Thinking Aloud: Hometown Associations and Remittances

Dec. 9, 2014 by Darius

In the course of doing research today for a different project, I came across a very interesting phenomenon in international development: the influence of hometown associations.  Hometown associations are groups of migrants with a common origin in a recipient country.  These organizations have two main purposes.  First, they look out for the interests of their members in the “new” country.  Second, they play an important, and growing, role in helping develop their communities of origin.

Hometown associations themselves are nothing new: they go back at least to the 1800s, where many immigrant groups, especially in New York City, banded together.  In recent years, though, as communication technology has taken off, it has become much easier for these associations to remain more connected to their home communities.  At the same time, advances in mobile banking have allowed these groups to send money home collectively and more efficiently.  The result is a major increase in immigrant participation in financing development projects in their communities of origin.

To be sure, individual migrants sending money home help their communities a great deal (see https://notwhatyoumightthink.wordpress.com/2014/10/09/thinking-aloud-the-hidden-force-in-global-economics/).  But individuals alone don’t have the financial clout to fund major community projects, such as the construction of a new sanitation system or school.  When enough individuals pool their money, though, as in a hometown association, these projects become viable.

Hometown associations are doubly effective because they come from the community and are completely responsive to the community’s perceived needs without the need for a middleman organization like the government or an NGO.  Exact numbers are sketchy and vary from year to year, but hometown associations have contributed millions of dollars to development projects in their home communities.  They are another way in which remittances are an overlooked but incredibly important player in alleviating poverty around the world.

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