07 Aug 2023
Had it not been for remittances to low- to middle-income countries (LMICs), many of the countries would have defaulted on their international financial obligations.
This is how important remittances are for developing countries.
A developing African country, the Gambia is no exception to this. According to a report by USAID, the Gambia is the smallest country in mainland Africa. It is a West African country with just over 2 million population. About 10th of the Gambia’s entire population lives in foreign countries to earn a living and send money to Gambia to extend financial support to their families back home.
Remittances are typically understood as funds sent by an expatriate from abroad to their families for financial support.
But there is a lot more than meets the eye about remittances.
Do you know in which ways remittances help a country’s economy? What is the impact of remittances on the Gambian economy?
Well, continue reading to know the answers.
When it comes to understanding remittances, you will see two terms running parallel to each other – migrants and remittances.
Migrants travel to foreign countries to earn a living and for employment purposes.
Remittances are the funds migrants send back to their native countries from abroad.
There is no single country in the world that does not host migrants. Minor or major, the presence of migrants can be founded everywhere.
But the fact remains that the flow of migration is typically from developing to developed countries.
Let’s take a look at the number of global migrants and global remittances.
Before jumping to the advantages of remittances and how they help boost economies, let’s take a look at the Gambian economy and the remittances the Gambia received most recently.
These statistics indicate that the Gambians suffer financially and thus travel to developed countries for better work and to support their families back home through a money transfer to Gambia regularly.
Find out more about getting jobs abroad as a Gambian expatriate below:
Job Opportunities For The Gambian Expatriates Abroad.
Now let’s see how remittances impact the Gambian economy.
Remittances to the Gambia boost the country’s economy in the following few ways.
One of the biggest advantages for the country that receives remittances is that these add to the recipient country’s foreign exchange reserves. These reserves are used to pay for goods, products, services, etc., exported from other countries.
The recipients of remittances in the Gambia utilise a major chunk of the amount they receive for investments in different areas. These investments and their types are subject to the volume of money being considered for investment.
Mostly the families receiving remittances invest in properties. Since property worldwide is an expensive asset, a majority cannot afford it. Therefore, the people in the Gambia normally save enough to purchase properties.
A majority of the Gambian people receiving remittances initiate constructions on properties they purchase for different purposes. This creates work opportunities for several associated industries like plumbing, sanitary, electricity, etc.
Many people start small businesses, which create job opportunities for the locals. The scale of business is directly proportional to the volume of investment. A larger amount leads to the establishment of big businesses resulting in multiple work opportunities.
These are some of the purposes that are fulfilled as a result of an online money transfer to Gambia of remittances by the Gambian expatriates.
The frequency of these transfers depends on the financial viability of the remitter.
Let’s take a look at some of the facts about the global remittances you have probably not thought about before!
These are some of the facts about global remittances that normally remain away from focus and attention.
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What are Remittances, and Why are They Important for The Gambia's Economy?
Remittances refer to the transfer of money, often by a foreign worker, to an individual in their home country. In The Gambia's context, remittances play a crucial role as they constitute a significant portion of the country's GDP. They are vital in supporting household incomes, enhancing foreign currency reserves, stabilising the financial system, and contributing to economic growth.
How Do Remittances Contribute to Economic Growth in The Gambia?
Remittances can stimulate economic growth in The Gambia by injecting more money into the economy, increasing consumer spending, and facilitating investment in education, healthcare, and small businesses. This additional flow of funds helps to create jobs, improve living standards and can also be a catalyst for financial inclusion and economic development.
Are There Any Risks or Downsides to Relying on Remittances in The Gambia's Economy?
While remittances offer numerous benefits, over-reliance on them can also present risks. The economy may become too dependent on these inflows, making it vulnerable to changes in global economic conditions or migration policies. Additionally, an emphasis on remittances might divert attention and resources away from developing other vital sectors of the economy, leading to imbalances and potential instability.
How Might Government Policies Influence the Role of Remittances in The Gambia's Economic Development?
Government policies can have a substantial impact on remittances and their role in the economy. By implementing favourable regulations, reducing transfer costs, and encouraging formal remittance channels, the government can maximise the positive effects of remittances. Conversely, restrictive policies or high taxation on remittances may deter the flow of funds, limiting the potential economic upliftment.
What are the Expectations for the Future of Remittances in The Gambia, Given Global Trends and Economic Conditions?
The future of remittances in The Gambia depends on various factors, including global economic conditions, migration trends, and domestic policies. An increase in the Gambian diaspora, favourable policies, and global economic recovery may lead to an uptick in remittances. However, challenges such as global recessions, changes in immigration laws, or domestic instability might negatively affect the remittance inflows. Continuous monitoring and adaptability to the changing economic landscape will be essential to harnessing the full potential of remittances in The Gambia's economy.
Resources
(Remittances Grow 5% in 2022, Despite Global Headwinds (worldbank.org)
(Interactive World Migration Report 2022 (iom.int)
(GDP (current US$) - Gambia, The | Data (worldbank.org)
(GDP per capita (current US$) - Gambia, The | Data (worldbank.org)
(Gambia: Diaspora Remittance in 2022 Stands At U.S.$712 Million - allAfrica.com)
