Gross capital formation, diaspora remittances and the migration paradox: explaining persistent rural underdevelopment

Résumé

Diaspora remittances constitute a major source of external finance for Zimbabwe, reflecting sustained outward migration driven by economic instability and limited domestic opportunities. Despite their growing macroeconomic significance, remittance inflows have not translated into meaningful increases in gross capital formation or sustained rural development. This study examines this apparent contradiction, conceptualised as the migration paradox, by analysing the structural, institutional, and policy constraints that limit the conversion of remittances into productive investment in rural Zimbabwe. Using a Delphi methodology, the study draws on expert consensus from policymakers, academics, development practitioners, financial sector professionals, and diaspora engagement specialists through three iterative rounds. The findings reveal strong agreement that remittances are predominantly channelled toward household consumption, social reproduction, and risk mitigation, rather than capital accumulation. Weak financial intermediation, policy inconsistency, insecure property rights, high rural investment risk, and the absence of credible diaspora investment instruments emerge as key binding constraints to gross capital formation. While remittances contribute positively to household welfare, that is, enhancing food security, education, health, and housing, their impact on productive investment and rural structural transformation remains limited. The study concludes that the remittance–capital formation gap reflects institutional and governance failures rather than migrant preferences. It argues for repositioning diaspora remittances as a complementary source of development finance through credible policy reforms, improved investment climates, and financial innovations that mobilise remittances into gross capital formation and rural development.

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