I live in Washington, D.C.
But I grew up in Sindhekela, a village in Orissa
in India.
My father was a government worker.
My mother could not read or write, but she
would say to me, "A king is worshiped only in his
own kingdom. A poet is respected everywhere."
So I wanted to be a poet when I grew up.
But I almost didn't go to college
until an aunt offered financial help.
I went to study in ___,
the largest town in the region,
where, already in college, I saw a
television for the first time.
I had dreams of going to the United States
for higher studies.
When the opportunity came,
I crossed two oceans, with borrowed money
for airfare, and only a 20 dollar bill in my pocket.
In the U.S., I worked in a research center,
part-time, while taking graduate classes in economics
and with the little I earned, I would
finance myself and then I would send
money home to my brother and mother.
My story is not unique.
There are millions of people who migrate each year.
With the help of the family, they cross oceans,
they cross deserts, they cross rivers, they cross mountains.
They risk their lives to realize a dream,
that dream is as simple as having a
decent job so they can send money home
and help the family,
which has helped them before.
There are 232 million international migrants in the world.
These are people who live in a country
other than their country of birth.
If there was a country made up of
only international migrants,
that would be larger in population
than Brazil.
That would be larger in its size
of the economy than France.
Some 180 million of them, from poor countries,
send money home regularly.
Those sums of money are called remittences.
Here is a fact that might surprise you:
413 billion dollars, 413 billion dollars
was the amount of remittences sent last year
by migrants to developing countries.
Migrants from developing countries,
money sent to developing countries--
413 billion dollars.
That's a remarkable number
that is three times the size of
the total of development aid money.
And yet, you and I,
my colleagues in Washington,
we endlessly debate and
discuss about development aid
while we ignore remittences as small change.
True, people send 200 dollars per month
on average, but repeated month after month,
by millions of people,
sums of money add up to rivers
of foreign currency.
So, India last year received 72 billion dollars, larger than
its IT exports.
Egypt, in Egypt remittences are three times
the size of revenues from the Suez Canal.
In Tajikistan, remittences are forty-two percent of GDP.
In poorer countries, smaller countries, conflict
afflicted countries, remittences are a lifeline,
as in Somalia or in Haiti.
No wonder these flows have huge
impacts on economies and on poor people.
Remittences, unlike private investment money,
they don't flow back at the first
sign of trouble in the country.
They actually act like an insurance.
When the family is in trouble,
facing hardship, facing hard times,
remittences increase, they act like an insurance.
Migrants send more money then.
Unlike development aid money,
that must go through official agencies
and governments, remittences
directly reach the poor,
reach the family,
and often with business advice.
So, in Nepal, the share of poor
people was forty-two percent in 1995,
the share of poor people in the population.
By 2005, it declined later, at a
time of political crisis, economic crisis.
The share of poor people went down to thirty-one percent.
That decline in poverty, most of it,
about half of it, is believed to be
because of remittences from India,
a poor country.
In El Salvador, the school dropout
rate among children is lower
in families that receive remittences.
In Mexico and Sri Lanka,
the birth weight of children is higher
among families that receive remittences.
Remittences are dollars wrapped with care.
Migrants send money home for food,
for buying necessities, for building houses,
for funding education, for funding
healthcare for the elderly, for business
investments for friends and family.
Migrants send even more money home
for special occasions like a surgery
or a wedding. And migrants also send
money, perhaps far too many times,
for unexpected funerals that
they cannot attend.
Much as these flows do all that good,
there are barriers to these
flows of remittences, these
400 billion dollars of remittences.
Foremost among them is
the exorbitant costs of sending money home.
Money transfer companies structure
their fees to milk the poor.
They will say, "up to 500 dollars
that you want to send, we will charge you
30 dollars fixed."
If you are poor and have only 200 dollars to send,
you have to pay that 30 dollar fee.
The global average cost of sending
money is eight percent.
That means you send 100 dollars,
the family on the other side receives only
92 dollars.
To send money to Africa,
the cost is even higher:
twelve percent.
To send money within Africa,
the cost is even higher:
over twenty percent.
For example, sending money from Benin
to Nigeria.
And then there is the case of Venezuela, where,
because of exchange controls,
you send 100 dollars and you
are lucky if the family on the other side
receives even 10 dollars.
Of course, nobody sends money to Venezuela
through the official channel.
It all goes in suitcases.
Whereever costs are high,
money goes underground.
And what is worse,
many developing countries actually
have a blanket ban on sending money
out of the country.
Many rich nations also have a
blanket-ban on sending money
to specific countries.
So, is it that there are no options,
no better options to send money?
There are.
Mpesa in Kenya enables people to send money
and receive money at a fixed cost of only
60 cents per transaction.
U.S. Fed started a program with Mexico
to enable money service businesses
to send money to Mexico
for a fixed cost of only 67 cents per transaction.
And yet, these faster, cheaper, better options
can't be applied internationally
because of the fear of money laundering,
even though there is little data
to support any connection, any significant
connection between money laundering
and these small remittence transactions.
Many international banks now
are weary of hosting bank accounts of
money service businesses, especially
those serving Somalia.
Somalia, a country where the
part-time income is only 250 dollars per year, 250 dollars per year.
Monthly remittences, on average, to Somalia
is larger than that amount.
Remittences are the lifeblood of Somalia.
And yet, this is an example of the right
hand getting a lot of aid,
while the left is cutting the lifeblood
to that economy, through regulations.
Then there is the case of poor people
from villages, like me.
In the villages, the only place where you can
get money is through the Post Office.
Most of the governments in the world
have allowed their post offices to have
exclusive partnership with money transfer companies.
So, if I have to send money to my
father in the village, I must send money
through that particular money transfer company,
even if the cost is high.
I cannot go to a cheaper option.
This has to go.
So, what can international organizations,
social entrepreneurs do to reduce [the] cost
of sending money home?
First, relax regulations on small remittances
under 1000 dollars.
Governments should recognize that
small remittances are not money laundering.
Second, governments should abolish exclusive partnerships
between their post office and the money
transfer company.
For that matter, between the Post Office
and any national banking system that
has a large network that serves the poor.
In fact, they should promote competition,
open up the partnership so that
we will bring down costs like we did,
they did, in the telecommunications industry.
You have seen what has happened there.
Third, large non-profit philanthropic organizations
should create a remittance platform
on a non-profit basis.
They should create a non-profit
remittance platform to serve the money transfer
companies so that they can send money at a low cost,
while complying with all the complex
regulations all over the world.
The development community should
set a goal of reducing remittance costs
to one percent from the current eight percent.
If we reduce costs to one percent,
that would release a saving of 30 billion per year.
30 billion dollars, that's larger than the entire
bilateral aid budget going to Africa per year.
That is larger than, or almost similar to,
the total aid budget of the United States government,
the largest donor in the planet.