Migrant Workers Remittances: Building Futures and Forging Leadership Back Home Mohamed Abdinur Augsburg College

Augsburg University Idun Theses and Graduate Projects 4-7-2010 Migrant Workers Remittances: Building Futures and Forging Leadership Back Home Mohamed Abdinur Augsburg College Follow this and additional works at: https://idun.augsburg.edu/etd Part of the Leadership Studies Commons Recommended Citation Abdinur, Mohamed, "Migrant Workers Remittances: Building Futures and Forging Leadership Back Home" (2010). Theses and Graduate Projects. 840. https://idun.augsburg.edu/etd/840 This Open Access Thesis is brought to you for free and open access by Idun. It has been accepted for inclusion in Theses and Graduate Projects by an authorized administrator of Idun. For more information, please contact [email protected]. ,4-UGSBURG C-O L-L-B-G-E MASTER 0 ARTS IN LEADERSHIP M hamed Abdinur Migrant Workers Remittances: Building Futures and Forging Leadership Back Home 2010 Augsbarg Coilege Lindeil Library Minneapolis, MN 55454 Master of Arts in Leadership MIGRANT WORKERS REMITT ANCES: BUILDING FUTURES AND FORGING LEADERSHIP BACK HOME MOHAMED ABDINUR Submitted in partial fulfillment of the Requirement for the degree of Master of Art in Leadership AUGSBURG COLLEGE MINNEAPOLIS, MINNESOTA April 2010 Remittances ii MASTER OF ARTS IN LEADERSHIP AUGSBURG COLLEGE MINNEAPOLIS, MINNESOTA CERTIFICATE OF AJ'PROV AL This is to certify that the Non-thesis Project of Mohamed Abdinur Has been approved by the review cornrnittee for the Non-thesis Project for the Master of Arts in Leadership degree Date Non-thesis Completed: '//4o>0 Committee: p/, m, m Adviser ')/'l'-" /]) t-" Remittances iii ABSTRACT MIGRANT WORKERS REMITT ANCES: BUILDING FUTURES AND FORGING LEADERSHIP BACK HOME MOHAMED ABDINUR APRIL 2010 Thesis Leadership application project 2Non-thesis (ML 597) Project For many developing countries, remittances from migrant workers are larger, more stable and outpace foreign direct investments and overseas development aid as a source of development funds. In many developing countries, external sources of finance, particularly remittances, are imperative to carry out poverty alleviation strategies as well as local economic development, given the low rate of domestic savings and high governrnent expenditures. Remittances appear to be very promising as developing countries continue the search for additional sources of income to achieve the United Nations Millennium Development Goals. With the benefits of the remittances that migrant workers send back home, overseas migration also brought untold stories of hardships and sufferings to countless migrant workers who often fall victims to racial Remittances iv discrimination and inhumane working conditions. This paper will explain the factors that induce people to work abroad and also examine the uses of the remittances at home: specifically, the reasons why migrant workers send money, to whom these remittances are sent, and how remittances stimulate leadership both among the migrants away and the recipients at home. It was found that remittances have caused improvements in the lives of the recipients and also contributed to the economic developments in the developing countries. Remittances also served as a catalyst to migrant workers to develop their leadership skills and experience. However, with the continuous advancement of globalization, additional studies need to be conducted to determine the impact of remittances to the economies of the developing countries. Remittances v TABLE OF CONTENTS I. Introduction 1 Context 1 Remittances outlook 2009-2011. 2 Benefits of remittances 3 II. A Review of the Literature 5 Globalization and Remittartces 5 Push-Pull theory 6 Brain Drain and Remittance 7 Definition of Remittance 8 Mechanism and ways of sending Remittances 9 Hawala Economic Impact and uses of Remittances III. Methodology 21 IV. Results and Discussions House hold and Remittances. Skilled and non-skilled workers V. Conclusion Developing Countries and Remittances Impact of Remittances References 32 Remittances 1 Introduction The economic and political uncertainties in the developing countries have pushed people to migrate to developed countries. Development in other countries served as the pull factors that attract people from developing countries to migrate and look for jobs to improve their lives. The advent of globalization has ushered in this phenomenon of overseas migration. Globalization enables the free transfer of goods and services from the developing to the developed countries. Among these worldwide transfers are remittances of overseas migrant workers. Glushchenko (2005) pointed out that "money transfers by migrants are neither entirely new nor unexpected in international financial follows; what is new is the scale and significance of such transfer in the economies of developing countries"(p.28). Indeed, many developing countries heavily depend on these transfers. Therefore, remittances have kept many developing countries' economies afloat. They have played a critical part in their economic growth and survival. In many developing countries, external sources of finance, particularly remittances, are imperative to carry out poverty alleviation strategies as well as local economic development, given the low rate of domestic savings and high governrnent expenditures. The World Bank (2008) estimates that remittances totaled $443 billion in 2008(of which $338 billion went to developing countries) involving some 192 million migrants or 3.0% of the world population. Remittances exceeded foreign development assistance and are rapidly approaching foreign direct investment flows in terms of value. Worldwide annual remittances are on the rise and are primarily sent from the developed to the Remittances 2 developing countries. The World Bank (2008) also confirms that the Asian countries comprise the biggest chunk of remittance recipients. India with US$45 billion was the top recipient in 2008, followed by China with US$34 billion and the Philippines with US$18 billion of remittances received annually. Table 1: Outlook for remittance flows to developing countries, 2009-11 S billion .?006 2007 2008e 2009f 2010f 2011f Developing 235 289 338 317 322 334 countries East Asia 58 71 86 85 85 89 and Pacific Europe and 37 51 58 49 51 53 Central Asia Latin 59 63 65 58 59 61 America and Caribbean Middle-East 26 31 35 32 33 34 and North Africa South Asia 43 54 73 72 73 76 Sub- 13 19 21 21 21 22 Saharan Africa Low-income 20 25 32 32 33 34 countries Middle- 215 265 306 285 289 300 income countries World 317 385 444 420 425 441 Growth rate (%) Developing 1E.3% 22.9% 16.7% -6.1% 1.4% 3.9% countries East Asia 14.1% 23.8% 20.8% -1.5% 0.8% 3. 7% and Pacific Europe and 24.1% 36.0% 13.8% -14.7% 2. 7% 5.0% Central Asia Remittances 3 Latin 18.1% 6.8% 2.3% i-9.6% 0.5% 3.5% America and Caribbean Middle-East 4.6% 20.1% 10.6% -7.2% 1.5% 3.3% and North Africa South Asia 25.3% 27.1% 35.6% -1.8% 1.7% 4.1% Sub- 34.7% 47.6% 13.4% -2.9% 1.8% 3.9% Saharan Africa Low-income 23.9% 23.4% 28.3% 0.7% 2.6% 4.6% countries Middle- 17.8% 22.9% 15.6% -6.8% 1.2% 3.8% income countries WOrld 15.3% 21.3% 15.3% -5.3% 1.2% 3. 7% Ratha (2009) argued that "remittances are proving to be one of the more resilient pieces of the global economy in the downturn, and will likely play a large role in the economic development and recovery of many poor countries" Therefore, the plienomenon of overseas migration has helped some governments of developing countries survive economic crisis and also helped the families of the migrant workers in improving their lives. With the benefits of the remittances that migrant workers have sent back home, overseas migration also brings untold stories of hardships and sufferings to countless migrant workers who often fall victims to racial discrimination and inhumane working conditions. Given the numerous populations of migrant workers in the developed countries and the prominence of remittances in the economic processes of both the sending and the receiving countries, this paper explored the factors that induced people to work abroad. It also examined the uses of the remittances being sent by migrant workers. Specifically, Remittances 4 this study focused on the reasons why migrant workers send money, to whom these remittances were sent and how remittances stimulated leadership both among the migrants and the recipients. Remittances 5 A Review of the Literature Many civil society groups, such as the Center for Migrant Advocacy Philippines, have made numerous studies on migration and development as well as on the economic impact of remittances that come with the widespread phenomenon of migration. The widespread transfer of goods including labor has been largely due to the advent of globalization. A study of the Center for Migrant Advocacy Philippines (2006), explained that: Globalization is synonymous to the phenomenon of acceleration. For the past 25 years rapid changes have affected political, economic and social developments. Acceleration is seen in vast technological changes, media revolution, global economic integration and massive changes in production systems and labor markets. All of these rapid increases in transnational flow of capital, trade and technology have made effects on international migration as well. Global economic restructuring has led not only to disruption in less developed or developing economies, it has also been a factor in unemployment, wage decline or job insecurity in dominant market economies. Heavily indebted countries, like the Philippines have resorted to labor export to help them stay afloat (p. 4). The Center for Migrant Advocacy Philippines (2006), also added that the current age of globalization is characterized by significant advances in technology, transportation and communication enabling the growing interdependence and integration of national economies and opening of markets. Remittances 6 Current views on migration are based on a theory called "The Push-Pull Theory of Migration" that explicitly explains the reasons why people are migrating abroad.

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