Remittance as a social responsibility for development - Essay Example

Accordingly, the compensation in the former for similar labor and similar work is significantly lower than that in the latter. In such circumstances, little money sent by the distant individuals in foreign currency proves a big treat for the remote relatives. Remittance is not only the money that is sent by migrants to their relatives in homeland, but also includes any money that is invested in real estate or other that is deposited by the migrants in the banks or saving accounts in the homeland.

Money pouring into underdeveloped countries in this way becomes a source of economic stability and strength. Remittance maintains the integrity and value of a nation’s economy. Life style and culture depend upon the economy of a nation for their maintenance and modification. As a result of the economic stability, the nation progresses as a whole. That is why, it is a social responsibility of every individual that makes part of a nation. Remittances have gathered the attention and appreciation of policy makers, academic institutions and other financial organizations.

This is so because remittances happen to be the second largest source of foreign investment in the underdeveloped countries after Foreign Direct Investment (FDI). This is despite the fact that considerable portion of the total remittance gets spent in its transfer occurring through informal routes. Much of this can be attributed to the fact that remittance is far less volatile as compared to the local capital flow because it is majorly invested in real estate and business as it usually is more than what the remote relatives in the homeland require.

Another way in which remittance helps a country gain economic strength and stability is that it provides the home country with enough sum to carry out heavy trade. According to Mansoor and Ouillin, and Razin (cited in Vogiazides), above 70% and 75% of the trade deficit in Albania since 1995 and Moldova in 2005 was financed