Migrant workers are sending $100bn home every year in what has become the biggest source of foreign funds for developing countries, the IMF says.
Small amounts of cash can be a lifeline for family members abroad
In its World Economic Outlook, the International Monetary Fund said remittances beat foreign investment, aid and exports in magnitude.
Inflows of $100bn for 90 developing countries in 2003 were up 25% on 2002 - with a similar rise expected in 2004.
But it warned that transaction costs are still too high.
Unlike aid and investment, remittances have stayed high despite downturns in the world economy.
The World Bank in particular believes that the stereotype of money flowing from rich countries to poorer ones is only part of the picture.
"My own belief is that South-South flows are a lot larger than North-South flows," said World Bank economist Dilip Ratha.
Easing the flow
Governments in both host and recipient countries needed to do more to ease the flow, which IMF and World Bank staff have previously said is a key source of money for driving growth and development.
A typical deal to send $200 back to relatives in a migrant worker's home country costs between $15 and $26 on average, the IMF said.
Some host countries are taking action. The UK, for example, estimates the cost of sending money from the UK at anything from £2.50 to as much as £40 for a transaction involving £100.
It has published its findings on a website, Sendmoneyhome.org, in order to help equip people with the information to seek better deals.
High costs and a mistrust of official systems often persuades people to use informal money transfer mechanisms such as the South Asian hawala network, the IMF noted.
Governments are often wary of informal networks, given their usefulness to money launderers and suspicions that they can be used to aid terrorist finance.
The IMF said regulation of such networks needed to be "carefully thought out, so that these flows can be better monitored without causing them to dry up or go further underground".