Remittance: Transfer of Funds

A comprehensive overview of remittance, the process of transferring money from one entity to another, often across borders. This article explores types, examples, historical context, and related terminology.

Remittance refers to the process of transferring money from one party to another, typically done by migrants to their home country. This financial action can occur domestically but is more commonly associated with international transfer where individuals send part of their earnings to family members or dependents in their home country.

Types of Remittance

Personal Remittance

Personal remittance is the common form involving individuals sending money to family members or friends. This is essential for the livelihood of many families globally, especially in developing countries.

Business Remittance

Businesses also engage in remittance when transferring money for purposes such as paying for services, wages, or supplier invoices across different countries.

Online Remittance

With technological advancements, online remittance platforms have become prominent, like PayPal, TransferWise (now Wise), and others, providing fast and cost-effective services.

Examples of Remittance

• An immigrant in the US sending part of their paycheck to their family in Mexico.
• A company paying freelance workers in various countries through international bank transfers.

Historical Context

The practice of remittance has been around for centuries and has evolved with transportation and communication technologies. Initially handled through postal orders or cash couriers, the advent of the internet and digital banking revolutionized how money is transferred across borders.

Applicability

Remittances play a critical role in the global economy, particularly for developing countries where these transfers often constitute a significant portion of the national GDP. They contribute to reducing poverty and fostering development.

Comparison to Related Terms

• Transfer of Funds (General term for moving money between accounts which can be both domestic and international).
• Wire Transfer (A method of electronic funds transfer from one person or institution to another).
• Cryptocurrency Transfer (Transactions involving digital currencies like Bitcoin).

FAQs

What are the costs associated with remittance?

Costs vary greatly depending on the service provider, the amount, and the destination country. Fees can include transfer fees, foreign exchange margins, and others.

How long does an international remittance take?

The duration can vary from a few minutes to several days, depending on the method used.

Are there any regulations on remittance?

Yes, remittances are subject to international and domestic regulations to prevent illegal activities such as money laundering and fraud.

Summary

Remittance is a pivotal element in global finance, enabling economic support to cross borders and aiding the development of recipient countries. As technology continues to evolve, the mechanisms for sending and receiving remittances are expected to become even more efficient and widespread.

References

• World Bank. “Migration and Remittances.” World Bank, 2023.
• Orozco, Manuel. “Understanding the Continuing Evolution of Global Remittances.” International Migration, 2012.