How Africa Can Make the Most of Diaspora Finance

Feb 6, 2024 | Research

Remittances by the African diaspora might lack the structure and formality of traditional philanthropy, but they play a central role in keeping people out of poverty and advancing community prosperity. Formal donors should be seeking ways to amplify their impact.

LONDON – The African diaspora is the biggest funder of change on the continent. Since remittances are informal, often unreported, and narrowly targeted, they tend to be overlooked. But their scale is large, sustained by diasporic Africans’ powerful commitment to improve the lot of family members and communities they love. Formal givers like me should not only learn from this, but also seek opportunities to collaborate with the diaspora to strengthen its members’ impact.

In 2022, the 160 million Africans who live outside of the continent sent home more than $95 billion in remittances. Of that, about $53 billion went to countries in Sub-Saharan Africa, with Nigeria, Ghana, Kenya, and Zimbabwe the top destinations. This compares with $30 billion in foreign direct investment and just $29 billion in official development aid for Sub-Saharan Africa.

Notably, FDI and aid declined last year, as global challenges, such as surging inflation and the Ukraine war, caused donors to reduce or redirect their giving. But remittances increased for many of the same reasons: Africans in the diaspora knew that their families and communities were grappling with food insecurity, as well as natural disasters like floods and severe drought.

After ensuring that families are fed, remittances are used mostly to fund health and education expenses. There is good reason for this: investments in health and education are the single best means of putting people on a path toward prosperity. Unfortunately, African countries still face a huge financing gap for human-capital development.

Africa’s health financing gap amounts to at least $66 billion. When it comes to achieving the Sustainable Development Goal targets of delivering universal pre-primary, primary, and secondary education by 2030, Sub-Saharan African countries face a shortfall of $70 billion per year, on average. Remittances will not close these gaps, but they can go further.

Members of the African diaspora have often shared with me their desire to expand their giving beyond their immediate family or community. The problem, they explain, is that they do not know which local organizations they can trust. That is why credible actors should be connecting the diaspora with community-based organizations that need and deserve support.

Like the diaspora, those running community-based organizations in Africa are often motivated by love for their communities and a deeply held commitment to catalyzing lasting change. Thanks largely to this passion, they have often proved adept at leveraging limited resources to achieve impressive results.

But with more funding, community-based organizations could do even more. As it stands, they often lack the know-how to engage in effective fundraising or reporting – a shortcoming that severely limits their ability to raise funds from structured philanthropies. The newly created Masana wa Afrika foundation – of which I am a funder and board member – is committed to helping organizations overcome this weakness, by providing them with small grants and tailored support.

More efforts of this type are needed. We know that the community-based organizations we support are trustworthy and engaged in hugely important work, from supporting disabled children in Lesotho to providing life-saving nutrition to babies in Uganda. What if – through Masana wa Afrika or a similar organization – members of the African diaspora could find out about such organizations, and support them directly?

The benefits of such an approach would extend beyond the communities being directly targeted. If the diaspora is doing more to finance cost-effective, community-based projects, big funders and structured philanthropies can focus their attention and resources on tackling larger-scale problems, such as eradicating neglected tropical diseases, closing the gender gap, and improving food security.

But truly maximizing the impact of remittances requires more data. Part of the reason why diaspora giving has been overlooked for so long is that little concrete data on inflows and impact are available. We have estimates of total funds sent to particular countries. But we lack a complete picture of volumes, preferred channels, and frequency.

The good news is that the World Bank is already working on filling gaps in the data on incoming remittances. But more robust ways to track and measure the impact of remittances on communities are still needed. The challenge will be to find ways to capture, collate, and share people’s stories – of children educated, medication acquired, and crops planted thanks to diaspora giving – in a form that can guide decision-making.

Giving by the African diaspora might lack the structure and formality of traditional philanthropy, but it plays a central role in keeping people out of poverty and advancing community prosperity. Moreover, given the personal motivations behind it, diaspora finance is support people can count on. If philanthropic organizations commit to enhancing its impact, we might be surprised by what we can achieve.