Remittances are among the largest, most stable, and most resilient financial flows reaching Latin America and the Caribbean. The region currently receives close to USD 170 billion annually in remittances, and in several countries these inflows exceed both foreign direct investment and official development assistance. In economies such as Honduras, El Salvador, Nicaragua, Guatemala, and Haiti, remittances also play a critical macroeconomic and social role, in some cases accounting for a very large share of national income. At the same time, the remittance industry is highly concentrated, with a relatively limited number of financial institutions, money transfer operators, and payment service providers capturing a significant share of the market.
Despite their scale and resilience, remittance-related financial flows remain largely disconnected from long-term productive investment. Most remittances are used to support household consumption, while the revenues generated through remittance intermediation have not been systematically leveraged to advance development finance. At the same time, Latin America and the Caribbean faces a persistent financing gap in sustainable infrastructure, particularly in the energy sector. Although the region has abundant renewable resources and substantial opportunities to accelerate the energy transition, investment continues to be constrained by high sovereign risk, limited fiscal space, shallow domestic capital markets, weak offtakers (the energy purchaser or primary counterparty responsible for project payments, typically a utility or large consumer) in several countries, and a high cost of capital for renewable energy projects.
The Proposed Mechanism
This paper presents a technical, financial, and institutional framework for a structured instrument designed to mobilize future cash flows generated by remittance intermediation services in order to support investment in renewable energy and sustainable infrastructure. The proposed mechanism does not tax, divert, or appropriate migrants’ remittances. Rather, it is based on the securitization of net revenues earned by regulated financial institutions and payment operators through remittance intermediation, including transaction fees, foreign-exchange spreads, processing revenues, and other contractually defined service income. By isolating these foreign-currency cash flows through a bankruptcy-remote special purpose vehicle or trust, the mechanism can support the issuance of long-term debt instruments that are structurally insulated from part of the sovereign and transfer risks that typically constrain financing in emerging markets. In this structure, repayment does not depend on the cash flow of renewable energy projects themselves, but on the remittance intermediation revenues contractually assigned to the vehicle.
How the Capital Would Be Deployed
This distinction is fundamental. It allows the instrument to mobilize capital on the basis of a relatively stable and externally linked source of revenue, while deploying the proceeds to reduce risk and improve financing conditions for eligible renewable energy investments. The paper argues that the proceeds from such issuance should not be used primarily for direct project lending. Instead, they should be deployed strategically through de-risking instruments such as guarantee facilities, reserve accounts, subordinated or mezzanine support, and other forms of credit enhancement. These instruments could improve the bankability of renewable energy projects developed under national procurement schemes, corporate power purchase agreements, or public-private partnership frameworks.
By reducing perceived risk and strengthening financing structures, the mechanism could contribute to lowering the cost of capital, which remains one of the most binding constraints on renewable energy deployment across much of the region. The proposed framework builds on international precedents in remittance securitization that have been used by financial institutions in emerging markets since the early 2000s, while introducing a novel application: the systematic linkage between remittance intermediation revenues and the financing of renewable energy infrastructure. The paper also examines the legal architecture of the structure, the allocation of risks across actors, the role of public institutions, multilateral development banks, and blended finance, as well as the governance and transparency requirements needed to preserve legitimacy and operational credibility.
Projected Impact
Based on conservative assumptions, the paper estimates that Latin America and the Caribbean could support approximately USD 3.9 billion in remittance-backed issuance capacity. If these resources are deployed through a blended structure combining direct project finance, mezzanine support, and guarantee mechanisms, the instrument could help mobilize more than USD 15 billion in renewable energy investment. In indicative terms, this could support the development of more than 19 GW of renewable energy capacity, particularly in countries where access to infrastructure finance remains structurally constrained.
Conclusion
Under appropriate legal, regulatory, governance, and financial conditions, remittance-backed instruments could become a strategic tool for multilateral development banks, donors, philanthropic capital, private financial institutions, and national policymakers seeking to accelerate the energy transition without directly increasing public debt. More broadly, the proposal opens a new pathway for linking a well-established and resilient cross-border financial flow to the long-term capital needs of clean energy transitions in emerging and financially constrained economies.
