Photo: UNDP Moldova. After many years, the inhabitants of Ungheni municipality enjoy a first alley arranged in the local park, thanks to involvement of local authorities and investment of remittances.

On the occasion of the International Day of Family Remittances (IDFR) on 16 June, Switzerland, United Kingdom, World Bank, International Organisation for Migration (IOM), United Nations Development Programme (UNDP) and United Nations Children’s Fund (UNICEF) call on Moldovan authorities to take a set of measures that would make remittances more accessible to the population.

This year, observing IDFR is more significant than ever. The coronavirus pandemic has changed the world. Many migrants have lost their jobs and have had to return home. Others face financial uncertainty in their countries of destination, leaving them without income, and therefore the ability to support themselves or their families back home.  Many of those dependent on overseas remittances, including children, suddenly find themselves below the poverty line.  One fifth of all households with children are also households with migrants. According to the National Bureau of Statistics, in 2019, this household composition is three times higher in rural areas than in urban areas.

During the ongoing COVID-19 outbreak, the disruption to, and of, remittance flows is having a significant impact on migrants, their families, members of diaspora communities, and the economies that rely on them. We recommend four key measures for Moldova:

1. better access to remittances in rural areas
2. use of financial services among the most vulnerable migrant families
3. financial inclusion of labour migrants by channelling remittance savings towards income-generating activities
4. increased investment opportunities.

To address these measures, the regulatory framework needs to improve in order to allow for wider competition in the money transfer market, beyond the banking sector. This would allow remittance payment outlets to operate closer to people, notably those living in rural areas. The use of technology and innovation would be widely available and replace the substantial use of informal transfer channels. If rural citizens can easily access remittances closer to home, they would no longer face the additional cost of having to travel to urban centres.

Making available small amounts of capital for financial services such as insurance or small investment loans for income-generating activities would significantly improve household economies, as opposed to using remittances solely for consumption. Programs such as PARE 1+1 and the DAR 1+3 should be scaled-up to broaden remittance investment.

Through their ongoing work in Moldova, international partners continue to assist local authorities in shifting the approach to migration from a loss of human capital to a development opportunity, particularly in rural areas. By involving migrants through Hometown Associations, migrant remittances have been re-oriented from private consumption to local services improvement projects. Since the outbreak of COVID-19 pandemic, the Moldovan diaspora has played an active role, contributing with early recovery and humanitarian initiatives in rural communities, benefiting the most vulnerable.

The country as a whole, and the vulnerable population in Moldova in particular, are highly dependent on remittances.  1.91 billion USD (16% of GDP) was remitted in 2019, putting Moldova in the top-20 of the most remittances-dependent countries in the world. The heavy impact of COVID-19 and the associated enforcement of containment measures, are expected to result in a decrease of around 25% with a fall of around 14% in consumption and 23% in investment. Given that around 25% of total income of rural households are remittances, rural people will likely be the most affected.   

According to an IOM study, a quarter of Moldovan households receive remittances. Half of these household remittances constitute more than 50 per cent of disposable income. The same source indicates that 23.4% of households would be placed below the poverty line if they did not receive remittances. 17% of all migrants have already stopped remitting in the current climate. 108,750 persons in 37,500 households will fall below the poverty line.  Remittances will remain a mainstay of the Moldovan economy in the medium term, and demographic developments indicate they will continue to decrease until 2030.