Channeling Diaspora remittances in Mozambique

Mozambique 2025 - Remittances as a Stabilizing Economic Buffer: Channeling Diaspora Wealth

Remittances represent a critical and growing source of foreign resources for Mozambique, acting as a vital economic buffer that supports consumption, provides a social safety net, and contributes significantly to the national financial services landscape. As of 2025, the government is actively seeking ways to leverage these financial inflows from its diaspora to support broader investment and development goals.

The Stabilizing Role and Magnitude of Inflows

Remittances have become a key source of foreign resources and are essential for financial intermediation in Mozambique. They play a crucial role as a social safety net for many Mozambican families.

• Significant Growth: Mozambique has seen a substantial increase in remittance flows in recent years. In 2022, the country received US$544.8 million in remittances, marking a six-fold rise in seven years compared to US$93.4 million recorded in 2016.

• Economic Weight: Remittances reached 5.7% of GDP in 2019, a figure that was greater than the FDI inflows recorded at 5% for that year.

• Consumption Support: The money sent by Mozambicans living abroad cares for their relatives and acts as a stabilizing force for household finances. The continuous use of remittances is a vital component of the country's financial inclusion strategy.

Origin and the Informal Market Challenge

The growth in remittances is fundamentally tied to the country's continuous export of migrant labour.

• South African Diaspora: The diaspora labor flows are primarily directed to neighbouring countries, notably South Africa. Mozambique has an estimated 800,000 migrants in South Africa who send money home to their families. South Africa is also Mozambique's largest trading partner.

• Informal Channels: Despite efforts to formalize transfers, the market for remittances is complex, and many Mozambican migrants still rely on informal, high-cost methods. A large number of the estimated 800,000 Mozambican migrants in South Africa send money through minibus drivers, with fees reaching up to 20 percent of the remittance value. This contrasts sharply with the average fee of 4.6 percent charged through formal channels.

Fintech and Regulatory Enhancements for Efficiency

The national market for remittances is structured around multiple channels and actors, highlighting its importance to the financial services landscape. Regulatory reforms introduced by the Banco de Moçambique (BdM) are actively aimed at enhancing transfer efficiency and promoting technological integration, particularly in the Fintech space.

• Dominance of Electronic Money: Electronic money products are becoming widely available in Mozambique, with mobile phone-based services dominating the remittance market. Approximately 80% of remittances are sent through electronic money services. Conversely, official banking channels account for only 7% of the remittance market.

• Fintech Regulation and Interoperability: To respond to the challenges of technological innovation, the BdM launched the fourth edition of its Regulatory Sandbox, which welcomed eight fintechs. Furthermore, the migration to the new electronic payment processing platform, managed by SIMOrede, offers the multiple advantages of interoperability between mobile money networks, banks, and other financial service providers.

• Foreign Exchange Liberalization: Structural reforms related to the Foreign Exchange Law are rendering operational the principle of progressive capital account liberalization, which is designed to improve the business environment and facilitate the inflow and outflow of capital. These reforms, intended to attract more Foreign Direct Investment (FDI), also apply to the efficiency of remittance flows.

Strategic Goal: Mobilizing Diaspora Investment

Beyond serving as a social safety net, the government is explicitly pursuing strategies to channel diaspora savings into productive national investments.

• Mobilizing Emigrant Investment: The government seeks to mobilize nearly 270,000 emigrants to invest in the country through remittances.

• Incentive Programs: Policy documents highlight the importance of encouraging the sense of patriotism among Mozambicans living abroad to ensure that remittance flows continue unabated. It is suggested that public overtures of gratefulness must be accompanied by serious incentives, such as establishing offices dedicated to diaspora affairs.

The increasing strength of remittances provides Mozambique with essential foreign exchange stability, particularly vital in a context where the country faces acute foreign currency shortages. By accelerating regulatory modernization, especially in fintech and digital payments, the country stands to formalize more of the diaspora flows, transforming them from solely a stabilizing consumption buffer into a robust source of development finance.

Background information: The Mozambican diaspora

The Mozambican diaspora represents a crucial segment of the country's population, playing an increasingly vital role in the national economy, particularly through financial flows and the provision of a social safety net.

Here is background information on the Mozambican diaspora and its impact, primarily centered on migration and financial contributions:

1. Historical Context and Migration Patterns

• Migrant Labor Tradition: Mozambique has historically been a significant source of migrant labor for its neighbors, especially South Africa, for over a century.
• Repatriated Workers: Following German unification, about 18,000 Mozambican contract workers who were employed in Germany were repatriated in 1992. These workers are commonly known today as Madgermanes.
• Definition of Foreign Exchange Residents: The country's foreign exchange law identifies several categories of Mozambican nationals residing abroad who are still considered foreign exchange residents. These include national natural persons with habitual residence in Mozambique who are staying abroad for more than a year due to academic or health reasons.
• Border and Seasonal Workers: Also classified as foreign exchange residents are national natural persons with habitual residence in Mozambique who perform non-occasional activities abroad, such as border or seasonal workers, or crews of ships, aircraft, or other mobile equipment operating outside the country.

2. Economic Impact: Remittances as a Key Resource

Remittances sent home by the Mozambican diaspora have emerged as one of the most critical sources of foreign resources, helping to drive structural transformation and providing essential financial support.

• Massive Increase in Flows: Mozambique has experienced a six-fold rise in remittance inflows in seven years. In 2022, the country received US$544.8 million in remittances, significantly higher than the US$93.4 million recorded in 2016.
• Outpacing Foreign Direct Investment (FDI): The flow of remittances is so significant that, by 2019, remittances reached 5.7% of GDP, a percentage greater than FDI inflows (which stood at 5% of GDP) during that period.
• Financial Inclusion Driver: Remittances are considered a vital component of the financial services landscape and the National Financial Inclusion Strategy.
• Usage and Channels:
  • In 2019, 32% of all adults in Mozambique participated by sending or receiving remittances, marking a 23% increase compared to 2014.
  • Electronic money (mobile phone-based services) dominates the market, being the channel for approximately 80% of remittance transfers.
  • In contrast, official banking channels account for only 7% of the remittance market.
• Social Function: The money sent home by Mozambicans abroad acts as a social safety net for their relatives.