25.06.2018

Similar to the discussions on the magnitude of the positive impact of migration on development, literature has debated the productive versus the consumptive use of remittances, as summarised by Bhandari and Chaudhary (2016). One line of research suggests that migration and remittances contribute positively to the migrant families and their communities through initiating development dynamics by lessening production and investment constraints in the economy, creating an environment for risk diversification, helping migrants to establish businesses, poverty reduction, and through investment in human capital development. Other scholars argue that remittances are primarily used to cover consumption expenses.

Research from Sri Lanka and Nepal supports both lines of argumentation. The International Labour Organization (ILO) sheds light on the use of remittances in Sri Lanka and finds that the major areas include housing, children’s education, personal assets and consumption. Migrant families’ expenditures on a range of unproductive and consumable assets have increased after migration.