As official development assistance begins to shrink and global uncertainty tightens traditional funding channels, Africa is being urged to look inward, and outward, to mobilize capital. A key recommendation in the 2025 African Economic Outlook (AEO) report is for governments to harness the untapped potential of the African diaspora as a strategic source of investment and economic resilience.
With remittance flows to Africa reaching $91.1 billion in 2023, despite a 6.2% contraction, diaspora income remains one of the most stable sources of external finance. Yet, the report notes that most of this money goes into consumption, not long-term investment or development. To close Africa’s $1.3 trillion annual financing gap for the Sustainable Development Goals (SDGs), the African Development Bank suggests that diaspora capital must be repositioned as a catalyst for business and infrastructure investment across the continent.
From Remittances to Investment Capital
While remittances are critical for household support, covering expenses such as food, education, and healthcare, the AEO argues for new mechanisms that can channel a portion of this flow into productive investments, including:
•Diaspora bonds for infrastructure and green projects
•Equity in local enterprises and startups
•Real estate and pension-backed instruments
•Investments in SMEs and value chains in agriculture, healthcare, and tech
The report emphasizes the need for clear, trustworthy financial instruments and policy reforms that make it easier, and more attractive, for Africans abroad to invest at home.
Trust and Transparency Are Crucial
One of the barriers to diaspora investment remains a lack of trust in governance and financial institutions. Concerns about corruption, political risk, weak legal enforcement, and poor returns have historically discouraged diaspora communities from making long-term financial commitments.
The AEO recommends several actions to rebuild this trust:
•Create diaspora-focused investment platforms backed by credible institutions
•Improve regulatory oversight and investor protections
•Offer guarantees and incentives for diaspora-targeted financial products
•Digitize processes for remote investment and participation in local markets
The Untapped Power of “Brain Circulation”
Beyond money, the African diaspora represents a deep pool of human capital and knowledge that can fuel innovation, entrepreneurship, and skills development. The report highlights the concept of “brain circulation”, where skilled professionals abroad return home temporarily or virtually to mentor, invest, and build capacity.
This model is already gaining traction in sectors like health, technology, and education, where African professionals are launching joint ventures, tech startups, and training programs that combine global expertise with local relevance.
The report also calls for more African countries to develop structured diaspora engagement strategies, including:
•Diaspora skills databases
•Incentives for short-term returnees
•Partnerships with diaspora chambers of commerce
•Cross-border mentorship and entrepreneurship exchanges
Policy Recommendations and Regional Examples
The AEO encourages governments and regional blocs to;
•Embed diaspora financing within national development strategies •Collaborate with multilateral institutions to de-risk diaspora investments
•Use the AfCFTA as a platform to attract cross-border diaspora capital flows into pan-African projects
Countries like Ethiopia, Nigeria, and Ghana have experimented with diaspora bonds and special investment windows, though success has been mixed due to regulatory and governance constraints. Africa’s diaspora is more than a sentimental lifeline, it is a powerful engine of capital, skills, and market connectivity. With the right financial instruments, policy reforms, and trust-building measures, African nations can turn diaspora engagement into a strategic pillar for development finance, private sector growth, and long-term economic resilience.
In relation, a report published by the Africa Finance Corporation (AFC), says Africa received an estimated $95 billion in remittances in 2024, but most of it is spent on short-term consumption, missing an opportunity to mobilise long-term capital for infrastructure and development. The report argues that remittance flows, while critical to household survival, are underutilised as a formal investment resource. Without policy reforms and financial innovation, this capital remains fragmented and difficult to channel into productive sectors such as energy, transport, housing, and manufacturing.
