Remittances exceed aid but costs limit their development impact
Published on 25 September 2026 at 04:58 GMT
By Editorial Team SDG10
Migrant remittances finance everyday life across borders, paying household bills while creating room for education, healthcare, housing and small businesses. Their scale puts them at the centre of development finance debates. Yet the money belongs to families, raising a policy question: how can governments improve the conditions under which it travels and is used without directing private household choices?
The International Fund for Agricultural Development (IFAD) reported on 14 September 2026 that remittances to low- and middle-income countries reached US$728.6 billion in 2025, more than four times official development assistance from members and associates of the OECD Development Assistance Committee that year, using preliminary aid data. The comparison demonstrates the size of family transfers, but does not make them interchangeable with aid. A payment to a relative and funding for a public service have different recipients, purposes and decision-makers.
The aggregate also says little about an individual household. A large national inflow does not establish that every community benefits, or that a family receiving money can afford to save. The developmental question extends beyond how much enters a country to what recipients can access after it arrives.
What family transfers finance
In its explainer on remittances, IFAD describes around three-quarters of transfers as meeting immediate household needs, with the remainder supporting education, healthcare, housing and small enterprise. This is a broad global characterisation, not a fixed spending rule or a budget applicable to every family. It captures both immediate support and the possibility of building assets over time.
The categories overlap in practice. Paying for treatment can meet an urgent need while protecting a person's ability to work. Housing expenditure can provide shelter as well as create an asset. Education spending can support future earnings, although a school payment alone cannot establish what learning or employment outcome follows. These distinctions matter when claims about developmental impact are based only on amounts transferred.
Small businesses offer another route from household finance into community activity. Money available for stock, equipment or farm inputs can support an enterprise, but a remittance does not by itself demonstrate that a business is viable. Demand, costs and the recipient's circumstances remain separate questions. Counting all money sent home as investment would conceal the ordinary living expenses it also finances.
The cost of crossing borders
The World Bank measured an average cost of 6.36 per cent for sending US$200 in the third quarter of 2025. Its Remittance Prices Worldwide report put the average for transfers to sub-Saharan Africa at 8.46 per cent. These are dated market indicators, not a current quotation for any particular customer or route.
At 6.36 per cent, the cost associated with a US$200 transfer is US$12.72; at 3 per cent it is US$6. The illustrative difference is US$6.72 per transfer, or US$80.64 over twelve identical monthly transfers. This arithmetic is not an estimate of universal household savings: actual prices and sending patterns differ.
The United Nations target 10.c under SDG 10 (Reduced Inequalities) is to bring remittance transaction costs below 3 per cent by 2030 and eliminate corridors costing more than 5 per cent. A corridor is a route between a sending and receiving country. The target connects inequality to the price paid to move family money, rather than setting conditions on how recipients spend it.
The deadline is still ahead, but the third-quarter 2025 global average was more than twice the 3 per cent benchmark. Lower prices would change the resources available within a transfer budget without requiring families to adopt a government-selected investment plan. How much benefit reached recipients would also depend on whether senders increased the amount delivered or retained the saving themselves.
Digital access is uneven
Digital services offer one possible reduction in costs. The same World Bank pricing report recorded a digital remittance average of 4.59 per cent in the third quarter of 2025. That was below the overall average, but still above the international benchmark. An average price advantage does not establish that a particular household can use the service.
The World Bank's Global Findex 2025 findings, based on 2024 surveys, identify a wider access gap: 1.3 billion adults lacked financial accounts, although about 900 million of them owned a mobile phone. Globally, 77 per cent of women had accounts, compared with 81 per cent of men. These figures describe adults generally, rather than remittance recipients specifically.
Access also brings questions about security. The findings showed that only around half of the four billion adult phone owners in low- and middle-income economies protected their phones with a password. The bank identifies stronger consumer protection and more secure phones and accounts as possible ways to support financial usage. Moving a transaction onto a screen does not remove the question of whether its user can manage it safely.
Policy without ownership of family money
In announcing its 2026 report, IFAD called for more affordable, transparent transfers, improved rural service provision and wider access to savings, insurance and appropriate credit. It also stated that private remittances cannot replace public investment, social protection or climate finance. Its position links development gains to expanded options for families while recognising limits to what these flows can fund.
That leaves several distinct measures of progress: the price of sending money, access to usable financial services and the scope for recipients to choose among spending, saving and investment. A larger remittance total cannot answer all three. The policy question is whether those conditions can improve while decisions about a family's money remain with the people sending and receiving it.
Written by a human author, edited with AI assistance.
Further information:
IFAD, September 2026 report announcement. Supports the 2025 remittance total, aid comparison and attributed policy position.
IFAD, Eight reasons remittances matter more than ever. Supports the broad description of household spending and investment uses.
World Bank, Remittance Prices Worldwide, issue 54. Provides the third-quarter 2025 global, regional and digital transfer-cost indicators.
World Bank, Global Findex 2025 findings. Documents account access, gender differences, phone ownership and digital security concerns.
United Nations, Goal 10. Sets out the 2030 remittance-cost target and its relationship to reducing inequality.
