NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Let me add my thoughts to Bal Joshi’s fine post of 12/6 and AnnaLee Saxenian’s reply of 12/8. I couldn’t agree more with most of the points made in both. The notion of remittances as a development platform is just right, in my view, and Ms. Saxenian strikes a fair balance on “good” and “bad” remittance impacts. When remittances become just another form of dependency, they get in the way of real development. I take note, however, of what might be a few hidden traps buried in Bal Joshi’s post.

Bal offers three primary justifications for them. First, it reduces costs; second, it increases sender control, “lowering waste and misuse”; third, it offers “the sender more options” for productive use, such as savings, build-up of capital, etc.; and fourth, it fosters creativity in the pipeline. My concern comes in points 2 and 3, as both are, to my perhaps over-sensitized ears, reminiscent of the “top-down” and “north to south” control that has so plagued development policy in the past. A considerable amount of criticism of the BOP agenda (particularly as relates to Prahalad’s enthusiastic portrayal of creating the capacity to consume) has revolved around “misuse” of this new-found buying power. This approach can, and often does, take on a moralistic tone; however well intentioned, this kind of guidance is usually counterproductive.? Economic empowerment is all about choice, and yes, some of the choices will be less than fully efficient, or productive, or even healthy.I say, let mistakes be made, but support “good” choices with better education. And as to creating options, I would expect that Bal agrees that well-informed, bottom-up investment decisions, within a strategic enterprise development framework, are more likely to succeed than long distance, top-down choices. Local knowledge, buy-in, support and risk-sharing are fundamental, and critical to success.

These concerns aside, the prospect for leveraging the $300+ billion in international remittances (plus hundreds of billions more internal remittances) is staggering, and this is an important discussion.