Other global south economies provide valuable lessons on successfully transforming remittance flows into broad-based growth.
In just over a decade, remittance inflows to Africa have surged from approximately US$53 billion in 2010 to US$95 billion in 2024. During this time, their share of the continent’s GDP rose from 3.6% to 5.1%, making remittances one of Africa’s largest and most stable sources of external finance.
To put this in perspective, remittances have matched or exceeded the value of official development assistance (ODA) and foreign direct investment (FDI) in recent years. In 2024, FDI inflows reached US$97 billion, roughly in line with remittances. Since 36% of this came from one urban development project in Egypt, Africa’s remaining FDI of about US$62 billion is significantly less than remittances.
Egypt, Nigeria and Morocco accounted for the largest shares of Africa’s remittance inflows in 2024. By contrast, Angola, Seychelles and São Tomé and Príncipe received less than 1% of total inflows, highlighting stark disparities in remittance dependence. Regionally, North and West Africa attracted the highest overall remittance volumes.
Remittances are pivotal in sustaining household livelihoods, particularly in low- and middle-income countries. In 2019, for instance, about 65% of Kenyans and almost 50% of Gambians relied on remittances for household income.
Unlike ODA or FDI, remittances bypass bureaucratic channels, going straight to households. They have a direct impact on food security, healthcare, housing and education. Recipients spend most of these funds locally, stimulating trade and services, and sometimes investing in community infrastructure.
Remittances also provide macroeconomic stability. In countries like the Gambia, Lesotho, Comoros, South Sudan, Liberia and Somalia, remittances account for more than 10% of GDP (see Chart 1). They offer a stable source of foreign exchange, which bolsters national reserves and reduces external vulnerabilities.
A major challenge is the substantial share of Africa’s remittances that move through informal channels, such as hand-carried cash or unregistered transfer systems, particularly in the Democratic Republic of the Congo, Libya, Zimbabwe, Somalia and Nigeria (see Chart 2). This reliance on unregistered intermediaries not only hampers efforts to promote financial inclusion and transparency but also obscures the true scale of diaspora support, limiting the effectiveness of evidence-based policymaking.
Despite their scale and stability, remittances are overlooked in Africa’s economic development debates, which focus on big-ticket investment, trade deals or aid flows. This neglect persists even though remittance flows are more stable and countercyclical, providing a critical buffer in times of crisis, as seen during the COVID-19 pandemic when ODA and FDI declined.
Another underexplored but increasingly important trend is the growth of intra-continental remittance flows. While the bulk of Africa’s inflows traditionally originate from the Gulf States, North America and Europe, about one-fifth of total remittances – accounting for about US$20 billion in 2023 – now stem from transfers within Africa.
A notable example is Zimbabwe, where in 2021, approximately 37% of its remittance inflows came from South Africa, which hosts over 690 000 Zimbabwean migrants. This reflects regional migration patterns and highlights the importance of financial technology (FinTech) platforms such as Mukuru, a key provider of low-cost cross-border transactions in Southern Africa.
Closing the gap between the potential and use of remittances requires action on three fronts: lowering costs and formalising flows, integrating remittances into national financial systems, and creating incentives for diaspora investment.
Lowering transfer costs and formalising remittance channels is the first essential step. The average cost of sending money through mobile applications to Africa was around 5% of the amount transferred in 2023, far above the UN Sustainable Development Goal (SDG) target of 3% by 2030. Addressing these bottlenecks requires regulatory innovation and universal access to financial services.
Technological advances are starting to break some of these barriers. The recent expansion of FinTech platforms has been instrumental in facilitating faster, cheaper and more secure cross-border payments. Mobile money platforms, blockchain-based transfers and peer-to-peer (P2P) apps such as M-Pesa, MTN MoMo and Airtel Money allow simple, cheap payments.
The AfCFTA Protocol on Digital Trade and cross-border payment systems like Pan-African Payment and Settlement System (PAPSS) offer a framework for harmonising rules, lowering costs and expanding formal remittance corridors.
A second priority is to link remittance inflows with national financial systems. The growing use of FinTech-enabled transfers isn’t uniform. Few African countries have robust frameworks to link remittance inflows with savings, insurance or productive investment. As a result, their potential as a development lever remains largely untapped. Remittances must be connected with financial products and domestic capital mobilisation.
Finally, creating incentives for diaspora investment can turn remittances into a long-term source of development finance. If better harnessed, remittances could support structured savings, investment products or diaspora bonds, providing sustainable capital for national development.
Increased reliance on remittances does however carry risks. Economic shocks in host countries can reduce flows, and heavy dependence on inflows could disincentivise governments from making in-country structural reforms. Also, digital channels bring cybersecurity and fraud concerns. To channel diaspora capital productively while avoiding overdependence requires incentives balanced with safeguards.
Other global south economies provide valuable lessons on successfully transforming remittance flows into broad-based growth. They show that remittances can shift from mere consumption support to productive investments in small enterprises, rural infrastructure, health systems, education and more.
Bangladesh has implemented targeted measures, including a 2.5% cash incentive for transfers via official channels, expansion of digital banking infrastructure, and the creation of diaspora bonds and migrant-focused financial products. These reforms have reduced informality, deepened financial access and enhanced macroeconomic stability.
Sign up for free AllAfrica Newsletters
Get the latest in African news delivered straight to your inbox
The Philippines’ Overseas Workers Welfare Administration (OWWA) and Philippine Development Plan (PDP) for Overseas Filipinos have institutionalised financial literacy programmes and promoted remittance-backed savings and microenterprise development. These have strengthened formal diaspora engagement and local development ownership.
In Mexico, remittances have been integrated into national development strategies. The 3×1 Program for Migrants scheme, for instance, matches every dollar sent for community projects with three dollars from federal, state and municipal governments. The initiative has financed schools, health facilities, roads and water systems, especially in rural areas with limited public funding.
With migration on the rise, remittances will remain a growing pillar of Africa’s financial inflows. A recent African Futures and Innovation study finds that if robust financial reforms are pursued, Africa’s net remittances will reach approximately US$168.2 billion by 2043, compared to US$137.2 billion under the baseline trajectory.
Deliberate government efforts could turn remittances into engines of inclusive economic development. As Africa navigates debt stress, climate pressures, economic transformation and global power shifts, remittances must be reconsidered. They are a strategic asset for Africa’s financial future.
This article was first published in Africa Today,
Marvellous Ngundu, Research Consultant, African Futures and Innovation, ISS
Julia Baum, Communications Consultant, African Futures and Innovation, ISS
