what is a remittance 
a remittance is money that is sent from one party to another broadly speaking any payment of an invoice or a bill can be called a remittance however the term is most often used nowadays to describe a sum of money sent by someone working abroad to their family back home the term is derived from the word remit which means to send back investopedia madelyn goodnightunderstanding remittancesremittances can be money sent as payment for a bill however most remittances involve sending money to relatives they are often sent by foreign workers to family members in their home countries the most common way of making a remittance is by using an electronic payment system through a bank or an electronic money transfer service such as western union people who use these options are generally charged a fee transfers can take as little as ten minutes to reach the recipient remittances play an increasingly large role in the economies of small and developing countries they also play an important role in disaster relief often exceeding official development assistance oda they help raise the standard of living for people in low income nations and help combat global poverty in fact since the late 1990s remittances have exceeded development aid and in some cases make up a significant portion of a country s gross domestic product gdp according to the world bank s migration and development brief 508 billion in remittances were sent to low and middle income countries in 2020 this was followed by 605 billion in 2021 in 2019 they reached a then all time high of 548 billion but declined thereafter due to the covid pandemic 12remittances to these countries is expected to grow to 630 billion in 2022 and 659 billion in 2023 the amount is larger than the foreign direct investment and official aid funds sent to these countries excluding china 1remittances are also used to help those living in less developed nations open bank accounts a trend that helps promote economic development 