AFRICA'S HIDDEN SAFETY NET: REMITTANCES AS AN INFORMAL SOCIAL PROTECTION SYSTEM
1. Introduction
Remittances are commonly examined in the literature as an outcome of international migration and as a component of countries' external financial flows (World Bank, 2024; IOM, 2024). Their significance, however, extends beyond migration and foreign-exchange earnings. Remittances represent direct transfers between migrants and households in countries of origin and can influence household consumption, investment, education, healthcare and resilience to economic shocks (IOM, 2024; World Bank, 2024).
The scale of these flows makes their welfare function particularly important in Africa. In 2023, Africa received approximately US$100 billion in remittances, equivalent to nearly 6% of the continent's GDP. This exceeded the continent's receipts of ODA, estimated at US$42 billion, and FDI, estimated at US$48 billion (Fliss, 2024). The OECD likewise identifies remittances and FDI as the two largest external financial flows to Africa, together equivalent to 6.4% of the continent's GDP in 2021 (OECD, 2023).
This article examines whether remittances can reasonably be understood as an informal social protection mechanism in Africa. The argument is not that remittances replace public social protection. Rather, their direct household orientation, flexibility and capacity to support families during periods of economic stress mean that they perform several functions commonly associated with social protection.
2. Remittances as Informal Social Protection
Social protection comprises policies and programmes designed to prevent and reduce poverty and vulnerability, while strengthening people's capacity to manage risks and withstand shocks (ILO, 2021). Formal systems generally include social assistance, social insurance and labour-market interventions. Yet households also rely on informal arrangements, including family transfers, community support and other private mechanisms, to manage economic insecurity, particularly where formal coverage is incomplete (ILO, 2024).
Remittances fit within this informal architecture. They are private transfers rather than public benefits, but they can provide income to households when earnings are inadequate, help finance essential expenditure and provide resources when households experience economic shocks (IOM, 2024; World Bank, 2024).
The distinction is important. A formal social protection programme is generally based on defined eligibility criteria and public or collective financing. Remittances are instead based on social and familial relationships and depend on the existence of migrants with the capacity and willingness to provide financial support. They should therefore be understood as complementary informal protection, rather than an alternative to public social protection.
3. Remittances' Uneven Importance Across Africa
The continental aggregate conceals substantial variation between countries. Remittances are not equally important to all African economies. In some countries they represent a relatively modest share of national income, while in others they constitute a major component of GDP. Figure 1 remittances as a percentage share of GDP. The figure also illustrates the variation of remittances significance across the continent.
Figure 1: Remittances as a Share of GDP in African Countries, 2024
Source: Author's compilation based on World Bank/KNOMAD (2025) and World Development Indicators.
The geographical distribution demonstrates why aggregate continental figures alone are insufficient for understanding the welfare role of remittances. The World Bank identifies The Gambia as having the highest remittances-to-GDP ratio in Sub-Saharan Africa, followed by Lesotho, Comoros, Cabo Verde, Guinea-Bissau and Zimbabwe (Ratha et al., 2024). For these economies, remittances are not simply an additional source of foreign exchange, their scale relative to domestic economic activity means that changes in remittance flows can have significant implications for household income and aggregate demand.
The broader trend is also significant. The World Bank estimates that remittances to Sub-Saharan Africa reached approximately US$54 billion in 2023, with Nigeria, Ghana, Kenya and Zimbabwe among the largest recipients in absolute terms (Ratha et al., 2024). This illustrates an important distinction. Countries with the largest absolute remittance inflows are not necessarily those with the greatest remittance dependence. A large economy can receive substantial remittances while having a relatively low remittance-to-GDP ratio, whereas smaller economies can receive comparatively modest absolute amounts that represent a substantial share of national income. This distinction reinforces the importance of examining remittances from a household welfare perspective rather than solely as a macroeconomic flow.
4. What Remittances Do for African Households
The strongest case for conceptualising remittances as informal social protection lies in their household-level functions.
i. Income support and poverty reduction
Remittances increase the financial resources available to recipient households and can therefore support consumption of food, housing and other necessities. Recent evidence from 38 major remittance-receiving countries across Africa, Asia and Latin America finds that remittances are associated with reductions in poverty measured through both consumption expenditure and poverty headcounts (Ojeyinka and Ibukun, 2024). The evidence is not, however, uniformly positive. Using data for 44 Sub-Saharan African countries, Acheampong et al. (2021) find a more complex relationship between remittances and poverty, while financial development is associated with poverty reduction. This suggests that remittance inflows do not automatically translate into better welfare outcomes. Their effects depend partly on the financial and institutional environment in which households receive and use them.
ii. Education, healthcare and household investment
Remittances can also support expenditure on education and healthcare, allowing households to finance services that might otherwise be constrained by inadequate income (IOM, 2024). In this respect, remittances potentially combine immediate income support with investments in human capital that can affect longer-term household welfare.
iii. Consumption smoothing and resilience
Perhaps the most important social-protection function is the ability to help households manage shocks. Remittances can provide financial resources when households experience income losses, illness or other forms of economic stress (IOM, 2024; World Bank, 2024). This creates an informal risk-sharing mechanism in which households diversify sources of income across geographical locations. Income earned by migrants elsewhere can support relatives facing economic difficulties at home.
The resilience of remittances during major crises reinforces this function. Remittance flows proved more resilient than initially expected during the COVID-19 pandemic, demonstrating the importance of migrant support to households during periods of severe economic disruption (World Bank, 2021).
5. The Limits of Remittances as Social Protection
The social-protection function of remittances should not be overstated.
First, access is unequal. Remittances depend on migration networks and on migrants having the income and willingness to remit. Households without migrant connections cannot access this form of support, while the poorest households may face greater barriers to migration in the first place (IOM, 2024). Second, remittances are not guaranteed. They depend on the economic circumstances of migrants and can therefore be affected by unemployment, economic downturns and changing conditions in destination countries (Ratha et al., 2024). Third, remittances are private rather than universal transfers. Unlike public social protection, they are not based on nationally determined eligibility criteria and cannot provide a minimum level of support to all vulnerable households (World Bank, 2025). Finally, significant resources are lost through transfer costs. The UN Office of the Special Adviser on Africa reports that sending US$200 to Africa cost an average of approximately 8.5% in 2022, substantially above the Sustainable Development Goal target of 3% (Katjomuise and Fliss, 2023). Reducing these costs would increase the amount of money ultimately reaching recipient households without requiring migrants to increase the amount they send.
6. Policy Implications and Conclusion
The evidence supports viewing remittances as one of Africa's most significant informal social protection mechanisms. Their scale is substantial, but their more important characteristic is that they place resources directly in the hands of households. They provide income support, help households meet essential expenditure, finance human capital and enable families to share risks across borders (IOM, 2024; Ojeyinka and Ibukun, 2024).
This does not mean that remittances should substitute for public social protection. Their unequal coverage, dependence on migration and exposure to economic conditions in destination countries prevent them from providing the universal protection that formal systems are designed to deliver. Rather, remittances should be understood as a complementary layer within Africa's broader welfare architecture.
This perspective has practical policy implications. Reducing remittance-transfer costs, increasing competition among providers, expanding digital payment systems and improving financial inclusion can increase the amount of each transfer that reaches households (Katjomuise and Fliss, 2023; OECD, 2024). Governments should also recognise remittance recipients within broader financial-inclusion and household-resilience strategies, while continuing to invest in formal social protection systems.
The central message is therefore straightforward. Africa's migrants are already providing a substantial, privately financed safety net to households across the continent. The policy challenge is not to replace this informal system, but to ensure that more of the resources migrants send home reach the families that depend on them, while building formal systems capable of protecting those who do not have access to remittance networks.
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