Remittances Boost Rural Development in Azerbaijan

Every year on 16 June, the global community observes the International Day of Family Remittances to raise awareness of the hard work and sacrifice of the millions of migrants who support their family members and communities of origin through the money they send back home.

More than one million Azerbaijanis live outside the country, many of them working and providing financial support to their families in Azerbaijan by sending remittances from abroad. This represents an important source of income for households, particularly in rural areas. Remittances significantly contribute to the socioeconomic growth of the country.

In Azerbaijan, the International Organization for Migration (IOM) recently implemented a project to enhance the socioeconomic benefits of remittances in the country. The initiatives aims to contribute to greater financial inclusion and use of digital financial services among Azerbaijani migrants and remittance recipients, located both in Azerbaijan and abroad. The project, carried out in coordination with the State Migration Service of the Republic of Azerbaijan thanks to funding from the IOM Development Fund, is very timely in the context of increased remittance flows to and from Azerbaijan.

The socioeconomic benefits of remittances are largely determined by the existing remittance service infrastructure and financial behaviour patterns of both remittance senders and recipients. In light of this, existing policies on remittances and remittance consumption models were assessed, comprehensive analysis and mapping of all stakeholders related to the remittance system was conducted, and a draft roadmap on uptake of digital remittances in Azerbaijan was prepared within the project.

“Digitalization of remittance-related services contributes to greater financial inclusion and higher financial literacy, and ultimately encourages savings- and investment-oriented financial behaviour patterns,” says Mahammad Ibrahimov, IOM project officer. “It is vital to raise awareness about existing digital methods and increase digital financial literacy on both sending and receiving sides, particularly in rural areas.”

According to the data from the Central Bank of the Republic of Azerbaijan, in 2022, the amount of official remittance inflows was three times as much as in 2021: 3.6 billion USD compared to 1.2 billion USD. The major inflow of remittances to Azerbaijan in 2022 came from three countries: the Russian Federation, Türkiye and the United States of America.

The major share of the counterflow of remittances, originating from Azerbaijan, is also directed to these countries. Remittance data refers to the cross-border remittances transferred via money transfer operators and paid out by banks and the national postal operator “Azerpost.”* These are the only remittance service providers in Azerbaijan.

Southern districts are among the most remittance-dependent regions in Azerbaijan, according to State Statistical Committee data. The city of Astara, located in the south of Azerbaijan, with a population of more than 110,000, stands out for the volume of remittances it receives.

Rahib Aghayev has been receiving remittances from relatives via the Astara post office for the past nearly 15 years. “I come to this postal office to receive remittances one to two times per month,” he says, adding that his sister and uncle reside in the Russian city of Volgograd. Rahib uses cash remittances to cover expenses for family emergencies.

Many elderly persons, apart from pensions, rely on remittances that are sent from abroad to cover their daily needs. Mehriban Hajiyeva is among them.

“It is easier for me to receive transfers at the post office, since there are no long queues. The money I receive helps me a lot, especially to buy medicines,” says Mehriban.

Vilayat Dunyamaliyev was able to grow his warehouse business thanks to financial support from family members living in Türkiye and the Islamic Republic of Iran sent in the form of remittances. Since the successful development of his business, he is now able support his family members living abroad. “I use digital remittances. It is more convenient for me, I am already familiar with the process because I had to learn to make business-related payments digitally,” said Vilayat.

Vilayat believes digital remittances are the solution to keeping costs down and making transferred money easier to receive. According to Vilayat, one of the main advantages of digital remittances is that one can send and receive money instantly. Time is the most valuable asset in life — especially true for entrepreneurs.

IOM works together with government stakeholders, local banks, diaspora and non-governmental organizations, as well as other UN agencies, to harness the benefits of digital remittances in Azerbaijan for the benefit of all.

For more information on remittances and Azerbaijan, refer to the IOM assessment report “Digital Remittances in Post-pandemic Azerbaijan: Supply- and Demand-side Analysis.”

*The interviews in this article were made possible thanks to support from Azerpost, the company responsible for postal service in Azerbaijan.