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African news, satire and analysis with a focus on East Africa

Diaspora Remittances: The Future of Financing Sustainable Development

23 Jun 2019

Government-funded partnerships manager at Comic Relief, Chibwe Henry, highlights  the potential impact of diaspora remittances on the economies of recipient countries in the Global South - the opportunities and challenges. 

 Source: Pew Research Center.

 

 

Today, we celebrate the fifth annual International Day of Family Remittances (IDFR). officially adopted by the United Nations Resolution on International Migration and Development, it was a milestone in recognising Diaspora contributions to the lives of their families and economies in their countries of origin. The term ‘Diaspora’ itself has many connotations and is now generally used to describe people who reside outside their country of origin or heritage but maintain active links with it. 

 

Remittances help families put food on the table, send their children to school and support economic development and job creation in countries of origin. Diaspora remittances also go beyond financial contributions to include transfers of human, social and cultural capital. Furthermore, in their countries of settlement Diaspora regularly fill critical labour gaps, create jobs as entrepreneurs and pay their taxes and make social security contributions. 

 

In addition, as indicated in the Advancing The Financial Sustainability of Civil Society in Africa Report, as civil society in Africa works to mitigate financial sustainability challenges, diaspora remittances are a part of the domestic resource mobilisation strategies that are being utilised. Therefore, remittances represent an important source of development capital for countries in the global south, and when supported by appropriate policies and mechanisms, could significantly contribute to their inclusive and sustainable economic growth and development. For example, in Somalia remittances account for more than a quarter of the country’s GDP. 

 

The Global Outlook on Financing for Sustainable Development 2019 report indicates that, as of 2017, an estimated 258 million people lived in a country other than their country of birth, 49% more than in 2000. This increase in the migration flows to OECD countries since 2010 was spurred by conflicts and economic hardship. However, this has also been accompanied by steadily increasing remittance volumes that reached USD 466 billion in 2017, approximately three times the value of official development assistance (ODA). The report also confirms that these remittances flows are steadily growing while other essential sources of financing for sustainable development are declining. In particular, while ODA remains steady, it is still falling short of international commitments, and in terms of individual flows of finance to developing countries, the drops in domestic private investment and foreign direct investment (FDI) are major causes for concern. 

 

This growing gap in financing for sustainable development has been identified as a significant global threat. Hence, it is exciting to read that according to the World Bank’s latest Migration and Development Brief, remittances to low- and middle-income countries reached a record high in 2018, with their official estimates at $529 billion, an increase of 9.6 percent over the previous record high of $483 billion in 2017 while global remittances that include flows to high-income countries reached $689 billion in 2018, up from $633 billion in 2017. 

 

Therefore, while the observation of the International Day of Family Remittances represents an invaluable opportunity to recognise both the efforts of migrant workers globally and to strengthen current partnerships, at the same time, it is an important space to create new synergies among sectors to promote the development impact of remittances around the world. 

 

The 2030 Agenda for Sustainable Development aims to reduce the transaction cost of remittance to less than 3 percent. 

 

It is also important to acknowledge the challenges that mobilising Diaspora communities to raise developmental finance entails. One of these key challenges relates to the difficulties of collecting data on Diaspora populations as emigrants are not automatically members of diasporas, and second- and third-generation descendants of migrants may also be considered or consider themselves to be part of a diasporas group. 

 

Nonetheless, the 2030 Agenda for Sustainable Development has shifted the ambitions of Financing for Sustainable Development beyond aid to also include private investment, remittances, taxation and philanthropy. SDG Goal 10.c epitomises the remittance ambition; By 2030, reduce to less than 3 per cent the transaction costs of migrant remittances and eliminate remittance corridors with costs higher than 5 per cent. This is because, unfortunately, although remittances from African migrants, for example, play a vital role in supporting health, education, food security and productive investment in agriculture, the costs of sending them still remain very high. 

 

Hence, as the Overseas Development Institute report summed up, the benefits of remittance transfers are lost in intermediation as a result of high charges. For Africa’s diaspora, they have to pay 12% to send $200 – almost double the global average. The impact of these excessive fees that cost local economies $1.8 billion, equivalent to paying for the education of some 14 million primary school-age children in sub-Saharan Africa – half of the out-of-school total or to provide clean water to 21 million people, is counter-intuitive to global development efforts. 

 

As a result, establishing how best to effectively and efficiently mobilise diaspora communities to raise developmental finance through leveraging the nexus between migration and development remains elusive for many national governments, development partners, civil society organisations, donors, the private sector and other relevant development actors. They all continue to grapple with how to define and categorise diaspora communities in order to leverage the resource they represent. Nevertheless, many of these debates are informed by the policymakers’ perspective and not the diasporas. 

 

Hence, going forward, relevant development actors should endeavour to inform their debates from a balanced view if they are to gain a fresh perspective on effective ways of how best to mobilise diaspora savings, diaspora philanthropy, and how to leverage remittances from the perspective of diaspora communities themselves. However, it is also important not to oversell what the diaspora could do in the development space. Diaspora are an important vector in development, but they cannot solve Africa’s problems because these are structural and require systemic change to ameliorate. Diaspora should therefore not be touted as the ‘Silver Bullet’. 

 

Nonetheless, given the significant shift in the development finance landscape and the consequent impact on global development processes within the international community, and in particular, on the shaping of effective strategies that contribute to achieving sustainable development and help to secure its financing, attention needs to be rebalanced from the global/national level to include the diaspora communities’ perspective with regard to how they would like to be engaged in order to contribute to development. This will go a long way in informing relevant migration and development policy debate in the international fora. 

 

If you're interested in connecting with us, please do join the 249 Collective group where we will be carrying on the conversation about all things diaspora within the international development and humanitarian spaces.

 

@chibwe_san

 

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 Msomi is a website offering a blend of news, satire and insightful observation on African social and political affairs. 

 

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