What is a remittance?

A remittance refers specifically to a transfer of money made by a foreign worker to their home country. This financial transaction is typically sent to support family members, cover education expenses, or invest in local businesses. The significance of remittances is especially notable in many developing countries, where they contribute significantly to the economy and the livelihood of many families.

In the context of international finance, remittances play a crucial role in the flow of money across borders, demonstrating the impact of globalization on personal finances and family support systems. They are distinct from investments or loans, as they do not involve a return on investment or repayment structure typical of loans; instead, they serve as a direct financial support mechanism from migrant workers to their loved ones.