What are diaspora bonds? For one thing, they’re an excellent reason to attend the 11-12 May 2012 WSBI Congress in Marrakech, because they represent a tremendous business opportunity for savings and retail banks.
Over the past 45 years, the number of people living outside their home country has almost tripled. In 2011, this 215 million-strong global diaspora sent home $350 billion, often in cash or via cash transmitters. What’s more, the World Bank estimates their savings at $400 billion. Through remittances, diaspora play a vital role in the development of their countries of origin, but now it’s time to combine the best of both worlds by harnessing not only their remittances but also their savings to drive development. How?
One way is for developing country governments to issue hard-currency bonds to diasporas, tapping into the wealth they’ve accumulated abroad. “Milking migrants” is what The Economist calls it: diaspora bonds appeal to migrant patriotism and pride, and provide a means for them to contribute to the development of their home country. Israel was the first to issue such bonds, in 1951, and in the last two decades India, Sri Lanka, South Africa and Ethiopia have also raised hard-currency financing from their respective diaspora. Securitising their future remittance receipts can raise lower cost and longer-term financing for infrastructure, public works, and commercial development initiatives. Fedecredito, a credit cooperative in El Salvador, is raising funds in this way in order to increase lending to underserved microentrepreneurs and low-income households.
Diaspora bonds are not yet widely used as a development financing instrument, but with Nigeria, Kenya and the Philippines possibly launching such projects in the near future, and given the immensity of diaspora savings and the business case for tapping them, their time has come.
Don’t miss the opportunity to explore the rich potential of remittance securitisation and diaspora bonds at the “Leveraging remittances for development” workshop at the WSBI Congress. Register now at www.wsbi2012.com.
Lee GILLETTE
WSBI
