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. This is according to the 2025 State of Africa’s Infrastructure Report published by the Africa Finance Corporation (AFC), which highlights the untapped potential of diaspora finance as a development tool.
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.
Remittances now exceed foreign direct investment (FDI) and official development assistance (ODA) in many African countries, making them one of the most stable sources of external finance. Yet despite their scale, they are rarely captured in national financial systems beyond the point of entry.
Redesigning the Flow
The AFC calls for a shift from remittances being solely for household support to becoming leveraged capital for national development. This includes;
- Diaspora bonds to allow structured investments in infrastructure
- Remittance-linked savings products through fintech platforms
- Digitised investment channels to improve trust and transparency
- Tax incentives for diaspora contributions to national development funds
The report notes that while diaspora bonds have been attempted in countries like Nigeria, Ethiopia, and Kenya, uptake has been limited due to weak product design, currency risk, and governance concerns. However, newer models using blockchain and digital identity platforms are improving transparency and accountability, renewing interest among African nationals abroad.
Digital Tools Are Key
A significant enabler of this transition is the digitalisation of remittance channels, which has grown rapidly with mobile money and fintech adoption. By linking remittance platforms with micro-savings, pension accounts, or domestic investment vehicles, countries can begin to convert short-term flows into long-term capital.
The report highlights emerging examples in Kenya and Ghana, where banks and fintech startups are partnering to offer remittance–to–savings and remittance–to–insurance products targeting low- and middle-income households.
Unlocking the Multiplier Effect
If just a fraction of annual remittances were redirected into structured financial products, the report suggests, African countries could unlock billions in investable capital each year. This would strengthen domestic capital markets, reduce dependence on volatile external finance, and align diaspora contributions with national development priorities.
However, doing so requires policy support. The AFC calls on governments and central banks to:
- Lower transaction costs
- Harmonise remittance regulations
- Create safe and credible investment frameworks
- Foster collaboration between diaspora networks and financial institutions
A Shift in Strategy
The report suggests that rethinking the role of remittances, beyond their traditional role as family support, is critical to unlocking new sources of infrastructure finance. As global capital markets tighten, leveraging diaspora wealth may become one of the most practical and politically feasible ways for African countries to close funding gaps without accumulating unsustainable debt.
