Remittances to rise in the Middle East amid inflationary challenges

Cost of living and currency values influence the frequency of money transfers, a Western Union survey finds

A money exchange in Beirut. Nearly three-quarters of consumers in the Middle East are transferring more money because of economic challenges. Reuters
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Three out of four people in the Middle East who transfer money to loved ones back home expect their volume of remittances to increase over the next 12 months amid rising inflationary challenges for households, according to a survey by Western Union.

About 66 per cent of consumers in the region send and/or receive money once a month or more, said Western Union, the world's second-largest money transfer company after PayPal.

Nearly three-quarters of respondents said they are transferring more money than previous years because of economic challenges such as the global higher cost of living, while 79 per cent of receiving consumers said they intend to ask for more money.

The survey polled 30,600 consumers in 20 countries across the Middle East, Africa and Asia Pacific between October 31 and January 10.

“We all felt a strong sense of relief as global economies went into post-pandemic recovery,” said Jean Claude Farah, president of Middle East and Asia Pacific at Western Union.

“However, macroeconomic conditions have since made the daily lives of people more challenging. Remittances are typically resilient because of their purpose.”

Remittance flows to low- and middle-income countries are estimated to have grown by 5 per cent on an annual basis to $626 billion in 2022, the World Bank said in November.

However, the increase in remittances was lower than the 10.2 per cent growth recorded in 2021, the Washington-based lender said in its migration and development brief.

Global remittance flows to poor and middle-income countries increased to $589 billion in 2021, according to an earlier World Bank report.

The five most common destinations for remittances are India, China, Mexico, the Philippines and Egypt.

The reopening of economies as the Covid-19 pandemic eased supported migrants’ employment and their ability to continue helping their families in their home countries. However, rising prices adversely affected migrants’ real incomes, the report said.

While family support was identified as the main purpose for remittances, consumers in the Middle East said transfers also played a strong role in future financial planning, according to the Western Union survey.

Consumers ranked paying for education costs as the second-highest reason for remitting money, followed by supporting business interests at home and saving for the future.

Together with the cost of living, consumers said they keep track of the performance of their home currencies.

About 70 per cent of respondents in the Middle East send more money when the currency value falls in their country, the survey found.

Criteria such as the best exchange rate, the lowest or no charges paid by receivers and speed of transfers determine which money transfer company consumers use, according to Western Union.

Forty-four per cent of respondents also want to use digital-only money transfer solutions, while 19 per cent prefer in-person channels, the survey found.

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Of those who choose not to use digital transfer services, trust and customer experience were identified as top barriers, along with a preference for face-to-face interaction, among both senders and receivers.

However, in the future, half of consumers want a choice in platforms when transferring or collecting money.

Thirty-six per cent want to be able to use digital channels from end-to-end, while 13 per cent would still want to send and/or receive through in-person platforms only, the survey said.

When asked how they would like remittances to evolve, respondents cited greater convenience, better planning and inclusivity.

About 74 per cent of senders and receivers said they are frustrated with repetitive and time-consuming paperwork for remittances, while 78 per cent would prefer facial recognition or biometric technology for instant and reliable registration, according to Western Union.

Meanwhile, 77 per cent of receivers want money to be disbursed on a prepaid card or e-wallet that does not require a bank account, while 82 per cent want the option of receiving in different currencies.

Nearly eight in 10 consumers (79 per cent) said they are eager to use integrated super apps, which allow them to manage remittances alongside other financial products with ease, the survey showed.

Updated: March 23, 2023, 4:30 AM