Money sent by migrants to their families is no longer simply a means of covering living expenses. In many low- and middle-income countries, these flows have become a financial safety net for households during crises, a source of savings and investment, and a channel whose effects extend to rural economies and local markets.
Remittances to low- and middle-income countries reached $728.6 billion in 2025, an increase of 94 percent since 2016, making them larger than foreign direct investment in these countries and more than four times the amount of global official development assistance in the same year, according to the latest report by the International Fund for Agricultural Development (IFAD).
But the scale of these flows does not necessarily mean that households can access them more easily. As sanctions and financial compliance requirements have tightened in some markets, remittance channels face a dual challenge: maintaining the integrity of the financial system on the one hand, while ensuring that legitimate funds continue to reach households at the lowest possible cost on the other.
Alvaro Lario, President of the International Fund for Agricultural Development, told Asharq Al-Awsat that, from the perspective of remittances and financial inclusion, the main challenge posed by US economic sanctions is maintaining safe, low-cost and transparent channels for legitimate family remittances, while complying with sanctions and requirements to combat money laundering and terrorist financing.
He added that access to regulated financial channels becomes increasingly important in fragile and conflict-affected countries, where many families depend on money sent by relatives living abroad.
Sanctions and De-risking
Lario explained that the impact of sanctions on remittance flows varies depending on the country, the nature of the sanctions and the financial channels being used. The concern, he noted, is not limited to sanctions themselves, but also extends to how financial institutions respond to regulatory, compliance and reputational risks.
He said that even in cases where personal remittances are permitted, financial institutions may impose stricter measures when processing transactions connected to certain countries. Restrictions on correspondent banking relationships may also make it difficult for money transfer companies to maintain banking services.
This broader phenomenon is known as de-risking. It can reduce the number of formal channels available and increase remittance costs and waiting times, making it more difficult for households to access their money.
Lario warned of another possible consequence: making formal channels excessively difficult, costly or unavailable could push some transactions into informal channels, reducing rather than strengthening transparency and consumer protection.
A Safety Net During Conflict
The importance of these channels is particularly evident in the Middle East, where some countries are experiencing protracted conflicts and economic crises.
Lario said that in many countries affected by conflict and economic crises, remittances have become a vital source of household resilience. Family members living abroad are often among the first to provide support when employment opportunities, public services, social protection networks and local economies are disrupted.
The importance of remittances lies not only in the regularity of their flow, but also in their ability to respond quickly to changing circumstances. Migrants may increase the frequency or adjust the amount of their transfers according to their families' needs, making this money, according to Lario, a first line of defense against shocks.
The funds are primarily used to cover basic needs such as food, housing, healthcare and education. But they can also give families an opportunity to build savings, obtain insurance and credit, and invest.
In Syria, a World Bank analysis found that receiving international remittances was associated with a 12-percentage-point reduction in the extreme poverty rate and an 8-percentage-point reduction in the overall poverty rate, according to Lario. In Lebanon, remittances have likewise become an increasingly important economic safety valve for households amid the prolonged crisis.
But the ability to send money is not enough. Families need financial infrastructure capable of receiving and using those funds. This becomes more complicated during conflicts, when financial infrastructure is damaged, liquidity and cash become scarce, displacement increases, people's ability to move around declines, payment systems are disrupted, or financial service providers withdraw.
1.1 Billion People Connected to Remittances
IFAD figures reveal the scale of the social economy behind these flows. The report estimates that 220 million migrants and members of the diaspora support around 1.1 billion relatives, meaning that roughly one in every six people worldwide is connected to remittances.
Since 2016, flows have increased by 94 percent, outpacing population growth and migration from low- and middle-income countries.
This money does not go only to cities. Roughly one out of every three dollars migrants send home, or about $233 billion, reaches rural areas, which often suffer from limited formal employment opportunities, financial services and infrastructure.
IFAD estimates that households receiving remittances invest around $22 billion each year in rural agrifood systems, supporting agricultural production, rural enterprises and employment opportunities.
Lario said that the impact of this money extends beyond recipient households to local businesses, jobs and food systems. For millions of rural households, he added, remittances can represent the starting point for building savings, obtaining insurance and accessing suitable credit.
Remittances Enter the Digital Age
The shape of the remittance market is changing alongside the growth in its value. IFAD estimates that more than half of remittances now originate through a digital channel, a shift that has helped reduce sending costs and made the process faster and easier.
But the digital transition is not yet complete. Only 35 percent of the services measured in 2025 were fully digital on both the sending and receiving sides, while cash remains widely used across many remittance corridors.
The report argues that the next step is not simply digitization, but also the ability of households to use the financial system more broadly. It therefore calls on governments, regulators, financial institutions and development partners to reduce remittance costs, increase transparency, improve services in rural areas, strengthen financial and digital capabilities, and expand access to savings, insurance, credit and investment.
Asia Leads as Africa Accelerates
Asia and the Pacific remain the global center of the remittance economy, receiving $384.9 billion, or 53 percent of the total flows covered by the report over the past decade.
Latin America and the Caribbean recorded the fastest growth over the decade, with remittances rising 132 percent to $168.6 billion, while flows to Africa increased 86 percent to $124.2 billion.
These figures reflect significant differences in how heavily economies depend on money from their diasporas. In 23 countries, remittances account for more than 10 percent of GDP, while in nine countries their value exceeds total exports of goods and services.
For IFAD, maximizing the impact of these flows does not mean turning them into a substitute for public investment, social protection or climate finance. Rather, it means building a financial environment that allows households to use the money they receive more safely and efficiently, and to transform part of it from a tool for meeting urgent needs into a means of saving, investing and building resilience.
