One key topic within the Diaspora community is Real Estate! Investment in homes back home and also in the Diaspora. An increasing number of people are investing in foreign land as some have taken up foreign residency and citizenships.
Now we have interesting cases of people who have invested in homes back home as well as the Diaspora, this community now wants more! They now want investment in other forms and not necessarily Real Estate. Some time back we had Zimbos in UK sending back used cars for resale, a business venture which peaked during the 2007-2012 period. Earlier, we had witnessed our Diaspora community investing in trucks (magonyeti) during the 2005-2007 period.
So the question here is that the Diaspora wants more than Homelink homes and what are the options available? Today we will examine the option of Government Bonds and our case studies are going to be Israel and India.
Diaspora Bonds
‘The rationale behind diaspora bonds is twofold. For the countries, diaspora bonds represent a stable and cheap source of external finance, especially in times of financial stress. For investors, diaspora bonds offer the opportunity to display patriotism by helping their country of origin.’ Ketkar and Dilip
Although remittances are the best known flow of monies from the diaspora to its homeland, there are other instruments that can capture some of these monies as well. Foreign currency accounts and bonds are designed to specifically attract the migrants’ monies. A diaspora bond is a debt instrument issued by a country – or potentially, a sub-sovereign entity or a private corporation – to raise financing from its overseas diaspora.
Foreign currency bonds have been around for at least as long as remittance bonds but once again are targeted to migrant workers abroad. As explained by Lowell, the bonds are denominated in a foreign currency and bearer certificates are issued, permitting the holder to redeem them for cash anonymously. High interest rates and premium exchange rates are given. These schemes are thought to attract remittances into formal banking, although they may be most attractive to professional and higherincome migrants.
Diaspora savings can be channelled to projects that have multiplier effects in the home country, rather than being transferred in the form of transfers that have little or no multiplier effects.
Israel: Some of the first diaspora bonds were the State of Israel Bonds issued in 1951.
India: The Indian government has consistently pursued diasporic capital. Between 1991 and 2000 it issued 3 separate savings schemes aimed at the diaspora. In 1992 the government issued ‘India Development Bonds’ and in 1998 and 2000 it launched ‘Resurgent India Bonds’ and ‘India Millennium Development Bonds’. Each offering was targeted towards infrastructure financing in India.
Sri Lanka: The Government of Sri Lanka has also sold Sri Lanka Development Bonds since 2001 to several investor categories including non-resident Sri Lankans.
Israel and India have raised over $40 billion through issuing diaspora bonds. There is scope for other countries with large Diasporas to issue diaspora bonds to raise finance for development.
Given the evident success and financial yields of the issuance of diaspora bonds in India and Israel, it is surprising that so few other countries have followed suit.
Food for thought for African Governments.
