Power of Remittances

In our multicultural society, one of the growing trends I have observed is the practice of Remittances. A Remittance consists of the portion of income (ranging from 10-40% of gross earnings) sent back to the home country of a migrant to support family members. At the most basic level, the money from Remittances are spent on food, shelter, clothing, and basic necessities. There are also benefits in that overall poverty is reduced, and families are encouraged to promote health and education.

I found a very good link to articles that reference many success stories of Remittances, particularly as an alternative to Foreign Direct Investment. This is an essential practice which has proven its worth and suitability for developing countries.
http://www.ime.gob.mx/investigaciones/remesas/remesas8.pdf

This is a perfect international example to show the direct relationship between Thrift and Wealth. The practices of Thrift enable the foreign employee to set aside a sizable portion of their income. In turn, this income is combined and consolidated into an amount that can be forwarded on to the people or areas in most need. One might liken this to a forced saving or an internal form of taxation.

Transferring the money from a prosperous economy to a developing economy also provides better use of capital - building wealth more quickly. The $10,000 made during a month on the oil rigs of Fort MacMurray, Alberta matches closely to the annual income of a university educated professional working in Manila, Phillipines, essentially doubling the purchasing power of a family. Imagine the opportunities if your household income was doubled by the contributions of a more fortunate and generous relative.

Remittances can work within our economy among our own culture. What would it take for us to set aside 20-30% of our income towards a capital pool to support the less fortunate within our own families. With interest rates of unsecured credit cards and payday loans approaching 30%, the better (and safer) alternative is to develop this capital independently to avoid the vicious cycle of high external debt and bankruptcy.

If we learn the lessons from our friends and neighbors in other lands, prosperity will come from their example.