Do Remittances Supplement South Asian Development?

Abstract

Remittance inflows have been recorded as the second major external source of finance after ODA and an important source of funds for growth in South Asian countries. This review article examines the interaction between remittances and development in South Asia. Most receiving countries have experienced a major increase in remittance inflows and increase in growth of their GDP. The migration-development nexus is drawn, however, generally on the contribution of migrants’ remittances to the GDP of receiving countries. While this contribution could no way be undermined, the calculation of this contribution is largely done by excluding some significant factors such as loan taken to finance migration; opportunity cost; remittances fee; risks and life lost. There are arguments that the entire amount of remittances channeled into South Asian countries does not go to development. Though there is huge potential to contribute to the development, South Asia did not fully benefit from migrant remittances. This may be because of the fact that channelling remittances, uses of it and lack of financial sector development have thwarted the potential.