Remittances have long played a significant role in the Lebanese economy. They have become even more vital in recent years as the country has faced a severe economic crisis. According to a 2021 study by Mercy Corps, remittances now account for 53.8% of the country’s total GDP. Consequently, they are a crucial lifeline for many families. Furthermore, they are also a key factor in preventing the economy from completely collapsing. In this article, we’ll tackle the Lebanese case of remittances.
Remittance in Lebanon
These financial transfers are made by individuals who live and work abroad to their families back home. They provide a steady flow of foreign currency that helps to support the economy. However, there are also challenges faced by those who receive remittances in Lebanon. These challenges include high costs and a lack of financial infrastructure.
According to the World Bank, in 2019, remittances to Lebanon made up more than 20% of the country’s GDP, making it one of the highest levels in the world. These financial transfers are an important source of income for many families, and they help to support the economy by providing a steady flow of foreign currency. However, there are also challenges faced by those who receive remittances in Lebanon.
Challenges of the Remittance Industry
One major issue is the high cost of sending money home. According to the World Bank, the average cost of sending $200 from a high-income country to a low- or middle-income country is around 7.5%. In Lebanon, the cost can be even higher due to the country’s difficult economic and political situation. This means that a significant portion of the money sent home is lost to fees and exchange rate spreads, which can make it difficult for families to make ends meet.
Another challenge faced by remittance recipients in Lebanon is the lack of financial infrastructure. Many families in the country do not have access to formal banking services, and instead rely on informal networks to receive and send money. This can make it difficult for families to save and invest their remittances, and can also expose them to the risk of fraud and financial abuse.
Lebanese Financial Bankupcy
In October 2019, the government of Lebanon declared a financial bankruptcy. They acknowledged that the country was unable to pay its debts and would be unable to meet its financial obligations. This sparked widespread protests and unrest in the country, as people expressed frustration with the government’s handling of the crisis.
The financial bankruptcy has had a number of consequences for the people of Lebanon. The value of the Lebanese pound has plummeted, leading to a sharp increase in the cost of living. Many people have lost their savings due to the depreciation of the currency. There have been widespread shortages of basic goods and services.
The government has implemented a series of measures in an attempt to address the crisis, including negotiating with international lenders for a bailout package and implementing a series of economic reforms. However, these efforts have been met with resistance and have not yet been successful in resolving the crisis.
Exploring New Solutions
Overall, remittances play a vital role in the economy of Lebanon, providing a vital source of income for many families. However, there are challenges faced by those who receive remittances, including high costs and a lack of financial infrastructure.
To address these challenges, it will be important to focus on reducing the cost of sending money home. Also improving financial literacy and access to financial services in the country will be crucial. The Lebanese government will have to address the underlying causes of the financial crisis and implement effective policies. The first goal will be to stabilize the economy and improve the lives of the people of Lebanon.
One solution that has been proposed is the use of technology to ease money management among families. Finnt, a company based in Miami, has developed an app that allows for the designation of a family Chief Financial Officer (CFO) living abroad to help his or her family in countries like Lebanon with financial transactions and account management.
The app provides a multi-account feature where the CFO can easily provide money to family members and, in the future, will also help them manage their spendings by setting up budgets and savings goals.