Lack of digital infrastructure risks leaving millions of rural families in poverty

Lack of digital infrastructure risks leaving millions of rural families in poverty

In spite of the global economic recession due to the pandemic, migrants continued to send money home to their families, with remittances in 2020 reaching $540 billion – a drop of only 1.6 percent compared to the previous year

Despite a massive increase in migrants sending money home via digital transfers due to the COVID-19 pandemic, millions of their rural family members struggle to access mobile banking services which could help lift them out of poverty. The President of the UN’s International Fund for Agricultural Development (IFAD) called for urgent investments in digital infrastructure and mobile services in developing countries to ensure rural families are not left behind.

Migrants have shown their continued commitment to their families and communities during the pandemic with more remittances transfers made digitally than ever before. Unfortunately, families in rural and remote areas – where remittances are a true lifeline – the battle to access cash outlets or even more convenient alternatives such as mobile money accounts. Governments and the private sector need to urgently invest in rural digital infrastructure to address this,” said Gilbert F. Houngbo, President of IFAD, speaking on the International Day of Family Remittances.

Mobile remittances increased by 65 percent last year, rising to US$12.7 billion. The change was driven by a switch from cash due to lockdowns that limited informal channels and social distancing rules for senders and recipients alike. In spite of the global economic recession due to the pandemic, migrants continued to send money home to their families, with remittances in 2020 reaching $540 billion – a drop of only 1.6 percent compared to the previous year.

However, in many countries, people living in remote rural areas have sparse local access to banking services or limited mobile connectivity. In addition, there is limited availability of agents offering mobile money services such as payouts in cash. Often mobile money service providers are only located in urban centers. This means millions of poor, rural people have to travel long distances to towns or cities, often at significant cost, to receive the cash sent digitally by their migrant family members.

Digital transfers are cheaper than traditional cash transfers, and mobile banking services also provide the opportunity for migrants and their families in their countries of origin to access useful and affordable financial products to better manage their finances, including savings, loans, and insurance.

Across the globe, 200 million migrants regularly send money to their 800 million relatives. This plays a crucial role in their lives and livelihoods. Almost half of these families live in rural areas of developing countries, where poverty and hunger are highest. Families use the funds sent by migrant workers to cover basic household needs such as food, housing, school, and medical bills, as well as to start small businesses. These resources can often transform both families and local communities.

While the pandemic accelerated the adoption of digital transfers and mobile money accounts, it also highlighted pervasive gender inequality. Research shows that women are 33 percent less likely than men to have a mobile money account. We must focus on closing the gap by addressing the barriers that prevent women from accessing and using mobile financial services,” said Pedro de Vasconcelos, the head of IFAD’s Financing Facility for Remittances. 

Since March 2020, IFAD has led a global Remittances Community Task Force comprised of 41 international organizations, inter-governmental bodies, industry and private sector groups, and networks of diaspora organizations to respond to the impact of the COVID-19 pandemic on the one billion people directly involved in remittances.

 

 

Lack of digital infrastructure risks leaving millions of rural families in poverty

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