Remittances to low- and middle-income countries reached an estimated $685 billion via formal channels in 2024 — more than all official foreign aid combined — and a growing number of governments now run dedicated diaspora engagement policies to raise those inflows further. A Migration Policy Institute (MPI) analysis finds these policies work, but only partially and highly contextually.

The numbers suggest a real link. During the 1996–2022 period, countries with diaspora engagement policies received on average about 2.2 percentage points more remittances as a share of GDP than countries without them, according to research cited by MPI. A separate International Organization for Migration (IOM) study found an even wider gap in 2022: countries with dedicated diaspora or emigration policies received remittances equal to 7.3 percent of GDP, versus 3.3 percent for the rest.

What do diaspora engagement policies look like?

Governments split their approaches into hard economic measures and soft engagement strategies.

Hard measures include:

• Reducing remittance transfer costs
• Issuing diaspora bonds
• Establishing preferential banking channels
• Matching programs that encourage capital inflows

Mexico offers two prominent examples. Since 2015, it has authorized tens of thousands of convenience stores and other shops as "banking agents" where people can send or withdraw cash, easing transfers and pushing recipients toward electronic mobile payments. Its Tres por Uno (3x1) program adds a $3 match from federal, state, and local government for every dollar remitted by diaspora associations, with funds invested in development projects agreed by local residents and migrants.

Nigeria offered its first diaspora bond in 2017, allowing investors of Nigerian heritage living abroad to earn a fixed return while funding national development projects. The bond raised nearly $300 million — significant, but far below the $22 billion that arrived via formal remittances that year. Nigeria has considered launching a new bond.

Soft strategies strengthen political and cultural ties. Ethiopia's "yellow card" identification policy lets holders travel and live visa-free and own property in Ethiopia. Malawi's 2017 diaspora engagement policy emphasizes attracting investment and remittances through incentives, land access reform, and promotional campaigns.

Does the policy actually cause higher remittances?

Nepal's record is the strongest illustration. Remittances averaged less than 9 percent of GDP in the ten years before the country unveiled its first diaspora policy, the 2008 Non-Resident Nepali Act. In the decade after, they averaged 24 percent. By 2024, remittances accounted for roughly two-thirds of Nepal's economy, according to World Bank data.

Yet causation is hard to prove. Governments often adopt economic-focused diaspora policies assuming remittance increases will follow, without systematically measuring outcomes, and typically cite anecdotal evidence such as higher remittance volumes or spikes in diaspora tourism.

El Salvador and the Philippines, which lack formal diaspora engagement policies as defined by the EU Global Diaspora Facility, recorded average remittance inflows of 19.9 percent and 10.2 percent of GDP respectively across 2000–24 — higher than policy-holders Mexico (2.5 percent) and Ethiopia (1.1 percent).

What outside factors move remittance flows?

Conditions beyond any single government's control shape the flows. Higher inflation in receiving countries appears associated with slightly lower inflows as a share of GDP, though studies diverge. Currency depreciation in receiving countries can reduce transmitted amounts. Political instability cuts both ways: Turkey saw lower remittances during years of political violence in the 1970s, while a study of 22 sub-Saharan African countries from 1994 to 2015 found deteriorating conditions actually spurred transfers, driven by senders' altruism.

The United States, the world's largest remittance source with about $93 billion sent via formal channels in 2023, illustrates host-country effects. Congress created a new 1 percent tax on many outgoing international money transfers earlier this year, effective in 2026. Following Trump administration statements and directives targeting unauthorized immigrants — the largest numbers of whom originate from Mexico — remittances to Mexico fell nearly 6 percent over the first eight months of 2025 compared to the same period in 2024, as many individuals avoided work and public settings. Conversely, some Central Americans in the United States increased transfers, apparently to secure family finances before possible arrest and deportation.

What is the upshot for policy?

Remittances are personal money and cost taxpayers in sending countries nothing, MPI notes. They frequently alleviate poverty and cushion households during hardship. In Nepal, Tajikistan, Nicaragua, Samoa, Bermuda, and Honduras, formal-channel remittances formed more than one-quarter of GDP in 2024. Survey data from 2014 to 2021 show roughly 80 percent of Latin American and Caribbean migrants directed remittances primarily at household maintenance; in northern Central America, 86 percent of remittance-receiving households spent the money on food, 40 percent on health, and 30 percent on utilities, per a 2021 MPI–World Food Programme study.

Even where financial returns are unclear, diaspora policies serve other purposes: Mexico's Red Global MX taps diaspora skills for the knowledge-based economy, and Morocco's Operation Marhaba manages peak summer return migration with administrative support. Rather than restricting outgoing transfers, MPI argues, governments may gain more from skilled worker programs, educational exchanges, and investment facilitation that keep the host-origin relationship mutually beneficial.