The Impact of Remittances in Lesotho, Malawi and Zimbabwe

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Households in sub-Saharan Africa have a long tradition of cross-border migration and associated remittances. During periods of economic or political instability, or simply when opportunities at home are scarce, the funds remitted by migrants are a lifeline that can help keep food on the table, children at school, and roofs over heads. However, from an academic perspective, remittances have not always been viewed favourably, with many commentators expressing concern over the hollowing out of economically active populations from the communities from which migration occurs, and the possible subsequent inflationary pressures which remitted funds may cause in those communities.

Increasingly, the literature increasingly reflects a more nuanced view of the economic role played by remittances. A key insight has been that, while remittances can and do play a role in supporting development in origin communities, remittances alone are not sufficient to deal with the often severe economic problems that spurred migration to begin with. Any examination of the impact of remittance receipt on entrepreneurship, for example, must acknowledge that the quality of the business environment may have a severely dampening effect. Even so, evidence is growing that remitted funds tend to support productive investments and activities in origin communities, via a number of channels:

  • Human capital formation: by supporting household consumption and educational expenditures, remittances support better human capital outcomes in recipient households
  • Improving market access: cash remittances improve the ability of recipients to access formal markets, and in doing so improve their productive capacity. For example, remittances may provide the cash necessary to purchase fertilisers and improve agricultural output, or may mitigate against the impact of lack of access to financial services
  • Asset accumulation: the accumulation of both human capital and physical assets can play an important role in facilitating the movement of households out of poverty, and the receipt of remittances may help to finance such asset accumulation

Given these insights, we examined evidence of the impact of remittances on the communities and economies of Lesotho, Malawi and Zimbabwe. The research combined a review of existing literature, primary research among remittance senders and recipients, and original data analysis; and explored the mechanisms by which remittance receipt affects developmental outcomes.