If one in every ten members of the African diaspora, worldwide, was persuaded to invest only $1, 000 in their home countries, Africa could raise a total of $3 billion a year for her development financing.
This hypothesis, by the World Bank is based on solid facts. The contribution made by diasporas to their homeland has been immense. According to this Washington D.C bases institution’s official records, Remittances to sub-Saharan Africa were expected to jump in year 2016, by 3.4 percent, to $36 billion, from $35.2 billion in 2015. Diasporas, especially from developing economies, have been contributing immensely especially on the areas of direct remittances, trade, investment as well as both the transfer of skills as well as technology.
“Countries like Kenya already deeply appreciate and are keen on tapping into their diaspora community for investments in their fast evolving economies. Both the government and private firms like Optiven Limited are providing information and linkages on investment opportunities and sourcing in their homeland countries and facilitate contacts between traders in destination and mother countries,” says Mr George Wachiuri, CEO of Optiven Limited, a leading real estate firm that is based in Nairobi, Kenya.
Besides direct individual remittances, one funding method for development back home, which was successfully pioneered by both Israel and India, is the Diaspora Bonds (DBs). The World Bank defines Diaspora Bonds as a retail saving instrument that is issued by a country to its own diaspora to tap in their wealth in the adopted developed countries.
Particularly, Israel has so far tapped Jewish diaspora since 1951 to raise US$32.4Billion while India has issued DBs and raised US$11.3 Billion. Lebanon, Sri-Lanka and Ethiopia have also followed suit. Nigeria and Kenya are amongst countries that have been debating on the possibility of DBs issuance.
Money raised through this instrument can be used in projects that are dear to overseas migrants. These could range from infrastructure, housing, hospitals and schools.
Given that they are familiar with their home countries, diaspora investors are a more stable source of funding compared to other foreign investors. In a major way, these bonds bet their bottom dollaron patriotism that is associated with migrants and their motherland.
Diaspora investors are more familiar with their home countries, as opposed to other foreign investors. This gives them a lower perception of risk. Members of the diaspora are also less concerned with devolution risk because they are more familiar with the homeland currency.
In order to further harness this instrument;“credit enhancements via donor guarantees or securitization, and investor protections via outside professional fund management would facilitate issuance of diaspora bonds,” notes Suhas Ketkar (Vanderbilt University) and Dilip Ratha (World Bank) in a paper that was recently published by the World Bank.