The African Diaspora’s Homeward Bonds
On the eve of the spring Bretton Woods institutions’ meetings, the World Bank and African Development Bank extended joint research on remittances and migration into a separate treatment of diaspora savings behavior and the prospect for placing dedicated Sub-Saharan bonds with that base. Official data count international African emigrants at 30 million, with half relocated on the continent in destination countries like Kenya and South Africa. High-income domiciles include the US, Europe and the UAE and Saudi Arabia in the Gulf, with Nigerians the largest group in the US. Communities are active in trade and investment missions with home nation embassies often targeting them through special outreach efforts. Migrants transfer funds for both business and household purposes, with non-resident property ownership restrictions often relaxed in their case. Studies of returning Ghanaians and Ivoirians show large percentages with at least $5,000 in cash on hand which they then plow into small and midsized firms across a range of sectors. The total annual amount of expatriate accumulation is estimated at $50 billion, or over 5 percent of GDP, which could be placed in capital market instruments. The agencies recommend a sovereign push into retail diaspora bonds to harness this potential, which could be sold through cross-border banking and money processing networks. Lower interest rates could offset the higher costs involved, as individuals with this background would presumably be more loyal to the recipient regardless of return and accept local in lieu of foreign currency payments in a contingency. If legal or creditor action were required domestic linkages could be tapped for recourse. The issuer will of course face standard capacity and willingness to service debt questions where existing or solicited ratings can be useful components. Earmarking the proceeds for specific infrastructure and social projects could heighten interest, especially if marketing and publicity is otherwise limited as in recent attempts by Ethiopia and Nepal.
India and Israel have had the most successful programs raising $40 billion even in times of crisis, while Sub-Saharan transactions could be $5-10 billion yearly, according to preliminary projections. The paper could be part of a diverse portfolio engaged under pooled diaspora investment funds at home and abroad, which typically lack liquidity and scale and professional management, the survey reveals. Associations, such as in Denmark, already bundle remittances for common country outlays, for which they may also contribute skills and technology. Dual citizenship and voting rights where authorized can solidify bonds in all respects, the document suggests as senior development bank executives champion financial market ties.
