The digital divide risks leaving millions of rural families in poverty

The lack of digital infrastructure is slowing the flow of remittances, leaving millions of rural families across the globe in poverty says IFAD.
calendar icon 20 June 2021
clock icon 3 minute read

Despite a massive increase in migrants sending money home via digital transfers due to the COVID-19 pandemic, millions of their rural family members struggle to access the mobile banking services which could help lift them out of poverty. The President of the UN’s International Fund for Agricultural Development (IFAD) is calling for urgent investments in digital infrastructure and mobile services in developing countries to ensure rural families are not left behind.

“Migrants have shown their continued commitment to their families and communities during the pandemic with more remittances transfers made digitally than ever before,” said Gilbert F Houngbo, President of IFAD, speaking on the International Day of Family Remittances. “Unfortunately, families in rural and remote areas - where remittances are a true lifeline - battle to access cash outlets or even more convenient alternatives such as mobile money accounts. Governments and the private sector need to urgently invest in rural digital infrastructure to address this.”

Mobile remittances increased by 65% last year, rising to $12.7 billion. This change was driven by a switch from cash due to lockdowns that limited informal channels and social distancing rules for senders and recipients alike. In spite of the global economic recession due to the pandemic, migrants continued to send money home to their families, with remittances in 2020 reaching $540 billion – a drop of only 1.6% compared to the previous year

However, in many countries, people living in remote rural areas have sparse local access to banking services or limited mobile connectivity. In addition, there is a limited availability of agents offering mobile money services such as pay outs in cash. Often mobile money service providers are only located in urban centres. This means millions of poor, rural people have to travel long distances to towns or cities, often at significant cost, to receive the cash sent digitally by their migrant family members.

Digital transfers are cheaper than traditional cash transfers, and mobile banking services also provide the opportunity for migrants and their families in their countries of origin to access useful and affordable financial products to better manage their finances, including savings, loans and insurance.

Across the globe, 200 million migrants regularly send money to their 800 million relatives. This plays a crucial role in their lives and livelihoods. Almost half of these families live in rural areas of developing countries, where poverty and hunger are highest. Families use the funds sent by migrant workers to cover basic household needs such as food, housing, school and medical bills, as well as to start small businesses. These resources can often transform both families and local communities.

“While the pandemic accelerated the adoption of digital transfers and mobile money accounts, it also highlighted pervasive gender inequality,” said Pedro de Vasconcelos, the head of IFAD’s Financing Facility for Remittances. “Research shows that women are 33% less likely than men to have a mobile money account. We must focus on closing the gap by addressing the barriers that prevent women from accessing and using mobile financial services.”

Since March 2020, IFAD has led a global Remittances Community Task Force comprised of 41 international organizations, inter-governmental bodies, industry and private sector groups, and networks of diaspora organizations to respond to the impact of the COVID-19 pandemic on the one billion people directly involved in remittances.

Of their numerous recommendations to the public and private sectors, the Task Force developed concrete measures to stimulate digitalisation in the remittance market in an effort to spur recovery and the resilience of migrants’ families around the world. In line with these measures, IFAD is currently financing private sector mobile solutions that will benefit over one million people in West Africa alone.

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