Remittances — money migrant workers send back home to family — have quietly overtaken foreign direct investment as the biggest source of external finance for developing countries.
The World Bank estimates remittances to low- and middle-income countries (LMICs) reached $685 billion in 2024, while FDI to those same economies shrank by 2%. One flow feeds families today. The other builds factories for tomorrow.
We’ve done exhaustive research on comparing remittances vs FDI, and here are the key findings from the data:
- FDI to developing countries fell 41%
- Remittances grew 57% over the past decade.
- India alone received a projected $129 billion in remittances in 2024
- During the 2020 pandemic, remittances dipped 1.6% — FDI crashed 35%
- Remittances now exceed FDI and foreign aid combined for developing nations
- The global average cost of sending $200 still sits at 6.4% — double the UN's 3% target
- Canada sent ~$27.8 billion abroad in remittances, attracting a record $85.5 billion in FDI in 2024
The rest of the report breaks down how, where, and why these two flows diverge — backed by data from the World Bank, UNCTAD, and the IMF.
What is the difference between remittances and FDI?
Both flows move money across borders, but the similarity stops there. Remittances are personal transfers — a nurse in Toronto sending $500 to her parents in Manila, or a construction worker in Calgary wiring funds to his family in Lahore.
FDI is corporate capital — we’re talking about a multinational building a semiconductor plant in Vietnam or acquiring a Canadian energy firm.
Here is an overview + comparison:
| Aspect | Remittances | FDI |
|---|---|---|
| Definition | Personal transfers from migrants to family abroad | Cross-border investment acquiring 10%+ control in a foreign business |
| Nature | Person-to-person, private | Corporate or institutional |
| Recipients | Households, families | Businesses, industries, governments |
| Primary use | Food, education, healthcare, housing | Business expansion, infrastructure, technology transfer |
| Channel | Digital platforms like RemitBee, banks, mobile wallets | Regulatory approvals, M&A, greenfield projects |
| 2024 scale | $685 billion to LMICs (World Bank) | ~$1.6 trillion globally (UNCTAD) |
Each flow reaches a different part of the economy and serves an entirely different purpose – based on the motive and timing.
For example, remittances run on obligation and love. A migrant doesn't stop sending money because GDP dipped back home — if anything, they send more during hard times (economists call this "countercyclical" behavior).
FDI follows a different logic entirely. Companies invest when profit expectations run high and retreat the moment uncertainty spikes. A single geopolitical event can freeze billions in planned investment overnight.
Also, speed matters too. A money transfer from Canada to India arrives within minutes through platforms like RemitBee. FDI deals take months or years of due diligence, regulatory review, and government approvals.
Remittances also reach places FDI never touches: small villages, rural communities, and low-income neighborhoods where no multinational would set up operations.
How have global trends shifted over the last five years?
The World Bank's Migration and Development Briefs track both flows year by year, and the divergence since 2018 has been dramatic — especially in developing countries. Remittances kept climbing, while FDI zigzagged.
Growth in remittances
Remittance flows to LMICs have risen nearly every year, even through a pandemic that shut down entire economies.
| Year | Remittances to LMICs | Change |
|---|---|---|
| 2018 | $529 billion | — |
| 2019 | $548 billion | +3.6% |
| 2020 | $540 billion | −1.6% |
| 2021 | $605 billion | +12.0% |
| 2022 | $626 billion | +3.5% |
| 2023 | $656 billion | +4.8% |
| 2024 | $685 billion | +5.8% |
Source: World Bank Migration and Development Briefs (various years)
That 2020 figure deserves a second look. The World Bank initially predicted a 20% plummet. The actual decline? Just 1.6%. Migrants switched to digital platforms, tapped savings, and often increased transfers because families back home needed the money more than ever.
FDI volatility
Global FDI flows crashed 35% in 2020 (from $1.5 trillion to ~$1.0 trillion), according to UNCTAD's World Investment Report. A partial rebound in 2021 pushed flows back to ~$1.6 trillion, but recovery was uneven — by 2022, FDI dropped again (~12%) to around $1.3 trillion and stayed there.
| Year | Global FDI | Key driver |
|---|---|---|
| 2019 | ~$1.5 trillion | Pre-pandemic baseline |
| 2020 | ~$1.0 trillion | COVID-19 lockdowns (−35%) |
| 2021 | ~$1.6 trillion | Post-pandemic rebound (+60%) |
| 2022 | ~$1.3 trillion | Geopolitical tensions, rate hikes (−12%) |
| 2023 | ~$1.3 trillion | Continued uncertainty |
| 2024 | ~$1.3 trillion | 3% decline (UNCTAD) |
Source: UNCTAD World Investment Reports (2020–2024)
The crossover of remittances and FDI
The gap between remittances and FDI in developing countries has ballooned into a chasm. In 2020, FDI to developing countries (excluding China) totaled just $259 billion.
If we look at the remittances to those same countries, the amount is $540 billion — more than double. Even combining FDI and all official development assistance ($179 billion in ODA), the total ($438 billion) still fell short of remittances alone.
| Country | 2024 remittances (projected) | Context |
|---|---|---|
| India | $129 billion | World's #1 recipient — rising share of high-skilled migrants |
| Mexico | $68 billion | Almost entirely from workers in the U.S. |
| China | $48 billion | Declining as a share of GDP |
| Philippines | ~$38 billion | Remittances exceed 8% of GDP |
| Pakistan | ~$30 billion | Record flows during 2020–2021 |
Source: World Bank Migration and Development Brief (2024)
By 2023 and 2024, the World Bank confirmed remittances as the single largest external financial inflow to LMICs — bigger than FDI and foreign aid combined. The top recipients tell a story of scale that's hard to dismiss.
Which flow holds up better during a crisis?
Remittances are far more resilient — and every major economic shock of the past two decades confirms the pattern. Remittances bend, while FDI breaks.
COVID-19 test
The pandemic offered the ultimate side-by-side comparison, and the results weren't close.
| Metric | Remittances (2020) | FDI (2020) |
|---|---|---|
| Decline from 2019 | −1.6% | −35% globally |
| Recovery timeline | Surpassed 2019 levels by 2021 | Rebounded in 2021, fell again in 2022 |
| Forecast vs. reality | Predicted −20%; actual −1.6% | Met or exceeded decline forecasts |
The World Bank called remittance resilience during COVID-19 "remarkable," noting that migrant transfers provided a "critical lifeline for the poor and vulnerable."
Dilip Ratha, a lead economist on the World Bank's migration team, stated that remittances "can no longer be treated as small change" given their growing scale.
The reason behind remittances resistance
The stability gap comes down to structure.
Remittances flow from millions of individual senders across dozens of countries (which diversifies risk), and migrants tend to increase transfers when families face hardship rather than cut them.
Digital platforms kept money moving even during lockdowns, and the spending remittances fund — food, rent, medicine — doesn't pause because markets dip.
FDI concentrates risk differently
A single cancelled project can wipe out a country's annual FDI intake, and corporate decisions respond to quarterly earnings, interest rates, and geopolitical headlines — all volatile inputs.
UNCTAD noted in its 2023 report that FDI remains "fragile" in developing regions despite periodic rebounds. The 2008–2009 financial crisis showed the same pattern: remittances fell ~5%; FDI collapsed far more sharply and took years to recover.
How does each flow shape economic development?
Remittances and FDI both contribute to growth, but through fundamentally different channels. Remittances work bottom-up (reaching households first and rippling outward). FDI works top-down (entering industries and — ideally — spreading to workers and communities).
Household effects
Remittances go straight to families, funding school fees, hospital bills, groceries, and housing (sometimes all at once).
The World Bank has linked remittance inflows to measurable poverty reduction, improved child nutrition, stronger school enrollment, and lower infant mortality across countries from the Philippines to Nigeria.
Panel studies across South Asian economies (Bangladesh, India, Pakistan, Sri Lanka) found that a 1% rise in remittances corresponds to 0.068% GDP growth — modest but consistent. A 10% increase boosts household savings by 1.6–1.7%, building a financial buffer that didn't exist before.
Industrial effects
FDI creates factories, offices, and supply chains. When a multinational enters a developing country, the immediate results include new formal jobs (often higher-paying), technology transfer to local firms, tax revenue for the host government, and access to export markets through supply chain linkages.
Isabelle Durant, former Acting Secretary-General of UNCTAD, emphasized that foreign investment is "crucial for productive capacity and infrastructure development."
Countries like Vietnam and China have used FDI-driven manufacturing to lift tens of millions out of poverty over several decades.
Side-by-side impact
The table below condenses the development effects of each flow.
| Impact area | Remittances | FDI |
|---|---|---|
| Poverty reduction | Strong, direct (household spending) | Indirect (jobs, wages) |
| GDP growth | Positive but modest (0.068% per 1% increase) | Higher potential, volatile |
| Job creation | Minimal; may reduce labor participation | Formal employment, skills transfer |
| Savings & investment | Boosts household savings 1.6–1.7% | Builds industrial capacity |
| Inclusivity | Reaches rural and low-income communities | Clusters in urban centers, specific industries |
| Stability | Countercyclical (rises during downturns) | Procyclical (drops during uncertainty) |
| Risks | Dependency, brain drain, Dutch Disease | Profit repatriation, capital flight, crowding out |
Dutch Disease risk
Large remittance inflows can push a country's currency higher — making exports more expensive and less competitive abroad.
Economists call the effect "Dutch Disease," and it's a real concern for heavily remittance-dependent economies like Tajikistan (where remittances account for 45% of GDP).
FDI carries its own version: profits earned by foreign firms often exit the country through repatriation, and sudden investor withdrawals can destabilize fragile economies.
What does the remittances vs. FDI picture look like for Canada?
Canada sits on both sides of the equation. As a high-income country with one of the most diverse immigrant populations globally, Canada sends remittances and receives FDI — the opposite of the typical developing-country profile.
Outbound remittances
Statistics Canada and World Bank bilateral estimates peg Canada's outbound remittances at roughly $27.8 billion in 2018 (the latest detailed breakdown available), flowing to 173 countries. The top corridors reflect the country's immigrant makeup.
| Destination | Estimated flow from Canada |
|---|---|
| China | $4.7 billion |
| India | $3.0 billion |
| Philippines | Significant (varies by year) |
| Pakistan | Significant |
| U.S. | Significant |
Source: World Bank bilateral remittance estimates; Statistics Canada
A narrower annual estimate pegged outflows at about CAD 8.4 billion in 2019 (~0.4% of GDP), dipping to $6.5 billion in 2020 before likely recovering alongside the global trend.
For families receiving money from Canada, even a few hundred dollars a month can cover months of living expenses in countries like the Philippines, India, or Pakistan.
Inbound FDI
Canada attracted a record-breaking $85.5 billion in FDI in 2024 — a 36% jump over 2023 and the highest in a decade, according to Invest in Canada.
The total FDI stock reached $1.5 trillion by year-end (+5.5% from the prior year), driven by mergers, acquisitions, and reinvested earnings.
| Canada FDI metric | Value (2024) |
|---|---|
| FDI inflows | $85.5 billion (record) |
| Total FDI stock | $1.5 trillion (+5.5% YoY) |
| Canadian investment abroad | $2.47 trillion (+12% YoY) |
| Net FDI position | $971 billion (end-2024) |
Source: Statistics Canada; Invest in Canada
Canada is a net capital exporter — Canadian companies invest more abroad ($2.47 trillion) than foreign firms invest in Canada.
The government's "Invest in Canada" strategy targets clean energy, advanced manufacturing, and technology. Analysts at the Fraser Institute note that FDI inflows are increasingly concentrated in those high-value sectors.
Two flows, one economy
The contrast is stark. Canada pulls in tens of billions in FDI annually while simultaneously sending billions outward through its immigrant population. FDI creates Canadian jobs; remittances from Canada keep millions of families afloat overseas. For Canadians using RemitBee to send money to India or the Philippines every transfer is a personal act of economic development — even if it never appears in an FDI report.
How do remittances and FDI compare across regions?
The balance between remittances and FDI shifts dramatically by region and income level, and the differences shape policy outcomes worldwide. Poorer countries depend far more on remittances; wealthier ones attract the bulk of FDI.
Dependent economies
In the smallest and lowest-income economies, remittances dwarf every other external finance source. For a family in Tajikistan, remittances aren't supplemental income — they are the income.
| Country | Remittances as % of GDP (2024) |
|---|---|
| Tajikistan | 45% |
| Tonga | 38% |
| Kyrgyzstan | ~30% |
| Nepal | ~25% |
| Somalia | ~25% |
| Haiti | ~22% |
Source: World Bank Migration and Development Brief (2024)
FDI inflows to most of these countries are tiny and sporadic because domestic markets don't attract large-scale corporate investment. Remittances fill the gap — though heavy reliance also reflects an underlying shortage of local jobs, pushing workers abroad.
South Asia
South Asia receives the largest share of global remittances. India leads ($129 billion projected for 2024), and Pakistan recorded over $30 billion in 2020–2021. Regional remittances hit 4.06% of GDP in 2024, growing 11.8% year-over-year.
Panel research covering 1981–2023 data across Bangladesh, India, Pakistan, and Sri Lanka found that remittances carry a positive long-run GDP effect, while FDI's long-run influence has been mixed (sometimes even negative because of structural barriers).
Remittances outpace FDI in poverty reduction across the region, though FDI brings stronger productivity gains when paired with reforms.
Latin America
Remittances to Latin America have surged — driven by strong U.S. labor markets and immigrant employment recovery post-pandemic.
Mexico received $68 billion in 2024, with Guatemala, El Salvador, and the Dominican Republic also hitting records. FDI in the region has been more erratic, fluctuating with commodity prices and political shifts.
Sub-Saharan Africa
Africa receives only about 5% of global FDI (UNCTAD, 2022), concentrated in resource-rich nations like Nigeria, South Africa, and Ethiopia.
Remittances to countries like Nigeria, Ghana, Kenya, and Senegal are a more dependable income source, growing steadily despite a brief dip in Nigerian flows during 2020.
Income-level patterns
The broader pattern breaks down cleanly by income bracket.
| Economy type | Primary external flow | Secondary flow |
|---|---|---|
| Low-income (Tajikistan, Haiti) | Remittances (20–45% of GDP) | Minimal FDI |
| Middle-income (India, Mexico) | Both significant | Remittances often exceed FDI |
| High-income (Canada, U.S.) | FDI (inward investment) | Remittances (outward, to origin countries) |
What does the future hold for both flows?
The World Bank projects remittances to LMICs will reach $690 billion in 2025 (+2.8%), with some long-range forecasts putting global remittances above $1.2 trillion by 2030.
FDI is harder to predict, but UNCTAD's 2025 data shows global flows at $1.6 trillion (+14%) — though gains have concentrated in developed economies, widening the gap with the developing world.
Remittance drivers
Several forces will keep remittances growing:
- Digital platforms are cutting costs and speeding delivery
- Corridors are diversifying beyond the U.S. and Gulf states
- The G20 and UN target fees below 3% (from the current ~6.4% average)
- Migration pressure keeps rising (income gaps, climate displacement, youth population growth)
Potential headwinds include stricter migration policies and automation,n reducing demand for migrant labor in certain sectors. Falling transfer costs (driven by fintech competition) could offset some of that pressure by directing more flows through formal channels.
FDI drivers
FDI's trajectory depends on geopolitical stability and global growth. Several trends could reshape flows in the coming years.
| Trend | Potential FDI impact |
|---|---|
| Supply chain restructuring ("China+1") | Fresh FDI to Southeast Asia, India, and Latin America |
| Government incentives (EVs, semiconductors, green energy) | Targeted investment in strategic sectors |
| Trade agreements (RCEP in Asia) | Reduced cross-border barriers |
| Competition for "quality" FDI | More emphasis on tech transfer and local job creation |
UNCTAD warns that the FDI rebound has disproportionately benefited wealthier nations. Creating stable business environments — with clear regulations, reliable infrastructure, and educated workforces — remains the surest path to closing that gap for developing countries.
Expert consensus
Dilip Ratha at the World Bank has consistently urged governments to cut transfer costs and channel more remittances toward productive investment (through diaspora bonds, matched savings, and credit programs that accept remittance streams as collateral).
UNCTAD advises developing countries to build stronger links between foreign investors and local firms so FDI doesn't operate as an isolated enclave.
A United Nations policy briefing captured it well: remittances "have become one of the largest forms of external financing for developing countries," while "investment in productive capacity is crucial for sustainable growth." The two flows aren't competitors — they fill different gaps.
Why remittances and FDI are partners, not rivals
The data leaves little room for debate. Remittances keep families fed, children in school, and household economies stable — especially during crises when every other financial flow retreats. FDI builds the industries, infrastructure, and export capacity that generate long-term employment.
For developing countries, the ideal strategy involves both. Remittance-funded education produces a skilled workforce, which attracts foreign investment.
FDI-driven job creation then reduces the economic pressure that pushes migration in the first place. The cycle can turn virtuous — if policymakers treat both channels with equal seriousness.
| Flow | Strongest at | Weakest at |
|---|---|---|
| Remittances | Poverty reduction, crisis resilience, reaching rural communities | Generating industrial growth, creating formal jobs |
| FDI | Building productive capacity, job creation, technology transfer | Reaching the poorest households, staying stable during downturns |
For Canadians sending money abroad, every transfer is a form of development finance — direct, immediate, and personal. The data confirms what millions of families already know: remittances are a lifeline, and they grow more powerful every year.
Frequently asked questions
Here are some commonly asked questions while comparing remittances vs FDI:
Are remittances bigger than FDI?
For developing countries, yes. The World Bank reports that remittances to LMICs reached $685 billion in 2024, exceeding both FDI and foreign aid combined. Globally, FDI flows are larger (~$1.6 trillion), but most of that capital circulates among wealthy nations. For countries that need external finance most, remittances dominate.
Why are remittances more stable than FDI?
Remittances come from millions of individual senders spread across different countries and industries, which diversifies risk considerably. Migrants tend to send more (not less) when families face hardship, making flows countercyclical. FDI depends on corporate profit expectations and investor confidence — both of which drop sharply during recessions and geopolitical crises.
How much does Canada send in remittances?
Canada's outbound remittances were estimated at $27.8 billion in 2018, with major flows to China ($4.7 billion), India ($3.0 billion), the Philippines, and Pakistan. A narrower annual estimate put outflows at CAD 8.4 billion in 2019.
Do remittances help or hurt developing economies?
Remittances carry a clear net positive effect — reducing poverty, funding education and healthcare, and stabilizing incomes during downturns. The risk comes from over-dependence: heavy reliance can trigger brain drain (skilled workers leaving) and Dutch Disease (currency appreciation hurting exports). Both concerns are real but manageable with the right policies.
Can FDI and remittances work together?
Absolutely. Countries that invest remittances in education produce a more skilled workforce, which attracts foreign investment. FDI-driven job growth can reduce the economic pressure that triggers migration in the first place. The most successful development strategies treat both flows as complementary channels.
References
- World Bank. (2024). Migration and Development Brief 40. Washington, DC: World Bank Group.
- World Bank. (2023). Migration and Development Brief 39. Washington, DC: World Bank Group.
- World Bank. (2021). Migration and Development Brief 35: Recovery — COVID-19 Crisis Through a Migration Lens. Washington, DC: World Bank Group.
- UNCTAD. (2023). World Investment Report 2023: Investing in Sustainable Energy for All. Geneva: United Nations.
- UNCTAD. (2025). Global Investment Trends Monitor. Geneva: United Nations.
- UNCTAD. (2022). World Investment Report 2022: International Tax Reforms and Sustainable Investment. Geneva: United Nations.
- Statistics Canada. (2024). International Investment Position, Canadian Direct Investment Abroad,d and Foreign Direct Investment in Canada. Ottawa.
- Invest in Canada. (2024). Why Invest in Canada: FDI Data and Trends. Government of Canada.
- Ratha, D. (2023). "Leveraging Remittances for Development." World Bank Blogs — People Move. World Bank Group.
- IMF. (2023). Balance of Payments and International Investment Position Statistics. Washington, DC: International Monetary Fund.
- Globerman, S. (2024). "Foreign Direct Investment in Canada: Trends and Implications." Fraser Institute. Vancouver, BC.
- World Bank. (2024). Remittance Prices Worldwide Quarterly Report. Washington, DC: World Bank Group.
- United Nations. (2023). "External Financial Flows to Developing Countries." UN Policy Brief. New York: United Nations.
- UNCTAD. (2021). World Investment Report 2021. Geneva: United Nations.
