Remittance – Definition, what it is and concept

A remittance in general can be defined as sending money in cash, checks or transfers from one country to another.

Also a consignment can be understood as an international transfer of money, because it is sent from one person to another, it is international because to be a remittance the destiny of money must be different from the country from which it originated.

Undoubtedly, the entry of foreign exchange through remittances occupies a very important place, especially in underdeveloped countries, since in these countries it is where the greatest number of emigrants is located, who go out to reside and produce in other countries where they find better job opportunities.

Indeed, remittances occupy the second place in the income of money badge in these underdeveloped countries and are only surpassed by the entry of currency from international aid.

Therefore, countries that have a higher degree of political, social or economic instability are those that register the greatest remittance income, compared to countries that generally enjoy greater degree of stability

Why have remittances increased?

It turns out that both the technology and the means of communication and transport, have allowed an inter-connectivity of all countries of the world, so that the flow of people who they migrate from one country to another for different reasons, particularly for purposes of study, business and work.

In the same way the need for send money from one country to another, these money transfers take a role very important within the international economy, mostly in the economies they are in the process of development.

What should we know about remittances?

Actually, most remittances are sent by workers who have migrated to another country looking to find better job opportunities that generate a higher level of income.

Then, the income of foreign exchange that is produced by remittances helps to improve the quality of life of the relatives of these people, but also  contribute to the development Economic of the receiving country.

In addition, remittance money transfers are also used by people who do business, since in Some cases have to pay salaries of employees who are hired abroad or pay bills to partners or companies that are located abroad.

Advantages of Remittances

Remittances also have some advantages such as:

1. Increase currency income

The rise of Currency income in a country is very important, because it allows the type of change remains at an adequate price level, especially in countries underdeveloped; This implies that some stability in the exchange rate is achieved.

2.Reduction of poverty

Similarly, there is a reduction in poverty, especially because the people who receive remittances have more money to spend on medical and educational services. Investments are also increased especially in the construction market, for that reason employment opportunities are increased and living conditions in general are improved.

Disadvantages of remittances

They also have some disadvantages such as:

1. Stimulates the desire to work

Above all, in the family nuclei that have a considerable income from remittances, motivates them to no longer work, encouraging conformity and little interest in contributing to the productive system of the country.

2. Increase economic dependence

Especially in underdeveloped countries, a large percentage of GDP is made up of foreign exchange, which maintains the country’s growth rate. Therefore, if for some reason there is a decrease in remittance income, the country could be affected by its level of economic growth.

To end, we can affirm that remittances constitute an important component of Currency entry into the national accounts of any country, but in greater scale in underdeveloped countries or suffering from any type of political, social or economic instability; since this forces its inhabitants to migrate to another country looking to find better opportunities than in their country of origin can not find.