As recently as 2016, a World Bank article listed Bahrain, Saudi Arabia, the US, and the UAE as countries considering imposing taxes on remittances. Washington is now proposing a 5% on remittances in its new tax plan.
In 2023, migrant workers on this planet may have sent $656 billion home across borders to low- and middle-income countries.
With its large and relatively successful diaspora, India was the biggest recipient of remittances, followed by Mexico and the Philippines. Our dear continent received about $100 billion in the same year—nearly double total foreign direct investment ($53 billion) and roughly 6 % of the continent’s GDP at the time.
Moving money across borders, a.k.a remittances, is such big business—and a pillar of some schools of thought in development economics—that there is an International Day of Family Remittances every year. Block your calendars for this year’s edition on 16 June 2025.
To illustrate.
At a conservatively priced average cost of 3.4 % per $200 in remittances globally, this $22-plus-billion (revenue) market (or $3.4 billion for Africa) is so large that every newly minted African fintech—and its older siblings—wants a slice of it.
African governments like this deal, too. The inflows are often significant relative to GDP and help refill national foreign-exchange coffers.
So Kenya’s President Ruto is working hard to get more Kenyans employed in Europe or the Gulf. Nigeria is launching a non-resident bank digital-ID scheme to support a renewed remittance push. And Egypt is dialing up policy reforms and leaning into digital transfers to shore up the forex it earns from remittances.
It’s one of those rare instances where government and cross-border fintechs’ interests align—at least in the public eye. Because we all want that remittance bread.
As all good untapped business opportunities go, the flood of competition is unending. There are new startups, revamps of old and creaking legacy remittance products, and, of course, shiny crypto things.
One such new entrant is the Republican caucus of the U.S. House of Representatives. They would like to revive a repeatedly rejected attempt to tax remittance income from all migrants and permanent residents in the United States. Their objective is asinine at a business level, of course, but presumably it has some political value(?).
It is an idea that flies in the face of years of hard work by many people without a lot of the same presumed political baggage, not to mention decades of policy wonking and institutional progress led by the World Bank and others to increase the volume of remittances and drive down their costs and other barriers.
Still, taxing micro-remittances to punish the migrant worker is not entirely new. As recently as 2016, a World Bank article listed Bahrain, Kuwait, Oman, Saudi Arabia, the United States, and the United Arab Emirates as countries considering imposing taxes on migrant remittances.
It’s a reminder that one of the more arcane variables in building or investing in a business—government mood swings—is universal.
Also, I find it interesting that this proposal is being revived at least in the US, just as several African fintechs, including Flutterwave, are joining Circle’s stablecoin money transfer network.
Among other things, for companies whose value proposition is cheap, quick, and efficient cross-border transfers, it is a reminder that they are building a double-edged sword: the sleek app that lets customers move money within seconds may also enable strict enforcement of a remittance tax, at the risk of these startups losing their compliance status. But at the same time, being the channel through which this tax is enforced might mean fewer transfers, more bunched-up transfers (a.k.a. irregular revenue), and generally slower business as one-off, higher-value transfers move underground.
Of course, at this point, the House bill is far from becoming law. Plus, the United States is not the only source of remittances, and migrants determined to support their families might elect to simply eat the 5 % tax or send less home. Still, it is worth asking how much the proposal changes the calculus for wide-eyed founders seeking remittance riches, for venture-capital theses, and for the grand forex-yielding hopes of African governments.
If I were a founder, I’d be running war games with my product teams and partner institutions right now. Partly because if you think the current competition in transfer fees and charges is bad, wait until Western Union starts muscling into your territory. Or your favourite giveaway-prone transfer app starts offering zero-cost transfers to juice growth while angling for a MoneyGram acquisition.
Ditto if I were writing cheques into remittance-led fintech products.
Abraham Augustine writes on Money, Myths & Digital Africa here.
