The importance of migration and sustainable development has been recognized more and more. Increasingly, countries of origin and destination are looking to maximize the benefits of migration to sustainable development. The general consensus is that effective policies will strengthen the migrants’ assets to the benefit of both origin and destination countries. Such policies often focus on remittances, entrepreneurship and diaspora engagement, though these are not the only approaches to mobilize migrants’ assets.

Remittances

Migrant remittances are now the largest source of external financing for low- and middle-income countries, with the exception of China (World Bank, 2021). However, the value of remittances is highly unstable. Their amount depends on a variety of factors that are not under the control of migrants. For example, flows of remittances declined in 2020 due to the COVID-19 pandemic (World Bank Global Knowledge Partnership on Migration and Development [KNOMAD], 2021). Unemployment or economic crisis in the destination countries can also affect the amount of money sent home (Ellerman, 2003).

Economic remittances mainly take two forms. First, collective remittances are monies that migrant associations send back to their country of origin or directly into local communities to support public and/or private initiatives. Collective remittances are used for different community initiatives in origin countries. Associations of migrants often send money to support local public initiatives, cultural and religious activities, and also to invest in the development of businesses and industries that resemble the work they do in their destination country (Ellerman, 2003).

Second, family remittances are savings that migrants send back in order to support their family members who remained behind. This type of remittance is often a lifeline for many migrant households, as they sometimes represent the only income for migrant families in origin countries. Most family remittances are spent on housing and food, which can reduce poverty and guarantee minimum subsistence levels. Because only a limited part of family remittances tends to be spent on direct investments for starting up new businesses, remittances most often reduce poverty rather than directly generate economic development (Kuznetsov, 2006).

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Source

IOM, 2012.

However, in other instances remittances can also be used as monetary support towards health care and education, two key sectors specifically related to development. In these cases, remittances fill in for social expenditure, sometimes replacing State support as the monies are used to access services not provided by the government in countries of origin. It is one of the main responsibilities of States to design policies and strategies for managing schools and hospitals, as well as ensuring universal access to them. Relying solely on remittances to increase education as well as to provide access to health, without equal public investment, shifts the responsibility of development from States to migrants, from public actors to individuals.

Remittances can also contribute to building resilience to environmental change impacts on livelihoods. At the household level, remittances can cover basic needs during periods of environmental stress, when crops and livestock may have been lost. In the longer term, remittances enable agricultural diversification and business ventures. At the community level, remittances can enable investment in community-based resilience projects such as water-harvesting infrastructure (see Managing environmental migration).

In addition to economic remittances, migrants also transfer norms and attitudes. These are called social remittances which can have profound impacts on gender equality and overall social development in origin countries (see Gender and remittances). Further, digital innovation is transforming the way knowledge and ideas are being transferred to origin countries. This also applies to economic remittances via online transfer. As such, training and education programmes on new technological advancements can involve migrants directly stimulating the flow of remittances – economic and otherwise – into countries of origin (Dahlman, 2017). Policymakers in both developed and developing countries can boost the positive effects of innovation on sustainable development through funding research, education and training programmes on technology.

Policy Approaches
Maximizing the development potential of remittances
  • Provide sufficient State support for housing, food and social security services so that people do not have to rely on remittances for basic necessities.
  • Provide training and support to encourage an optimized use of remittances.
  • Establish and maintain adequate financial and telecommunications systems to allow for the easy flow of remittances.
  • Inform migrants on whether formal channels for remittances are working or not. If they are not, provide migrants with alternatives.
  • Reduce the global average cost of sending remittances to less than 3 per cent of the transaction cost. One way to do so is by requesting that money-transfer companies lower the cost of remittances.
  • Create policies to incentivize savings and investment through coordination with local banks and credit unions. Such incentives can include, for instance, authorizing foreign currency accounts for the deposit of remittances, or channelling individual remittances into microfinance to start up new businesses.
  • Match community remittances with public investments in basic infrastructure such as telecommunications, physical infrastructure, public education and public health systems.
  • In the contexts of disaster and post-disaster recovery, adopt a zero-fee policy or significant reduction of transfer fees.
Good Practice
Mexico’s “three-for-one programme”

In some Mexican states, such as Zacatecas and Guanajuato, the local governments have matched associations’ donations with a two-for-one programme, and at the municipal level, a three-for-one match. These programmes sponsor local public goods or small-scale infrastructures, such as for example the construction of schools, parks and roads.

Other three-for-one programmes have been more ambitious, with local governments matching donations for the creation of specific businesses, in which the partnership between public and private actors have ensured the creation of firms that have boosted local development. The state of Guanajuato, for example, has provided legal, administrative and technical advice for the establishment of 21 local firms created with investments from Mexican migrants in the United States. These firms have created stable jobs in the area. Migrants, thanks to the skills and competences they have developed in the United States, have provided effective problem-solving strategies where difficulties were encountered, thus helping to ensure the success of the firms.

Source

World Bank, 2002.

To Go Further
Entrepreneurship

Entrepreneurship is a key aspect of sustainable development in both countries of origin and of destination. In countries of destination, policies that promote entrepreneurship accelerate migrants’ contributions as actors of development. Such policies also contribute directly to the local economy (United Nations Conference on Trade and Development [UNCTAD], IOM and United Nations High Commissioner for Refugees [UNHCR], 2018). Launching a successful business is undoubtedly an effective way to create jobs (Serageldin, Vigier and Larsen, 2014). However, it is important to exercise caution when promoting migrant entrepreneurship. Entrepreneurship can lead to disappointments associated with low wages and significant investment of time and resources prior to becoming fully self-sufficient (Cortina, Taran and Raphael, 2014). Migrant entrepreneurship does, however, contribute to innovation, as migrants bring new ideas, skills and knowledge that are transferred to the local population and job market (see Labour migration).

In origin countries, returning migrants contribute to development through entrepreneurial activities. For instance, the roles that returning migrants play in strengthening trade and investment links between origin and destination countries provide developmental benefits. Moreover, returnees can benefit from resources, skills, networks and knowledge that they acquired through migration upon their return in origin countries (UNCTAD, IOM and United Nations High Commissioner for Refugees (UNHCR), 2018).

To maximize the positive effects of return migration on development, policymakers should, where appropriate, alleviate barriers to entrepreneurship. Effective policies are key so that returnees are able to utilize their skills, knowledge and networks for setting up businesses, thereby contributing to local entrepreneurship (see Reintegration and development).

Policy Approaches
Addressing the relation between migration and entrepreneurship
  • Provide reintegration assistance at the pre-departure and post-arrival stages of migration. Highlight the assistance that is available for entrepreneurial activities.
  • Encourage the provision of entrepreneurship training and monetary support for returning migrants to sustain themselves and their families, including access to credit.
  • Combine entrepreneurship training with other approaches to labour market reintegration, such as skills assessment and development.
Diaspora engagement

Diaspora engagement is another important area in which governments can harness the development potential of migration. By their transnational nature, diasporas serve as important partners for both origin and destination countries. Diasporas contribute to development by providing collective remittances in sectors such as health, education, water and sanitation. This is in addition to serving as catalysts for philanthropy, investment and innovation (Riddle, 2017). Diasporas can also provide tangible resources (financial, logistical or legal) to help migrant workers overcome challenges in a new destination country through policy consultation and otherwise (see Labour migration).

Diaspora organizations are transnational actors. Their social space encompasses both the origin and destination countries. This has been the case in India, where Indian diasporas have directly invested approximately 3 per cent of the overall foreign direct investment. They have played an important role in brokering deals between American firms and Indian companies. Similarly, diasporas are also sometimes involved in youth mentorship programmes (see Youth and migration) and are a way to build resilience to environmental shocks (see Managing environmental migration). Enabling the creation of gender-specific diaspora associations is especially important, as they have the potential to empower marginalized gender groups in both countries of destination and of origin.

Governments can help diasporas to play these supportive roles by establishing institutions at various levels of government in both origin and destination countries. Some governments have created specific ministries for diaspora engagement, and have designed specific strategies to engage with diasporas through public funds, policy consultations and active collaboration on development initiatives. The central assumption is that migrants from the same origin and who reside in the same country, region or continent form groups which can be organized and leveraged for the development of their country of origin (Ellerman, 2003; Kuznetsov, 2006).

Example
Increased involvement of local governments to harness diaspora engagement

In South Africa, the World Bank’s Development Marketplace aimed to stimulate the development of a diaspora network and establish important ties with origin countries and communities among those sharing common interests in the same business sector. Members of the network were expected to contribute to knowledge and skills transfer. However, despite members’ enthusiastic participation in knowledge transfer activities, there has been no ongoing support to make the network grow to the point of moving trade relationships forward.

The South African example demonstrates the fact that local governments need to be involved to be able to fully harness diaspora engagement. For example, the Mexican community project “three-for-one” received technical, administrative and legal assistance from the local government. This is in addition to the provision of public funds to match investments made by the diaspora community. Further, the local government was directly involved in the creation of basic infrastructure, which is often crucial to ensure the success of diaspora-funded community projects.

Source

Ellerman, 2003; Kuznetsov, 2006.

However, migrants do not necessarily organize to support their origin country. Some migrant groups are formed as an opposition to the government in their country of origin, while others may be created as unions to protect foreign workers in a country or aim to promote cultural traits in their city of residence. Further, the existence of ethnic communities in destination countries does not necessarily imply that their members are linked in a diaspora network or that they form organizations. Nor does it imply that they share the same prospects, the same vision about their origin country, or the same will to be engaged (or not).

 Although diaspora engagement can be an effective lever for development, this does not mean that there is a direct and automatic link between diaspora groups and development. The link may exist under some circumstances or may be enhanced through policies and initiatives both in origin and destination countries. In other words, diaspora projects should not replace policies but rather support them. The implementation of projects alone, without relevant policies in place, does not automatically link migration with development.

Policy Approaches
Harnessing effective diaspora engagement
  • Create a stable financial, business and immigration environment for skills transfer and investment.
  • Provide organizational support and other financial means necessary to enable project development and implementation.
  • Work with diasporas and local and regional authorities to establish a decentralized cooperation framework between origin and destination communities.
  • Consider creating incentives to heighten diaspora contributions to development efforts through, for instance, tax cuts and exemptions should diaspora members decide to engage in businesses and/or other local investments in their countries of origin.
  • Facilitate the temporary and permanent return of diaspora members through dual nationality and related frameworks.
To Go Further
Key messages
  • Migrants can be actors of development if their social, economic and human capital is leveraged. Leveraging migrants’ capital, however, relies on policies and projects.
  • Remittances constitute a lifeline for many families and are a very important tool of poverty reduction. However, their sustainability, and resulting link to development, needs to be supported through well-planned public policies and programmes to ensure a long-term, positive effect of remittances on local communities.
  • The success of migrants’ entrepreneurial activity depends on a variety of factors, such as non-discriminatory access to the economic sector, administrative and technical support, recognitions of foreign credentials, and more generally, on how countries promote the integration of migrants.
  • Migrants from similar backgrounds can gather into associations or organizations to promote development in both countries of origin as well as and destination. However, such projects should be supported by government policies to better contribute to development.
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