UNITED NATIONS, Nov 27: Remittances to the world’s least developed countries (LDCs) must play a greater role in reducing poverty while also empowering those countries’ economies to grow, a new United Nations report said.

In the 2012 edition of its LDC report, the UN Conference on Trade and Development (Unctad) notes that with remittances forecast to grow over the medium term, the world’s poorest nations should ensure better banking and financing services to allow for greater domestic investment, small business development and job creation among their increasingly urbanized populations.

Remittances have grown eight-fold between 1990 and 2011, and are now worth $27bn on a global scale, according to the report.

Moreover, they have continued to rise despite the impediments posed by the 2008 global economic crisis and consequent fears of financial stagnation.

The report entitled “harnessing remittances and diaspora knowledge to build productive capacities” also asks governments to reduce the transfer costs associated with remittances, which often run as high as 12pc.

In 2010, for instance, money sent to sub-Saharan Africa could have generated an estimated $6bn for recipients if the costs associated with the transfers had been lower.

The potential pay-off for LDCs posed by remittances is “significant,” the report notes, considering that some 27.5 million LDC citizens live and work abroad. Over the past decade, remittances have steadily surpassed the value of foreign direct investment to LDCs.

Unctad warns that with the growing danger of global economic stagnation and deflation, LDCs must escalate their policy rethink of how remittances can promote industrial development and structural transformation through a freer channel of investment.

“This may entail a range of policy interventions, such as domestic and regional development policies aimed at inducing private investments,” the UN report notes, adding that new measures could also include “appropriate financial and regulatory reforms designed to reduce transaction costs and promote greater financial inclusions and credit provision for small- and medium-sized enterprises.”

While money flows from LDC migrants are crucial to the advancement of the world’s poorest nations, it is the migrants’ very departure which often contributes to further debilitation of an LDC’s chances of development.

According to the Unctad report, the impact of `brain drain’ on LDC countries appears to reinforce international inequalities in the availability of qualified personnel, and to damage LDCs’ prospects for long-term economic growth.