Remittances are funds transferred by migrants to their home country. Estimated amount of about $200 billion are transferred by migrant workers every year. These funds are counted as sizeable part of gross domestic product. Economy of developing countries, especially in western hemisphere, is incredibly dependent upon remittances.
Migrant workers who work abroad mostly belong to poor families who left their homes in order to find jobs as developing countries are facing a serious problem of unemployment and poverty.
The funds transferred to these poor families help them to meet the ends. On country level, by contributing a sizeable part to the GDP, remittance helps governments to alleviate poverty and provide basic necessities to poor people. This process of contribution takes place by the inflow of foreign capital throughout the country. Foreign funds which are saved in banks can be given as loans to establish small scale businesses that can eventually lift up the lower class of the society. This private fund goes directly to the hands of poor without any intervention of any government or private institution. The consumption caused by remittances boosts the economic cycle, helping economy to grow as a whole with improved livelihood and welfare to the poor families.
Although, the funds sent by migrants can provide a better livelihood to individuals’ family but such type of economic activity causes short-term stability and prosperity. These funds need to be utilized wisely by saving and investments by both individuals and governments in order to achieve sustainable economic growth.