, migrants usually send money to their families to raise living standards. As migrant workers in Western Europe and Russia are forced to cut the quantities they send back to families in Romania, Bulgaria, Ukraine, and other former Soviet bloc nations, Eastern Europe is projected to be one of the worst-hit areas.

Studies by the World Bank have shown that remittances have alleviated hunger in low- and middle-income countries, improved nutrition, increased education spending, and decreased child labor in poor households.

A decrease in remittances affects the willingness of families to invest in these regions, as more of their resources are targeted at resolving food shortages and urgent needs for livelihoods.

Remittances help to offset the expenses of basic needs. Education, lodging, food, and well-being are part of this. Savings, savings, and job growth in cities also have a positive effect on them. In times of crisis, they provide an essential safety net, offering vital tools that can help families deal with unexpected shocks, such as low crop yields or a natural disaster.

EVOLET is a digital wallet app for migrant workers.

Learn more at https://evolet.io/