Urbanization and remittances

In recent decades the internal migration of populations from rural to urban areas has become a nearly universal phenomenon. Vast multitudes are leaving villages to settle in cities. Global population demographics are undergoing a decisive shift. Migration is an important decision for any individual. It involves much planning, investment, effort, and risk. Voluntary migration is driven by strong motivating factors, primarily economic. One of these factors is remittances. Worldwide remittances and urbanization are simultaneously on the rise. Is one driving the other? Let’s examine some facts.

Key regions

The UN projects that the world’s urban population will increase from 55% in 2018 to 68% in 2050. This increase represents the movement of a billion people. The vast majority of the developed world is already more than 80% urbanized. In the coming years 90% of the global population growth as well as urbanization will occur in Asia and Africa. Notably, India, China and Nigeria will collectively add another 35% to the world’s urban population.

Global urbanization data shows high correlation with remittance statistics. India and China are the world’s first and second largest remittance recipient countries, while Nigeria is seventh. Remittance inflows are growing much faster in low and middle income countries (LMICs) than the rest of the world, as is urbanization.

Impact on education and employment

Urban areas generally offer better access to education and employment. This is one of the primary reasons that drive global urbanization. Migrating from a village to a city is an opportunity to improve one’s quality of life. From the perspective of remittances two potentially opposing factors come into play. On one hand, better availability of local jobs reduces the need for citizens to seek overseas job opportunities. On the other hand better education enables more migration in white collar jobs rather than blue collar. The latter leads to an increase in per capita remittances, and represents a shift in migration trends in the right direction.

However, urbanization is not without its challenges. Education and employment opportunities in cities are far from evenly distributed. The same applies to healthcare and amenities. In many regions urbanization is leading to widening rifts in income inequality. The 2019 annual progress report of UN HABITAT states that, “over 1 billion people, or a seventh of the world’s population, are living in slums.” Many countries are now taking steps to address the increasing urban poverty.

Access to remittances

Millions of remittance recipients in developing nations don’t have access to banks. They depend on versatile services such as Ria Money Transfer, and its extensive network of cash pickup agents to receive incoming remittances. Towns and cities are growing as a result of urbanization. Cities are expanding to encompass surrounding areas. Meanwhile population densities at the center of urban agglomerations are rising to unprecedented levels. This is necessitating more efficient use of living space, utilities, and public amenities. One notable factor in this regard is connectivity. With urbanization a significantly larger proportion of the population now has connectivity. Online money transfers and remittances cannot exist without data networks. Urban areas also have more banks and ATMs per capita. Both senders and recipients of remittances benefit from these features.

In summary

Urbanization has the potential to reduce poverty, fight inequality, and improve human development. However, this only becomes possible when governments actively manage the expansion of cities. Uncontrolled urbanization leads to congestions, rising pollution, greater inequality, and higher crime rates. Well-managed cities ensure healthcare, education, and jobs for all. Take the example of Singapore. At 7,800 people per square km, it is one of the densest urban areas in the world, yet ranks highly on human development.

It is evident that urbanization and remittances are correlated. However, it is not clear which drives the other. Both could be dependent variables of another more fundamental causal factor. However, the more important issue is for developing nations to effectively manage urbanization. Urbanization is a megatrend. It is an inevitable reality of our times. It is up to national governments to formulate the right policies and incentives. If nations can effectively channel urbanization, it can be a transformative force for promoting economic equality, sustainable development, and inclusion.

About the author:

Hemant G is a contributing writer at Sparkwebs LLC, a Digital and Content Marketing Agency. When he’s not writing, he loves to travel, scuba dive, and watch documentaries.