In 2000, the global diaspora community sent $132 billion to (mostly) friends and family members. For 2012, the World Bank estimated that figure grew to $529 billion. And it’s on the rise.
Harnessing the power of the diaspora, not just as a means of familial economic assistance, but also for wider financial and infrastructure investment, is getting less theoretical and more applied. That’s especially thanks to the power of social media to pull expatriate investors together, and the ease of money transfers. It seems the next big wave of financial innovation is coming in the form of products like diaspora bonds and profit-seeking, albeit patient capital, diaspora funds.
Last week, Calvert Foundation’s Leigh Moran explained how the impact investing group is looking to create a new fund that would enable U.S. diaspora members to invest in the development of their homelands (be it their birthplace or place of heritage). The foundation hopes to launch a pilot for a specific diaspora community after it completes a feasibility study. It’s but one example of the recent diaspora investment surge.
Earlier this week, in an article in Think Africa Press, Post-2015: It's Time to Harness Diaspora Power, Onyekachi Wambu argues that Africa needs to take a page from China’s playbook by harnessing diaspora remittances that boost infrastructure, education and skills development. The strategy isn’t just about decreasing poverty, but increasing wealth.
“That is why over 50 UK-based African diaspora organisations, under the Africa-UK umbrella, are pushing for a different focus for the post-2015 (Millenium Development Goals) architecture. These groups take the view that international development must not focus solely on poverty reduction in line with the MDGs, but also foster wealth, drive structural reform and create employment opportunities.”
Kanayo F. Nwanze, president of the International Fund for Agricultural Development (IFAD) last month said cutting down on transaction costs is one way to help grow the power of the diaspora in rural development.
“The value of remittances is staggering, but the rural poor need greater impact ... We need more strategic ways to invest the US$200 billion sent home to the rural areas every year.”
According to IFAD, remittances could potentially generate another $30 billion each year for investment in rural areas if initiatives easing the process are scaled.
In an April BBC report, Hong Kong-based Ghanaian academic Adams Bodomo said the African diaspora remitted $51.8 billion back to the continent. But according to the World Bank, development assistance to Africa totalled $43 billion.
Noting this trend (which is at the heart of a recent tussle between Bill Gates and Dambisa Moyo, author of the controversial book, Dead Aid) Forbes contributor Farai Gundan sees the diaspora movement as a key to investment-based development. Although the vast majority of funds the diaspora are sending ultimately goes back home to family members and not to nonprofits, that too may be changing.
“South African billionaire Patrice Motsepe signed the Giving Pledge, committing away half of his wealth to charity, and Nigerian billionaire Aliko Dangote pledged not only to step up his giving but also to make it more public. On a much more granular level, Ubuntu has already raised USD $13 million, with a substantial amount of support coming from South Africa and its diaspora. Ubuntu (Education Fund) Board Member Nomkhita Nqweni, who chairs the U.ME.WE campaign from Johannesburg, recently hosted a private fund-raising event for 40 professionals, mostly Black South Africans.”
Finally, in a recent article, 'Africapitalism' promises new model of African self-empowerment The Guardian’s Afua Hirsch, looked at the launch of the One Thousand and One Voices fund, a $300 million patient capital initiative lead by CEO Hendrik Jordaan.
"Our objectives are akin to the objectives of philanthropy – lifting millions of people out of poverty," said Jordaan. "Philanthropy does have a role to play, for example in relieving pain and suffering where a free-market society may not have a solution, but the tool that we believe should be used for economic development is private-sector investment."
The Guardian also reported on the fashion designer Ozwald Boateng, who in May asked African philanthropists to help raise $400 million to jumpstart a $68 billion African infrastructure development goal. His Made in Africa Foundation aims to create diaspora bonds to finance roads, railways, ports and power projects:
"This is unequivocally the new trend in development," said Jordaan. "We are seeing it every day, everywhere.”
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