A newly proposed US bill aiming to impose a 5% tax on remittances sent by non-citizens poses significant risks to African fintech startups, many of which have expanded into the remittance sector. This legislation, recently introduced by Republican lawmakers, would necessitate that money transfer operators verify the immigration status of senders. It also introduces a tax credit mechanism for US citizens, effectively imposing a surcharge on undocumented immigrants and non-citizen residents.

While similar proposals have emerged previously, this iteration is gaining traction, particularly amid US President Trump’s push to reshape global trade relations. The bill arrives at a critical juncture for Africa’s remittance industry. In 2024, African nations received over $90 billion in remittance inflows, constituting up to 10% of GDP in some countries. These remittances are essential for families and provide critical funding for local businesses.

Startups such as Lemfi, NALA, Kuda, and Moniepoint have become important players in the African remittance landscape, providing faster, cheaper, and more user-friendly alternatives to traditional money transfer services. Lemfi secured $53 million in Series B funding in January, while NALA, based in Tanzania, raised $40 million the previous year, indicating strong investor confidence in the sector. The US, home to over two million African immigrants, remains a primary remittance corridor to the continent, contributing almost $13 billion annually. Nigeria received $5.7 billion from the US in 2021, followed by Egypt ($1.8 billion) and Kenya ($1.2 billion).

Although African governments have yet to formally respond, some countries heavily reliant on remittances may soon need to address the issue. Esteban Moctezuma Barragán, Mexico’s ambassador to the US, has already expressed opposition. In a letter to the House Ways and Means Committee, he urged lawmakers to reconsider the proposal, highlighting the potential burden on vulnerable migrant communities.

As the bill advances in Washington, African fintechs and their investors should prepare for a potential decrease in transaction volumes and increasing regulatory challenges in a sector that has been experiencing substantial growth and optimism.