16/06/2019 - International Day of Family Remittances, celebrated on the 16^th of June each year, recognizes the efforts of some 200 million migrants globally who send home billions of dollars that sustain 800 million people in their home countries. Remittances are a major contributor to development and approximately 40 per cent of them go to rural areas where poverty and hunger are pressing issues.

But a worrying trend is emerging in Southeast Asia. The benefits of income earned abroad are gradually being eroded by the ever-increasing debt burden faced by many migrants and their families. In a region where debt has become part and parcel of life among low-income households, the precarious situation that families may find themselves in often remains underdiscussed outside of academia.

Phany’s family from Cambodia is an example of a family in crisis. For years, Phany has been struggling to make ends meet following the death of her husband. The multiple loans which she took out to help finance her two sons’ migration to Thailand on three occasions have resulted in mixed outcomes.

Her sons’ first migration experience was positive. Having followed a neighbour who had extensive experience working in Thailand’s fishing sector, they earned enough to save and remit money back home each month. Together, the family saved enough to buy a small plot of land and materials to improve the small home they shared back in Cambodia.

However, things took a turn for the worse on the pair’s second and third migration undertakings. On their second journey, the boat they worked on moved into international waters and began fishing illegally. It was apprehended by Indonesian authorities and the boys were sent to prison. They were subsequently identified as victims of forced labour and returned to Cambodia with the help of the International Organization of Migration (IOM).

On their third attempt, the boat entered Malaysian waters and was piloted by a Thai captain who was violent. In addition to having boiling water thrown at them, the boys were paid only half of the THB 10,000 (USD 310) monthly salary they had been promised. Desperate to escape, the pair called Phany, and with an additional USD 1,000 she borrowed, they were able to run away and return to Cambodia. The family still struggles to pay off the amount today.

Stories like those of Phany and her boys’ illustrate the central role debt can play in the daily lives of migrants and their families. Debt has the countervailing potential to both mediate and create risk. Loans can provide migrants access to opportunities to work abroad, pay off household debt and improve living conditions back home. On the other hand, it can also create conditions where migration becomes more burdensome than helpful.

For Phany, the loans undertaken to finance her sons’ migrations have been a double-edged sword. Her sons’ first migration journey enabled them to send remittances that contributed to poverty reduction for her family. On the other hand, Phany became over-indebted as a result of her sons’ remigration and exploitation on their second and third journeys, highlighting the fact that debt is a complex issue that needs to be viewed in relation to other forms of vulnerability.

Debt is often a primary cause of migration in rural Southeast Asia. Many households routinely take on loans to cope with acute crises such as illness and failed crops. When the amount undertaken far exceeds average income, migration can be seen as a coping strategy in response to debt stress.

Research indicates that an increasing number of remittance-receiving rural households have reported the repayment of debt as the main use of remittances. This leaves little potential for earnings to be channeled to other uses such as savings, education or livelihood improvement initiatives.

A strong link also exists between indebtedness and increased vulnerability to trafficking and related exploitation. Migration in Southeast Asia typically involves prohibitive recruitment fees and migrants often take on additional debt to fund their journeys. Repayment can take anytime between several months to years.

In the recently-published IOM study Debt and the Migration Experience: Insights from Southeast Asia, migrants in debt were found to be more likely to make potentially risky choices, often accepting and choosing to remain in jobs with poor working conditions. Wage deductions which can used by employers to cover the cost of recruitment and migration often discourage workers from changing jobs or leaving.

Prospects for those who return home in debt can be bleak. Indebted returnees are more likely to encounter financial insecurity due to a lack of savings or difficulties in finding decent work. In addition to reduced financial status, indebted returnees also typically face social and psychosocial problems, including shame, embarrassment and discrimination in their communities, as well as harassment and violence from lenders.

With one in six migrants in the region struggling with debt upon return to their countries of origin, there is a real need for governments, private sector entities, and civil society to find ways to alleviate this significant burden.

A plethora of solutions are available, including strengthened social protection programmes, increased financial literacy, improved oversight and regulation around credit provision, simplified access to legal migration pathways and expanded monitoring of labour rights violations.

A solution commonly promoted by migration practitioners is to have recruitment costs borne by employers rather than workers. A shift to the “employer-pays” model would not only protect migrant workers from indebtedness linked to recruitment but also incentivize good labour practices. If employers bore the costs of worker recruitment, they would have powerful incentives to retain workers, including by providing decent working conditions.

Tackling the issue of debt and reducing vulnerabilities faced by indebted migrants and their families is a long-term endeavor and interventions are necessary across a range of levels and at multiple moments during the migration and return experience. Only then, can the full benefits of remittances in relation to poverty reduction and development can be realized.

Dana Graber Ladek is Chief of Mission of the International Organization for Migration (IOM) Mission in Thailand.