GENEVA, July 4 (Xinhua) -- Poor countries could do more to fully exploit the developmental potential of remittances from migrants, said a new report published by the International Organization for Migration (IOM) on Tuesday.

    The report, prepared by IOM and the UN office of the High Representative for Least Developed Countries (LDCs), identifies migrants' remittances as an increasingly important source of external finance for LDCs.

    Although Overseas Development Aid remains the major source of finance for the world's 50 poorest countries, migrants' remittances have increased significantly over the last few years and outpaced Foreign Direct Investment reaching 10.4 billion U.S. dollars in 2004, according to the report.

    For some LDCs, remittances account for a large chunk of national income. Lesotho, for example, receives around 30 percent of its GDP from workers abroad.

    For Haiti, Samoa and Nepal, remittances accounted for 24.8 percent, 12.4 percent and 11.7 percent of GDP respectively in 2004.

    However, the true size of remittances to LDCs could be even larger because most remittances to LDCs are channeled through informal channels due to high transfer costs, restrictive foreign exchange rules as well as poor infrastructure and the weak financial sector in LDCs, the report points out.

    It notes the need for LDCs to promote the use of official transfer channels. This could be done by offering incentives to recipients to save more within the formal banking sector.

    To make formal transfers attractive, the LDCs would also need to offer favorable exchange rates and establish efficient banking systems, the report says.

    The challenge facing many poor countries that receive substantial income from remittances is how to direct them into programs that benefit society as a whole.

    The report calls on LDCs to develop a set of coherent policies so that the benefits of remittances may be felt across societies. Enditem