Sending money home: impact on poverty and carbon emissions
Money sent home by migrants plays a substantial role in household economies across southern Africa. For many families, these transfers provide essential income that covers daily costs, supports children through school, and offers a buffer when work is scarce or harvests fail. Recent research from the University of Johannesburg has examined not only how these payments affect poverty, but also whether they influence carbon emissions in the recipient countries.
The findings reveal a more nuanced picture than might be expected. While remittances can cut poverty rates significantly, their environmental effects change as household income rises. This matters for policymakers trying to reconcile development goals with climate commitments, and for businesses operating in economies where migrant income represents a major financial flow.
Understanding these dynamics is increasingly relevant as remittance volumes grow and as governments across the region seek to meet both poverty reduction targets and emissions commitments under international agreements.
Poverty reduction measured in a KwaZulu-Natal community
Researchers led by Professor Mduduzi Biyase conducted matched surveys with households in Hlokozi, KwaZulu-Natal, and their migrant relatives. The study aimed to quantify the impact of remittance income on poverty levels within a specific community context.
Without counting remittances, the poverty rate in Hlokozi stood at 84%. When remittance income was included, the rate dropped to 58%. Consequently, migrant transfers reduced the local poverty rate by 26 percentage points.
Families primarily use the money to meet immediate needs. Food purchases, school fees, and electricity bills account for most spending. Moreover, these transfers function as informal insurance during economic shocks such as job losses, crop failures, or unexpected medical costs.
The way households allocate remittance income varies by their existing financial position. Poorer families tend to direct funds toward consumption and basic subsistence. In contrast, households with slightly higher incomes are more likely to spend on education, healthcare, and home improvements.
These local findings align with broader global patterns. The World Bank estimated that officially recorded remittance flows to low and middle income countries reached approximately $685 billion in 2024. This figure exceeds the combined total of foreign direct investment and official development assistance to the same countries. Sub-Saharan Africa received an estimated $56 billion in 2024, up from around $55 billion the previous year.
Carbon emissions show a non-linear relationship
The University of Johannesburg research extended beyond poverty measurement to examine environmental consequences. Specifically, the team investigated whether remittance income affects carbon emissions in the Southern African Customs Union, which comprises Botswana, Eswatini, Lesotho, Namibia, and South Africa.
The central question was whether additional remittance income consistently raises household-related emissions, or whether the relationship changes as income levels increase. The results indicate a non-linear pattern rather than a simple upward trend.
At lower remittance levels, higher receipts were associated with increased carbon emissions. This likely occurs because households with more disposable income purchase more goods, consume more electricity, and use more fuel for transport and cooking. As a result, their carbon footprint expands alongside their spending power.
However, beyond a certain threshold, additional remittances were associated with lower emissions. The researchers suggest that larger and more stable transfers give households the financial capacity to invest in cleaner technologies. Examples include solar panels, energy efficient appliances, or improved housing that reduces heating and cooling needs.
Similar evidence emerged from research in Kenya, while a related study on India was under way at the time of the University of Johannesburg report. These findings suggest the pattern may hold across different developing economies where remittances form a significant income source.
Implications for businesses and supply chains
For UK businesses with operations or suppliers in southern Africa, these findings have practical relevance. Remittance flows influence household purchasing power, which in turn affects domestic markets for consumer goods, utilities, and services. Furthermore, understanding local income dynamics helps businesses anticipate demand patterns and assess market stability.
Companies reporting Scope 3 emissions need to consider the consumption patterns of communities linked to their supply chains. The research indicates that emissions impacts vary depending on household income levels. Therefore, businesses cannot assume a linear relationship between economic development and carbon footprint in these markets.
Remittances also affect labour markets. Households with reliable migrant income may have greater flexibility in employment choices, which can influence wage expectations and workforce availability. Additionally, economic shocks that disrupt remittance flows can quickly affect local purchasing power and labour supply.
Businesses tendering for public sector contracts in the UK increasingly face requirements to demonstrate carbon reporting compliance and supply chain due diligence. Understanding how income flows affect emissions in supplier countries can inform more accurate reporting and more effective carbon reduction strategies.
The non-linear emissions relationship also suggests opportunities. Businesses investing in cleaner technologies or energy efficiency products may find viable markets among households receiving larger remittance flows. These households have both the purchasing power and potential motivation to invest in lower carbon alternatives.
Transfer costs remain a significant barrier
Despite their importance, sending money home remains expensive across much of Africa. The World Bank has consistently identified Sub-Saharan Africa as the most costly region for remittance transfers. One recent estimate placed the average transfer cost at 8.78%.
High fees reduce the amount reaching families and encourage use of informal channels. Informal transfers are harder to monitor and may offer fewer consumer protections. They also remain invisible in official statistics, which can lead to underestimation of remittance volumes and their economic effects.
Transfer costs matter because they directly reduce the poverty-fighting impact of migrant income. A family expecting to receive £100 might actually receive £91, with the difference absorbed by fees and exchange rate margins. Over time, these costs accumulate substantially.
Digital payment systems offer potential solutions. Mobile money platforms have reduced costs in some African markets, particularly in East Africa. However, regulatory barriers, limited competition among providers, and infrastructure gaps continue to keep costs high in many southern African corridors.
Remittances face multiple vulnerabilities
Remittance flows depend on conditions in destination countries where migrants work. Economic downturns, unemployment, migration restrictions, and geopolitical instability can all reduce migrants' ability to send money home. The World Bank projected only modest growth in remittances to Sub-Saharan Africa in 2024, following a slight decline in 2023.
These vulnerabilities matter because households often rely on remittances as an informal social protection system. When formal welfare provision is limited, migrant income helps families absorb food price increases, job losses, and climate related shocks. A disruption in transfers can therefore have immediate consequences for household welfare.
Currency fluctuations add another layer of risk. Migrants typically earn in the currency of their host country and send money that is converted to the recipient's local currency. Exchange rate movements can significantly affect the purchasing power of transfers, even when the nominal amount remains stable.
Climate change itself poses risks to remittance stability. Extreme weather events can disrupt employment in sectors where migrants work, such as agriculture, construction, and tourism. Similarly, climate impacts in recipient countries can increase the financial demands on migrants as families face crop failures, infrastructure damage, or health emergencies.
Important findings from the research
- The poverty rate in Hlokozi, KwaZulu-Natal, was 84% without remittances and fell to 58% when remittance income was counted, representing a reduction of 26 percentage points.
- Officially recorded remittance flows to low and middle income countries reached approximately $685 billion in 2024, according to World Bank estimates.
- Sub-Saharan Africa received an estimated $56 billion in remittances in 2024, up from about $55 billion in 2023.
- At lower income levels, increased remittances were associated with higher carbon emissions, but beyond a certain threshold, additional remittances correlated with lower emissions.
- The average cost of sending remittances to Sub-Saharan Africa was 8.78% in a recent World Bank assessment, making it the most expensive region globally.
- A separate study covering 1990 to 2020 found no uniform effect of remittances on human development across the five Southern African Customs Union countries, although improvements occurred in some countries receiving larger inflows.
Planning for remittance-dependent economies
The research presents remittances as more than private transfers between family members. They reduce poverty, finance education and healthcare, and help households withstand economic shocks. At the same time, increased purchasing power can raise energy use and emissions, particularly at lower income levels.
The possibility that higher remittance income eventually supports cleaner consumption is significant. However, this outcome depends on access to affordable renewable energy, efficient appliances, reliable infrastructure, and financial products that allow households to invest rather than merely cover daily expenses.
For businesses, several considerations emerge. First, remittance flows affect market demand and consumer behaviour in ways that differ from other income sources. Second, the environmental impacts of increased household income are not linear, which complicates carbon footprint assessments. Third, economic shocks that disrupt remittances can quickly affect supply chain stability and labour markets.
UK SMEs working with sustainable procurement frameworks should consider how remittance dependence affects the resilience of their supplier communities. A supplier workforce that relies heavily on migrant income from family members abroad may be vulnerable to external economic shocks in ways that traditional financial assessments might miss.
The policy challenge involves reducing the cost of sending money while creating conditions in which remittances can support productive, climate compatible investment. Improving digital payment systems, strengthening competition among transfer providers, and expanding access to clean technologies could increase the developmental benefits of migrant income.
The broader lesson from the Southern African Customs Union research is that remittances have no single effect. Their consequences depend on who receives them, how much they receive, and the economic choices available to them. For poorer households, remittances mean food, schooling, and survival. For households with greater financial security, they may become a pathway to investment, including investment that reduces future carbon emissions.
Where to find more information
The World Bank migration and remittances portal provides data, analysis, and regular updates on global remittance flows, including regional breakdowns and cost comparisons.
The Department for Energy Security and Net Zero publishes guidance on carbon reporting requirements and net zero strategies relevant to UK businesses with international supply chains.
For businesses seeking to understand their carbon reporting obligations, including Scope 3 emissions from supply chains, the SBS compliance support service offers practical guidance tailored to UK SMEs.
The International Organization for Migration researches migration patterns, remittance flows, and development impacts across Africa and other regions.