man waiting outside a convenience store, the words "money transfer" are written over the awning implying the sending of remittances.

Remittances and Development: a complicated relationship

By Caroline Wanjiku Kihato and Katja Holtz

June is a month of International Days. From World Ocean Day to International Asteroid Day, not to mention the fact that June is Pride Month, this is a month for commemoration and reflection.

International Day of Family Remittances

Of the days singled out for raising awareness  in June, we’d like to focus on International Day of Family Remittances (IDFR, 16/6). The issue of remittances can be a controversial topic so this month we’ll be exploring the ways that remittances contribute to local development and poverty alleviation while at the same time, inadvertently, entrenching inequalities. 

“The IDFR recognizes more than 200 million migrant workers, women and men, who send money home to over 800 million family members. This day further highlights the great resilience of migrant workers in the face of economic insecurities, natural and climate related disasters and a global pandemic.” (UN website)

According to the International Monetary Fund, remittances are the part of a migrant’s earnings that they send home to their families in the form of either cash or goods. These are usually handled formally and informally by sending agents, who manage the transaction from payee to recipient, for a fee. Their importance in supporting migrant households around the world cannot be overstated. Just as an illustration of this, remittances are the most significant source of external financial flows to Africa, and until the pandemic, were on the rise [1]. 

Figure 1: Remittance Flows to Low- and Middle-Income Countries Are Larger than Official Development Assistance and More Stable than Private Capital Flows, 1990–2019 [2]
Figure 2: Remittance relative to foreign direct investment, official development assistance and portfolio and equity flows [3]

The evidence suggests that remittances alleviate poverty, support livelihoods, as well as strengthen community resilience. For instance, a number of cross-country analyses have found that remittances reduce the proportion of poor people in a population, in Uganda the reduction in poverty was found to be as high as 11 percentage points.

Remittances vs Development Aid

That said, these figures, with their emphasis on populations, tend to obscure how remittances generally operate on a grassroots level. They allow individuals and households to develop a degree of financial independence and achieve social mobility that moves them out of a state of poverty. What remittances cannot do, however, is change the structural conditions that keep people poor. They don’t restructure society, narrow the wealth gap or even the playing field.

For this reason, overreliance on remittances as a substitute for national development aid can render a country more vulnerable in the long run. Although they can raise individuals and households out of poverty and provide them with stability, remittances are vulnerable to disruption by various external events—events such as COVID. Remittances declined across the continent due to the pandemic. With losses of between 15%-30%, Southern African Development Community (SADC) members Mozambique, Seychelles Lesotho, and Namibia suffered the largest declines on the continent [4]. With the economic contraction and subsequent job losses experienced during the pandemic lockdowns, the region’s marginalised communities became even more vulnerable.

Besides international crises such as the pandemic, regional shifts in politics can also affect the flow of remittances. As the region’s largest economy, remittances from South Africa play a significant role in supporting households in the region, particularly in Zimbabwe, Mozambique and Lesotho. Given the country’s economic stagnation, high unemployment levels, and intensifying xenophobia, reliance on South Africa may prove problematic. 

Figure 3: Remittances from South Africa In 2018 to the rest of the region totalled R21 bn [5]

If South Africa, and other countries like it, are no longer able to act as economic buffers for fragile communities around the world, we are likely to see growing poverty and the erosion of households’ ability to deal with external shocks. 

There must be some degree of balance, then, in how remittances are factored into conversations about development, poverty alleviation, and international aid. Without disregarding the fundamental role they play in the lives of migrants and their families, it is important to account for the gaps remittances cannot fill. 

Asking The Right Questions

Paying attention to the details and asking the right questions might teach us something about the issues that remain to be solved. 

  • Who is able to migrate, find work, and send remittances in the first place?
  • Subsequently, who can’t take advantage of migration as a strategy in the same way? 
    • Usually, it is those that are better off in a community that are the ones who can travel to seek job opportunities and then remit some of their income back to their families.
  • Under what conditions do remitting migrants work?
  • What are remittances typically used for? 
  • Do remittances supplement other income streams or serve as the primary source of income?

Migrants are often very resilient, facing and embracing unprecedented challenges in a bid to improve their lives and the lives of their loved ones. Remittances are evidence of this resilience. That being said, migrants and hosts alike rely on individual and household strategies, such as remittance, as well as national and international strategies that serve to reduce poverty and inequality on a more comprehensive scale.


1 African Development Bank, Africa Visa Openness Report 2021, pg. 19.

2 KNOMAD, Migration and Development Brief 31 2019, pg.1.

3 Ratha, D., Keep remittances flowing to Africa, Africa in Focus Brookings, available from: 

4 African Development Bank Group, African Economic Outlook 2021: From Debt Resolution to Growth: The Road Ahead for Africa (Abijan: African Development Bank Group, 2021), 21.

5 Finmark Trust and Genesis Analytics, SADC Remittance Values and Volumes (Johannesburg: Finmark Trust, 2020), 5.