Remittances: A Hidden Resource for Locally-Led Development
By Is-Haaq Ali
Over the last decade, I have witnessed first hand the immense impact of remittances and the critical role these funds play in sustaining communities. I have been working in a money transfer shop in Toronto for nearly 10 years. Our primary customer base – nearly 80% – are people, originally from Somalia, who are sending money back home to their families. For many, these transfers sent back home are more than just money—they’re a lifeline that supports education, healthcare, and a brighter future.
Working at both the currency exchange/remittance store and now as an intern at Adeso, I have an even better sense of just how impactful the remittance industry is and the role it can play in locally-led development.
For example, I have a client that sends most of his paycheck back home to Mogadishu every 2 weeks in the hopes that he can bring his family over here to Canada for a better life. I have another client that sends money to his elderly parents in Hargeisa and makes sure they visit in the summer months and head back home during the colder winter months here in Toronto.
What are Remittances?
Remittances are the money sent by diaspora to their home countries; and they are a financial lifeline for millions of families across the globe, particularly in the Global Majority / Global South nations.
In 2023 alone, global remittances exceeded $650 billion, outstripping official development assistance (ODA) and foreign direct investment (FDI) in many countries.
Harnessing Remittances to be Most Impactful
The potential for us to harness remittances lies in their ability to complement and amplify these funds, turning individual contributions into broader community benefits. At Adeso, we want to be a part of the solution for helping make remittances more strategic. We are building tools and thinking of innovative financing mechanisms to get money more directly to communities and organisations in the Global South with the greatest impact.
Adeso is currently in the planning and design phase of the Proximate Fund. The Proximate Fund is a pooled donor collaborative made by Africans for Africans. It is being intentionally designed as a managed fund that will directly reach local civil society and social entrepreneurs on the continent through investing in a new funding infrastructure. Within the design phase of the Proximate Fund, the team at Adeso is critically thinking of how to harness remittances to be more collaborative and be strategic to scale impact most.
Navigating the Challenges of Remittances
While the potential benefits of remittances are clear, there are also many challenges as well. Highlighting some of those challenges feels important.
For example, if I was going to send money to a family member in Somalia, say $100 through a money transfer company, for them to get the full amount, I would need to pay $106 (or each transaction has a 6% fee attached). The more you send the cheaper the fees get, sort of like tiers. Once you pass $1000 the fee becomes 5%, and $2000 it becomes 4% etc. Not everybody can afford to send a lumpsum amount of money to their families back home because many are living paycheck to paycheck and sending what they earn back home biweekly.
At the same time, providing recipients with the knowledge and tools to manage their remittances effectively is essential to ensuring that these funds are used in ways that promote long-term economic growth and community resilience.
High transaction costs, a lack of financial literacy among recipients, and restrictive regulatory environments can all limit the effectiveness of remittances. Being aware of this is key to remittances being more strategic in driving locally-led change.
The Power of Remittances to Make a Greater Impact
Despite their scale and impact, remittances remain an underutilized resource in the humanitarian aid and development system, which often overlooks their potential to drive locally-led change.
Unlike traditional aid, remittances are a consistent and stable source of income, largely unaffected by political or economic fluctuations. They empower recipients by giving them the means to directly address their needs, whether it’s paying for education, healthcare, or basic household expenses. This autonomy makes remittances a unique tool for fostering community driven work and financial inclusion—two critical areas where we can make a significant impact.
By recognizing the power of remittances and working to enhance their impact, we can help build more resilient communities that are less dependent on external aid and more capable of driving their own development.
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Is-Haaq Ali is currently Adeso’s Digital Communications Intern and contributed to Adeso’s communications and social media strategies. A recent graduate of Humber College, Is-Haaq completed a post-graduate certificate in International Development. Based in Toronto, Canada, he is passionate about global justice, and the decolonisation of aid. Is-Haaq’s interest in the decolonisation of aid, sparked by his international development studies, drives his efforts to promote genuine partnerships that empower local communities. He is committed to challenging the paternalistic nature of traditional aid models and advocating for approaches that respect local governance structures and cultural identities, fostering long-term sustainable development.