Funds transferred by people working in other countries to their home country for their families are known as remittances. This transferred money is usually the savings of the workers which they send to their families and thusdon’t impact the country’s economy directly. However looking from an indirect perspective, thismoney being spent for the purpose purchasing food, clothing and other expenditures in their home countrycan play a magnificent role in boosting economic growth in several ways as mentioned below.
You must be wondering that how in the world can a simple purchase or investment from foreign currency make a difference in the country’s economy. Well here is the answer:
- These funds can not only help individuals to pay for basic needs such as food, clothesand bills, but can also be used to make loans in order to appreciate investments if they are saved not spent; depending on the laws of movement of capital around the country.
- Banks can also establish branches all around the world giving the service of easier remittance transfers.
- The concept of remittance also shows that the migrants return to their home country with new business ideas to establish in their home country that can provide jobs that can reduce unemployment rate.
- The funds transferred electronically from one country to another keeps the money transfer companies in business and it can help the home country to purchase imports.
- The inflow of foreign currency can greatly contribute to the worth on home currency on international levels.
Besidesthe important role of remittances in economical growth, it is important to note that government has a huge role to play in utilization of these funds in best ways possible.