More than 2 million Somali diaspora use remittances to give financial assistance to loved ones in their home country.
While the first is always positive, the second term may also be positive, depending on the way recipients in the origin country use remittances.
Indeed, the initial distribution of uncertainty is an important determinant of the migrant's ability to use remittances as a precautionary investment.
Carling (2008) points out that migrants who do not visit home cannot directly observe whether their families use remittances as intended.
Mexican households use remittances to cover a range of basic needs, such as food, education, health, clothing and housing (Amuedo-Dorantes, Sainz, & Pozo, 2007; Valero-Gil, 2008; Yearbook of Migration & Remittances, 2016, p. 164).
Our data (not shown) support this assumption and reveal that only 1.3 and 1.4% of Georgian and Moldovan migrant households, respectively, had to use remittances to cover medical costs for children.
During the 2011 famine in Somalia, for example, which killed more than a quarter of a million people, aid agencies used remittance companies to provide cash transfers to more than 1.5 million people.
IFAD says that in 2006 Zimbabwe got $361m in cash transfers, Cuba $983m and North Korea a whopping $1.8 billion.At least more governments are thinking about using remittances to step up investment.
A range of banking options need to be available for the girl who needs access to finance to pay for vaccines and school fees, the bride struggling to finance a wedding and dowry, the mother seeking to provide nutritious food, and the grandmother who uses remittances across her family and social network.
