MACHARIA: Diaspora remittances not transforming economies but keeping households afloat

Every month, a familiar transaction takes place. A Kenyan nurse in Manchester sends school fees. A software developer in Toronto clears a hospital bill. A driver in Doha pays rent back home.

These are private decisions, driven by duty and affection. Taken together, they now form Africa’s single largest financial inflow.

According to the World Bank, African diaspora remittances reached about $100 billion (Sh12.9 trillion) in 2024. That is more than all foreign aid to the continent combined, which the OECD estimates at $42 billion (Sh5.4 trillion). It is also larger than total foreign direct investment, which UNCTAD places at nearly $48 billion (Sh6.2 trillion). This is not auxiliary capital. It is Africa’s primary source of external finance.

Yet it is not transforming economies. It is keeping households afloat.

Roughly 75 per cent of remittances are used for survival. Food. Rent. School fees. Medical care. These are not discretionary choices. They are substitutes for failing public systems. Where healthcare breaks down, a sibling abroad intervenes. Where wages collapse, the diaspora absorbs the shock. This is not resilience. It is a quiet outsourcing of state responsibility.

Only about $25 billion (Sh3.2 trillion) a year remains for investment across the entire continent, and even that figure flatters reality. The World Bank’s Remittance Prices Worldwide database shows that sending money to Africa costs an average of 8.2 per cent. The United Nations has set a global target of three per cent under SDG 10.c. Africa is nowhere close. The difference is not technical. It is extractive. Nearly $8 billion (Sh1 trillion) a year is lost to intermediaries before money reaches families or businesses.

There is also a visibility problem. A significant share of remittances moves through informal channels. Cash carried by travellers. Trust-based networks operating outside formal banking. In Somalia, Zimbabwe and the Democratic Republic of Congo, informality is not an exception. It is a rational response to expensive, exclusionary systems. The official $100 billion  (Sh12.9 trillion) figure almost certainly understates the true scale.

Kenya is a classic example of hope and despair. Data collected from the Central Bank of Kenya indicates that in 2024, remittances received into Kenya by citizens working in other countries were in excess of $5 billion (Sh644 billion), surpassing Sh1 trillion in annual remittances. Remittances currently exceed earnings from horticulture, coffee and tea. They form the foundation for foreign exchange stability.

President William Ruto has acknowledged this, calling diaspora remittances Kenya’s largest source of foreign exchange. His administration has urged Kenyans abroad to see themselves not only as family supporters, but as partners in national development. The creation of a State Department for Diaspora Affairs signals that recognition.

But recognition is not a strategy. Most remittance flows still end in consumption. Transfer costs remain stubbornly high. Structured investment vehicles are scarce. Trust in public institutions remains thin. Kenya, like much of Africa, continues to treat its largest investor as an emergency response mechanism rather than a strategic asset.

Technology is no longer a constraint. Diaspora-led fintech platforms have already reduced costs, widened access and moved billions efficiently. The binding limits are regulatory inertia, weak coordination and political hesitation.

The World Bank and African Development Bank estimate that with lower transfer costs, wider digital adoption and deliberate integration of diaspora capital into national investment plans, remittances to Africa could reach $500 billion (Sh64.5 trillion) by 2035. That would rival domestic tax revenues in several economies. But growth without structure will only scale the current dysfunction.

Three policy shifts are overdue. First and foremost, governments need to break up long-standing monopolies and permit real competition in the remittance markets. Second, they must provide reliable channels for diaspora investment, such as transparent bonds, pooled funds and infrastructure entities with clear governance and rewards. Third, remittances, rather than being considered acts of individual charity, must be legally regarded as strategic external funding in macroeconomic planning.

This shift was accomplished years ago by nations like the Philippines and Bangladesh. They transformed survival money into development financing and centred institutions around migrant capital. Africa and Kenya are capable of doing the same.

Innovations evangelist and a PhD candidate | [email protected]