Improving health and education

Remittances encourage investment in education and health, especially for children. New research suggests they can help families break the cycle of poverty and improve living conditions for future generations.

The Inter-American Development Bank (IADB) estimates remittance flows to Latin American and Caribbean countries at over US$45 billion in 2004. In 2005 they will have reached US$55 billion - higher than foreign direct investment and overseas development assistance to the region. The magnitude of such transfers raises important questions about their development impact and how national governments and the international community can maximise their potential.

Remittances may improve education and health as they allow families to supplement their limited incomes and invest in the future. Examining the impact of remittances separately from other effects of migration is difficult, however. The possibility of emigrating, and remittance income itself, may affect people's work and schooling decisions. Migration may disrupt family life and influence children's performance at school. Migrants may get better information about health care that they then share with their families back home.

An increasing number of studies show that the overall effect of remittances on education and health is positive.

Evidence indicates that children from recipient households stay in school longer:

• In El Salvador, US$100 of remittance income lowers the probability of children leaving school by 54 percent in urban areas.
• In the Philippines, a 10 percent rise in household income through remittances leads to a proportional increase in enrolment rates among children aged 17 to 21.
• Across Mexican rural municipalities, illiteracy among children aged 6 to 14 falls by three percent when the number of households receiving remittances rises by one percent.

Remittances play an important role if the public health care system is unable to provide universal health insurance or adequate treatment and preventative care. Studies in Mexico show that:

• An additional peso in remittance transfers raises households' health care expenditure by between 6 and 9 centavos.
• Infant mortality falls and birth weight among Mexican children improves with remittances. A one percent rise in the portion of households receiving remittances reduces by 1.2 lives the number of children who die in their first year.
• Remittances may reduce infant mortality by improving housing conditions, allowing mothers to stay home and care for the newborn baby, or by improving access to public services such as drinking water.

What can the international community and national governments do to strengthen the developmental impact of remittances? The IADB and other institutions recommend:

• lowering the cost of sending remittances home by increasing competition among service providers, improving payment system infrastructure and removing regulatory barriers
• promoting financial democracy by encouraging greater use of the banking system
• promoting greater remittance flows by avoiding taxation and overregulation
• enhancing their local development impact by supporting hometown associations (groups of migrants from the same community)
• improving housing conditions by offering mortgage loans to migrants
• encouraging banks to offer new financial products to migrant families, such as health insurance policies
• working with hometown associations to improve education and health infrastructure.

A consensus is emerging among international organisations and national governments to work in these areas. Facilitating remittance flows should allow recipient families worldwide to offer their children a brighter future.

The opinions expressed in this article do not necessarily reflect the views of the IADB or its member countries.

Ernesto López Córdova
Integration and Regional Programs Department, Inter-American Development Bank, Stop W608, Washington, DC 20577, USA
joselc@iadb.org

See also

International Remittances and Development: Existing Evidence, Policies and Recommendations, paper presented by Ernesto López Córdova and Alexandra Olmedo at the G-20 Workshop on Demographic Challenges and Migration, Sydney, Australia, August 2005

Beyond Small Change: Making Migrant Remittances Count, Inter-American Development Bank: Washington DC, edited by Donald F. Terry and Steven R. Wilson, 2005

IADB and World Bank figures in this issue of id21 insights differ because the IADB reports remittance flows from more countries in Latin America and the Caribbean than the World Bank.

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