Understanding Opportunities for Diaspora Investment

An Approach for African Governments

WEBINAR 20 February 2020 | 1pm GMT

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Housekeeping Items

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ModeratorAbdelkader Benbrahim, Financial Sector AdvisorMaking Finance Work for Africa Partnership

SpeakersLeon Isaacs, Chief Executive OfficerDMA Global Ltd

Claudia Natali, Senior Labour Mobility and Human Development SpecialistInternational Organization for Migration

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Context

• Africa faces major challenges in securing the financing and investment needed to attain the SDGs

• African countries are increasingly beginning to look beyond their borders to call on an asset that has supported the continent far more than aid interventions ever have;; its own people

• Africa has one of the largest global diaspora’s

• Diasporas makes a major contribution to economic development via:

o Transfer of skills / Socio-­cultural influence

o Remittances -­ $US 86 billion (World Bank, 2019)• Annual Diaspora Savings is an increasingly important source, can take several forms (i.e. remittances, direct investment, portfolio investment, philanthropy)

• The African diaspora is estimated to have annual savings estimated at more than $30 billion (AU, 2019)

o FDI – $40 Billion (UNCTAD, 2018)

o ODA – $51 Billion in 2016 (UNCTAD, 2018)

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Diaspora Engagement:

• Lack of trust with public institutions that deal with the diaspora;;

• Lack of reliable data on individuals and organizations within the diaspora – lacking human/financial resources to map the diaspora and engage with them;;

• Lack of national policies/strategies on diaspora engagement – Rarely harmonized at the regional/ continental level;;

• The younger and third-­generation diaspora remains a relatively untapped resource;;

Diaspora Investment:

• Diaspora capital are hardly ever harnessed for productive investment and are usually kept in host countries;;

• Not many examples of successful diaspora investment initiatives globally. Most successful examples have involved considerable time in planning, product design and significant resources.

• Actions and tools to help understand the potential of diaspora investment, and guide governments to design and implement effective diaspora investment mechanisms are still relatively underdeveloped.

Context (cont.) -­ Challenges

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• Help countries identify opportunities to boost diaspora investment as a viable source of productive investment in Africa and the best approach for attracting this investment

• Create a replicable framework for governments to work through, that can support the development of effective Diaspora Investment programmes given the specific individual country

o Diaspora Investment Channel Profiles (Direct Investment, Retail products, Intermediaries, Capital Markets)

o Viability of different types of intervention

o Best means of coordinating between stakeholders, both at national and regional levels

o Taking into account large variations between African countries (Profile of diaspora, Enabling environment)

• Assess and make recommendations on how donors can most effectively support productive diaspora investment into Africa

The Study – A Systematic Approach to Supporting Diaspora Investment

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Approach and methodology• Funding from the Migration and Development Fund

• MFW4A worked with DMA Global to undertake research and develop the Toolkit

• Phase 1 – Developing a Diaspora Investment Toolkit

o Mapping of projects that have been undertaken – themes, outcomes (success & challenges), geographies, technical elements, target diaspora groups etc.)

o Development of a Handbook and an accompanying Diaspora Investment Assessment Template

• Phase 2 – Pilot country testing of toolkit

o Three countries (Ghana, Senegal and Nigeria)

o Diaspora Profile, investment climate, enabling environment, existing diaspora investment plans

• Phase 3 – Recommendations

o For individual country diaspora investment Framework

o For donors and development partners

• Phase 4 – Dissemination

The Study (cont.) – A Systematic Approach to Supporting Diaspora Investment

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AFRICAN DEVELOPMENT BANK AND MAKING FINANCE WORK FOR AFRICA. TOOLKIT FOR UNDERSTANDING DIASPORA INVESTMENT

Potential Investment Channels for Diaspora

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• Simplify project design

• Investment areas of interest tend to be determined by government, less by development finance institutions, and in rare cases by the diaspora communities themselves

• Understand the demand from diaspora, and support with marketing

o Diaspora may be interested in a broader range of investments – not just in their own country

• Registering with foreign regulators is expensive but is ultimately unavoidable

o Bonds feature more prominently than other methods

• Ability to issue Eurobonds is an adequate proxy for ability to issue diaspora bonds

• Ensure bond issuances are appropriately positioned and designed with care

• Countries need to leverage the the clear non-­financial link to their home country that many migrants have

• Most experts felt that the previous initiatives had fallen short of success, but there is a general lack of consensus on what success is

• Lack of data is a continual challenge

• Diaspora investors need support throughout the investment process

High Level Findings & Recommendations

The Diaspora Investment Assessment Process

The Diaspora Investment Assessment ProcessPurpose• Purpose – to help implementers of diaspora initiatives ascertain the best modalities to pursue

• Design programmes that are fit for purpose

• The assessment template uses proxy indicators to guide users to consider areas of weaknesses and strengths. The framework consists of their (i) financial environment;; (ii) diaspora investment readiness;; (iii) government’s diaspora’s engagement strategy

• The assessment template also highlights which channels are most suitable for a specific country. Where the Template suggests a certain vehicle is not suitable in the current climate, a series of recommendations are made.

Diaspora Investment Insights from Toolkit

RECOMMENDATIONSn Low Financial

Robustness n Low Investment ability

due to size of diaspora– % of diaspora with

investment wealth is low– Fulfilling their needs

would will require significant effort

– Consider regional approach

Diaspora Policy RECOMMENDATIONS• Develop a Diaspora Engagement Strategy based on the collected

information on the diaspora, and share it with all other bodies involved in diaspora programs to create a coordinated roadmap and action plan

• Develop an effective and centralized communication channel for programs available to the diaspora for investments

• Develop financial education programs about stock market instruments.

• Channel donor support to leverage existing initiatives and investments through matched funding (increasing investible assets towards projects diaspora care about) and guarantee funds

• Make it easier for the Senegalese diaspora to open bank accounts in Senegal by broadening the eligibility to non-Senegalese passport holders.

• Eliminate the fees from the BCAO for repatriation of funds for the UEMAO Diaspora regardless of where they have invested. Particularly relevant for allowing diaspora to repatriate principle and profits from portfolio investments (in T-Bills, bonds and the stock market).

SENEGAL DIASPORA PROFILE• Diaspora is concentrated in 5 oversea countries (Spain, Italy, France,

US, Canada)• Estimated 70% are not from Dakar and work in the informal sector in

host country• Diaspora profile depends on geography, e.g. Professional

accomplishment and education level are particularly high in Canada and US

• Spain and Italy have a higher percentage of informal immigration• Religious profile appears to be informing investment decision and

engagement, e.g. of religious set-up of matched funding platform Senegalese entrepreneurs groups: Morite, Catholic and Tijane. The Morite have been cited in several occasions as active investors in their community.

• Rough estimate of diaspora with investible wealth: 10%

DIASPORA INSTITUTIONSMinistry of foreign affairs is involved in multiple projects: • Aiming to build a better understanding of the situation • Map the different migration zones and create territorial strategies leading to

tailored projects• Strengthen the economic situation of diaspora in host countries• Fund projects and offer technical assistance facility • Leveraging diaspora investments in stock markets (new)• Financial education DIASPORA ENGAGEMENT • Senegal has a very well connected diaspora through the involvement of

institutions. • The Banque de l’Habitat du Sénégal has representation in countries with the

highest % of its diaspora and is actively managing bank accounts for them• American Senegalese diaspora created a guarantee fund to mobilise savings

(that are meanwhile invested in US bonds) which will serve as guarantee for specific project financing (XOF 500M raised to date)

• Entrepreneurship from returnees is supported by a number of donor programs and the Senegalese government

INVESTMENT POLICY• Free repatriation of profits and physical assets • Free transfer on principle and returns on funds • Tax exemptions on employer social contribution for 5 years • Import duty exemptions

DONOR INTEREST• Mainly around support of returnees’ entrepreneurial activities• GIZ has a program that sponsors diaspora members to come back to country of

origin to consult for projects or to work for local institutions at the same salary level as in country of residence

RECOMMENDATION FOR DONORS• Matched fund to diaspora investment in local funds and stock markets • Bi-lateral partnerships between diaspora host country and the COO for diaspora to

be able to transfer pension funds without paying taxes• Partnership with governments and financial institutions of host countries to create

pension products linked to COO with tax benefits• Technical support to local banks in order for them to create attractive investment

products to diasporans

IOM 3Es approachD

I A

S P

O R

A

R E S O U R C E S

HUMANC U L T U R A LS O C I A L & ECONOMIC

ENGAGEReach out & understand•Mapping•Migration Profiles

•Outreach & awareness

ENABLEReduceobstacles•Development planning•Migrant protection•Integration

EMPOWERInitiate sustainablecollaboration. Transfer skills & resources

Return – long-­term, temporary, virtualInvestment & remittances

IOM 3Es approach (cont.)Enable• Participation (socioeconomic and civic/political)

• Socioeconomic• Healthcare, employment, social protection (transferability), housing,

education and recognition of skills and qualifications, information, celebration of diversity, social integration (local level), dialogue.

• Civic / political• Flexible citizenship, residency, visa requirements, • overseas voting rights, • Association, representation (advisory councils CoO, consultations CoD)

• Integration (local level)• Public service provision (CoO + CoD) • Information, orientation, referrals• Communication campaigns• Collaboration between local authorities, CSOs, service providers, migrants

IOM 3Es approach (cont.)Engage

Purpose of the Research Methods/Outcomes

Understand the perceptions of diaspora actors about their engagement in development

Qualitative Approach• Willingness to engage, nature of engagement, perceptions of countries of origin/residence, motivations

Construct Diaspora Profiles

Quantitative Approach• Size and spatial distribution of diaspora, socioeconomic / demographic / migratory profile, inventory of associations, major destinations…

Develop strategies for diaspora outreach, capacity building or mobilization

Qualitative & Quantitative Approaches• Number and characteristics of associations;; organizational characteristics and difficulties;; preferred communication channels;; most effective ways of communicating

Understand• Map• Profiles

Reaching out• Build trust• Dialogue• Outreach campaigns

IOM 3Es approach (cont.)

Empower• Networking, funding, capacity building• Facilitating the transfer of skills and resources

• Skills transfers (TRQN/MIDA)• MIDWEB – Western Balkans • 71 Temporary assignments • universities, private businesses, NGOs, public sector

• Health – Sierra Leone (details to follow)

• Resource transfers / entrepreneurship (financial and/or technical assistance)

• Matching schemes • Humanitarian sector

EMPOWER DIASPORA-­ Case study from Sierra Leone

Free Medical Services • Provided high skilled health service to rural Sierra Leone• 150 Surgical Cases• 48 Dental Services • 45 Dermatology/ General medical services

World Diabetes Day Campaign 2017• Screened178 local residents of health conditions, BMI, Hypertension(HTN) , Fasting blooding Sugar Level (FSL).

• 88.8% of screened residents were giving health consultation.

Strengthening Sierra Leonean National Health Care Capacity through Diaspora Engagement

Sensitization to local health worker/ citizens in SL• Provided health information

• 200 nurse • 350 school children • 50 local authorities personnel

Outreach Activity • Provide several services 6 rural Peripheral health unit (PHU) • Renovation to 3 PHU• Provision medical services• Support delivery • ANT care

Strengthening Sierra Leonean National Health Care Capacity through Diaspora Engagement

EMPOWER DIASPORA-­ Case study from Sierra Leone

WHAT IS iDIASPORA?

iDiaspora:Is a community driven digital venue, facilitated by the IOM, designed to empower diaspora engagement in the 21st century;;

Will provide interactive access to global connections, content and commentary on diaspora engagement;;

Is an evolving space and will actively seek to develop an emerging portfolio of products to facilitate diaspora engagement.

Diaspora engagement TOOLS

Lessons learnt1) Without knowing who your diaspora is it is not possible to promote diaspora financial investments

Concerning implementation of mapping exercises:• Objective of the mapping should be clear and well thought• Need for outreach campaigns to take place before the mapping exercise begins in order

to sensitise the target population• Low levels of organization among diaspora can hinder the mapping process itself• Need for specific measures to reach ‘invisible’ or marginalised groups within diaspora in

order to avoid re-­enforcing unequal power dynamics within communities• Need for validation of results o f mapping with diaspora community• Need to ensure confidentiality of respondents• Importance of having a clear plan for how the information collected will be used in

concrete programmes to avoid ‘survey fatigue’

2) Building TRUST is another building block to develop successful diaspora investment programmes

3) Diaspora should be seen as PARTNER and consulted throughout the process of developing new programmes

Q&A

Questions can be submitted via the Chat box. You may submit your questions at any time during the presentation

To ensure questions is seen by the moderator, select “All participants” from the dropdown menu when sending the question

Feel free to contact us at

Abdelkader Benbrahim a.benbrahim@afdb.org Leon Isaacsleon.isaacs@developingmarkets.comClaudia Natali

cnatali@iom.int

Thank You!

www.mfw4a.org