Each year, migrants from ACP countries send home millions of euros, mainly to help their family and, to a lesser extent, to fund profit-making ventures, especially in the field of agriculture. There is a pressing need to improve methods for transferring the funds and to encourage productive investment.

The figures alone speak volumes. In the 2008-2013 period, EU development aid to ACP countries channelled through the 10th European Development Fund (EDF) will reach a total of €22.98 billion, or €4.6 billion per year. By comparison, migrant remittances are now estimated to exceed €20 billion per year. These transfers represent a massive sum whose significance has long been overlooked, even though they play a major role in the economy of much of the developing world. For countries with large numbers of nationals living abroad, remittance flows account for a substantial share of the gross national product: 60% for Lesotho, almost one-third for some Caribbean and Pacific Islands (31% for Tonga) and 25 to 30% for Cape Verde. They are equal to 346% of state development aid in Comoros and almost 200% in Kenya, according to a study by the African Development Bank.

The main routes for remittance flows are from Western Europe to Africa, from North America to the Caribbean and from Australia and New Zealand to the Pacific Islands. But nearly 40% of all transfers are South-South: for example, from Botswana or South Africa to other African countries. World Bank figures show that the sum of such remittances, averaging €100 to €300 per person per year, has tripled over the past 15 years.

Opinions are divided on the impact of these revenues. Some 80% is spent on consumer requirements, 15% or more - depending on the country - goes to building infrastructures such as health centres, schools and mosques, while a scant 1% or so is invested in profit-making ventures. There can be no doubt whatsoever that this money improves the lives of the poor, especially in rural areas, and that it acts as a safety net in times of poor harvests or health problems. It also helps ensure better access to schools, especially for girls. "These investments are crucial for well-being and strengthen human capital", observed Flore Guibert, a researcher at IRD, the French development research institute.

The dependency trap

But some critics claim that these flows are counterproductive when it comes to stimulating work and agricultural productivity in recipient countries. In the small Caribbean States of Anguilla and Barbuda, migrant transfers enable islanders to live in reasonable comfort without having to bother about developing agriculture, which continues to decline.

Remittance flows also create a strong state of dependency for many families. It encourages them to save up in order to send other young members off, who in turn will send home money that they have painstakingly earned and set aside, at the cost of great sacrifice. Knowing that they have become crucial to the support of their relatives, these exiles must abandon all hope of ever returning to their country of origin. The result is a vicious circle all too familiar in the Sahelian countries, where emigration has a long tradition.

"Seen as a whole, remittances enable those left at home to emerge from extreme poverty," said Jean-Pierre Garson, a migration specialist at the Organisation for Economic Co-operation and Development (OECD). "But their impact on development is less clear, especially if one considers the loss of manpower that emigration entails for these countries". That is a major problem in rural areas affected by mass emigration, where the absence of men is seriously hampering agricultural output.

So how can this money be turned into a real development tool for those who stay behind and, in a wider sense, for the South as a whole? The issue has taken on a new urgency in recent times. The reasons for this renewed interest are many - a desire to enable people to become self-reliant and therefore reduce immigration, coupled with a wish to better control international money transfers and avoid both money laundering and the funding of terrorist networks.

Facilitating transfers

The first stage in any strategy will involve formalising transfers so as to be able to trace and record them but also lower their cost and make them more secure. At present, remittances rarely pass through official banking channels, especially in Africa. Most payments are handled by money transfer agencies operating in many places, whose service is safe and swift but costly, with commission ranging from 10 to 15% of the sum sent. A recent study by the International Fund for Agriculture and Development (IFAD) found that 70% of remittance flows to West Africa pass through these agencies. Emigrants from the Comoros and Mali tend to favour informal and sometimes insecure channels, via traders, a system made easier by use of the mobile phone.

Measures likely to lead to an increase in migrant transfers include encouraging partnerships between banks in the country of origin and those in the host country, easing rules and facilitating transactions. Ethiopia has shown what can be achieved by allowing customers to open accounts in foreign currencies. As a result, banks have set up systems that enable migrants to send money home by making a simple telephone call.

One important goal is to provide easier access for remittances to rural areas and to enable small sums to be sent. This can be done via networks of cooperatives and microfinance institutes. Here too, mobile phones facilitate transactions.

In an effort to find innovative solutions for rural areas, IFAD, working together with other organisations, launched a call for proposals in June 2007, backed by a €7 million fund. Diversifying transfer systems also lowers the cost of transactions, as is already happening in the Caribbean.

Migrants want banks to offer them attractive interest rates, guarantees and above all loans so they can launch larger ventures. But money alone will not generate the kind of structuring and sustainable venture that creates jobs and wealth. It is crucial that those behind the initiative receive support in the host country and that the people working in the venture back home, who may not be highly motivated, receive proper help and training. A growing number of migrants' associations, NGOs and development organisations are currently working together in order to encourage the launching and follow-up of viable projects. Local authorities can also play a role by offering an economic, social and political environment that is both favourable and stable.

Agricultural projects: a rare commodity

Agricultural projects and initiatives to support family farming are for the time being few in most ACP countries and those that do exist are mostly modest in their scope. Notable exceptions include certain islands in the Pacific and, more recently, the Caribbean where, once basic needs have been met and building completed, migrants are investing in ventures based on agriculture, fishing and rural tourism. In West Africa, such initiatives are virtually nonexistent, aside from a few irrigation plants set up in Malian and Senegalese villages on the banks of the Senegal River. Elsewhere, in Kenya for example, migrants tend to prefer investing in small-scale agrifood enterprises. However, with the help of specialists, a few projects are slowly beginning to get under way. In Benin, migrants from one of the country's eastern regions who are keen to improve food security have organised and trained women to buy and store crops at harvest time so as to eliminate speculation by traders. In contrast with previous practice, the migrants now exercise strict control over the sums injected into these activities, to avoid their being squandered.

A word of caution comes from various international agencies that have stepped up studies into this sector in recent years. They warn that funds sent home as remittances should neither take the place of state development aid nor be used to compensate for inadequate measures to foster development on the part of local authorities.

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