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

Abstract

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.

Keywords: {'name': 'Migration; Gross Capital Formation; Diaspora Remittances, Poverty Reduction; Zimbabwe; Rural Underdevelopment'}

Authors & affiliations

Alexander Maune
UNISA, College of Economic and Management Sciences

Deposited references

Supplied references, not a list of publications citing this article.

DOI: 10.1016/j.worlddev.2013.04.009

DOI: 10.55493/5009.v10i1.4454

DOI: 10.1007/978-3-030-46482-0_11

DOI: 10.1007/978-3-030-48291-6_20

Altenburg, T. (2011). Industrial policy in developing countries: Overview and lessons from seven country cases (Discussion Paper No. 4/2011).

DOI: 10.3390/socsci10110410

Bakewell, O. (2009). Which diaspora for whose development? Some critical questions about the roles of African diaspora organisations as development actors. DIIS Brief.

Banerjee, P. S. (2022). Economic development in agro-finance sector: A complete guided study. Notion Press.

DOI: 10.1038/s41893-018-0155-4

Bardhan, P. K. (2000). Understanding underdevelopment: Challenges for institutional economics from the point of view of poor countries. Journal of Institutional and Theoretical Economics, 156(1), 216–235.

DOI: 10.1111/j.1467-8586.2011.00398.x

DOI: 10.1596/30126

DOI: 10.1007/978-3-030-68127-2_853-1

DOI: 10.20378/irb-49928

Bjuggren, P. O., & Dzansi, J. (2008, November). Remittances and investment. Paper presented at the 55th Annual Meetings of the North American Regional Science Association International, New York, NY.

DOI: 10.1111/j.1467-856X.2010.00435.x

Boswell, C., Stiller, S., & Straubhaar, T. (2004). Forecasting labour and skills shortages: How can projections better inform labour migration policies? (pp. 21–38). EC, DG Employment and Social Affairs.

Bracking, S., & Sachikonye, L. (2006). Remittances, poverty reduction and the informalisation of household wellbeing in Zimbabwe. GPRG. https://ora.ox.ac.uk/objects/uuid:d51e6826-8ad2-44a4-a008-70d9494ae1df

Bracking, S., & Sachikonye, L. (2010). Remittances, poverty reduction and the informalisation of household wellbeing in Zimbabwe. Brooks World Poverty Institute, University of Manchester.

DOI: 10.1177/1609406915621381

DOI: 10.1111/j.1468-2486.2006.00553.x

DOI: 10.4337/9781788112376.00016

Chatiza, K. (2008). Opportunities and challenges in institutionalising participatory development: The case of rural Zimbabwe [Doctoral dissertation, Swansea University].

DOI: 10.38035/dijefa.v5i5.3446

Chipande, G. H. (1983). Smallholder agriculture as a rural development strategy: The case of Malawi [Doctoral dissertation, University of Glasgow].

DOI: 10.1080/23311886.2025.2461258

DOI: 10.1111/imig.12542

DOI: 10.1111/dpr.12471

DOI: 10.1080/14747731.2015.1016302

DOI: 10.5042/ijmhsc.2011.0059

Crush, J., & Tevera, D. S. (Eds.). (2010). Zimbabwe's exodus: Crisis, migration, survival. African Books Collective.

DOI: 10.1016/j.worlddev.2019.104766

DOI: 10.1057/s42214-019-00035-8

Dafuleya, G. (2017). Non-state social protection strategies of poor households in Bulawayo, Zimbabwe [Doctoral dissertation, University of Johannesburg].

Dauod, S. (2023). Crisis and stability: Examining the effects of remittances on the macroeconomy [Doctoral dissertation, George Mason University].

DOI: 10.1080/01436590601081823

DOI: 10.1111/j.1467-7660.2007.00435.x

DOI: 10.1111/j.1747-7379.2009.00804.x

DOI: 10.1111/j.1468-2435.2012.00755.x

DOI: 10.1016/j.worlddev.2010.02.002

DOI: 10.1016/j.techfore.2015.12.009

DOI: 10.1093/0199269009.003.0009

DOI: 10.1596/1813-9450-3964

DOI: 10.1007/s40803-016-0028-8

DOI: 10.1111/dech.12180

DOI: 10.1016/j.techfore.2011.05.005

DOI: 10.5089/9781589067011.084

DOI: 10.1016/j.heliyon.2021.e06355

Gelb, S., Kalantaryan, S., McMahon, S., & Perez-Fernandez, M. (2021). Diaspora finance for development: From remittances to investment. Publications Office of the European Union.

DOI: 10.1086/713939

DOI: 10.1111/1468-2435.00183

DOI: 10.1108/01443580510631379

DOI: 10.1111/1471-0366.00036

DOI: 10.1177/03091325211033645

DOI: 10.1016/j.worlddev.2008.05.007

Harriss, J. (1982). Rural development: Theories of peasant economy and agrarian change. Routledge.

DOI: 10.1080/13569770802396360

International Organization for Migration. (2022). Migration and development in Zimbabwe. IOM.

DOI: 10.26643/rb.v118i12.13087

DOI: 10.1007/s11077-020-09407-x

Jok, J. M. (2011). Diversity, unity, and nation building in South Sudan. US Institute of Peace.

Kapur, D. (2005). Remittances: The new development mantra? In Remittances: Development impact and future prospects (Vol. 2, No. 1, pp. 331–360).

DOI: 10.3390/land14020263

DOI: 10.1016/j.jrurstud.2017.04.012

Kolev, A., & La, J. (2021). Financing the extension of social insurance to informal economy workers: The role of remittances (OECD Development Centre Working Paper No. 344). OECD.

Kuhlmann, J. (2010). Political activism of the Zimbabwean diaspora: Opportunities for, and challenges to, transnational mobilisation. Leipziger Univ.-Verlag.

DOI: 10.1016/j.ijdrr.2013.03.007

DOI: 10.1007/978-981-96-9618-5_5

Lofgren, H., & Cicowiez, M. (2022). Taxation, infrastructure investment, growth, and poverty reduction: A case study of Zimbabwe. Documentos de Trabajo del CEDLAS.

DOI: 10.3390/land11091444

DOI: 10.71458/phc2js94

DOI: 10.1596/0-8213-5794-8

DOI: 10.4324/9781003157175-2

DOI: 10.3390/su17156752

DOI: 10.1080/03768350601165942

DOI: 10.5897/AJHC2015.0269

DOI: 10.2478/foli-2023-0030

Maune, A., & Matanda, E. (2022). The nexus between gross capital formation and economic growth: Evidence from Zimbabwe. The Journal of Accounting and Management, 12(2).

Maune, A., Matanda, E., & Chitombo, E. (2023). Governance, gross capital formation, foreign remittances and economic growth in Zimbabwe. Acta Universitatis Danubius. Oeconomica, 19(3), 107–117.

DOI: 10.1016/j.enpol.2023.113501

Mohamed, A. A. (2025). Essays on remittances in conflict-affected and fragile states [Doctoral dissertation, University of Glasgow].

DOI: 10.1080/03066150.2011.583642

Moyo, S. (2016). Family farming in sub-Saharan Africa: Its contribution to agriculture, food security and rural development (Working Paper No. 150).

DOI: 10.1016/j.heliyon.2023.e14735

DOI: 10.1016/j.gloenvcha.2020.102085

Murapiro, A. T., Ping, Z. N., & Mapisa, L. (2023). The impact of remittances as a source of economic growth in LDCs: Case of Zimbabwe since independence. International Journal of Arts, Humanities and Social Sciences, 6(1).

DOI: 10.32479/ijefi.18044

Muzapu, R., & Havadi, T. (2021). Boosting diaspora remittances as a key source of investment capital: The case of Zimbabwe. Management, 11(2), 27–37.

Muzondidya, J. (2011). The Zimbabwean diaspora: Opportunities and challenges for engagement in Zimbabwe's political development and economic transformation. In Zimbabwe in transition: A view from within (pp. 112–158).

DOI: 10.1016/j.sciaf.2022.e01521

Ncube, G. (2011). Local economic development and migrant remittances in rural Zimbabwe: Building on sand or solid ground? ISS Working Papers – General Series.

Ncube, G., & Gómez, G. (2015). Remittances in rural Zimbabwe: From consumption to investment? International Journal of Development and Sustainability, 4(2), 181–195.

DOI: 10.1111/dpr.12126

Ndhlovu, E. (2022). Rural development through land reform in South Africa and Zimbabwe: Prospects and challenges. International Journal of Development and Sustainability, 13(9), 754–773.

Newland, K., & Patrick, E. (2004). Beyond remittances: The role of diaspora in poverty reduction in their countries of origin. Migration Policy Institute.

DOI: 10.1017/CBO9780511808678

North, D. C. (1993a). Institutions and credible commitment. Journal of Institutional and Theoretical Economics, 149(1), 11–23.

North, D. C. (1993b). The new institutional economics and development (Economic History Working Paper No. 9309002).

DOI: 10.1007/978-981-16-6771-8_3

Nyikahadzoi, K., Dzingirai, V., Zamasiya, B., Warinda, P., & Quarshie, E. (2019). Incomes, remittances and implications for the welfare of migrant-sending households in Zimbabwe (Migrating Out of Poverty Working Paper No. 64).

DOI: 10.1007/s12571-012-0218-8

Onwuka, C. O. (2019). Macroeconomic determinants of migrant remittances in Nigeria [Doctoral dissertation, Nnamdi Azikiwe University].

DOI: 10.9734/ajeba/2023/v23i221152

DOI: 10.1177/0117196816680625

DOI: 10.1080/02533950108458709

DOI: 10.1088/1755-1315/158/1/012042

DOI: 10.30574/wjarr.2024.21.1.0088

DOI: 10.1016/S1574-0714(06)02017-3

Ratha, D., & Mohapatra, S. (2007). Increasing the macroeconomic impact of remittances on development. World Bank, 3(1), 178–192.

DOI: 10.1016/0305-750X(95)00061-G

DOI: 10.1080/09692290.2019.1607766

DOI: 10.4337/9781789907131.00017

DOI: 10.1111/dech.12449

DOI: 10.1080/21632324.2019.1589073

Sørensen, B. (2014). The migration-development nexus: Diaspora as development agents. Aalborg University.

DOI: 10.1080/00220388008421764

DOI: 10.1080/1369183X.2023.2279708

DOI: 10.5897/JGRP2017.0670

DOI: 10.1111/1468-2435.00066

Terrazas, A. (2010). Diaspora investment in developing and emerging country capital markets: Patterns and prospects. Migration Policy Institute.

Tevera, D., & Zinyama, L. (2002). Zimbabweans who move: Perspectives on international migration in Zimbabwe. IDASA and Queens University.

DOI: 10.1111/imig.13012

DOI: 10.1108/JBIM-06-2015-0112

DOI: 10.1016/j.agsy.2013.10.010

DOI: 10.1177/0308518X211038013

DOI: 10.2307/2620358

DOI: 10.3167/sa.2009.530305

Woodhouse, P. (2013). New investment, old challenges: Land deals and the water constraint in African agriculture. In The new enclosures: Critical perspectives on corporate land deals (pp. 159–176). Routledge.

World Bank. (2023). Migration and remittances data. World Bank Group.

DOI: 10.3390/su14063703

DOI: 10.1111/dpr.12331