Small island states are increasingly characterised by the growing role of international migration and remittances as components of national and household incomes. Recent household‐level survey data on migration and remittances in two Pacific island states, Fiji and Tonga, demonstrate that where formal social protection systems are largely absent, migration and remittances can perform a similar function informally, contributing significantly to development objectives. Remittances also have a positive effect on poverty alleviation and wealth creation, although the impacts on income distribution are mixed. From a policy perspective, these informal social protection and poverty alleviation mechanisms may be more effective in promoting development than policies designed to incorporate remittances into the formal financial systems. Migration and remittances play an increasingly valuable role in small states where domestic development opportunities are limited. Copyright © 2013 John Wiley & Sons, Ltd.