A Systematic Approach to Supporting Diaspora Investment

As members of the Remittances Donor Working Group (R-DWG), DMA and IOM have been asked to develop this study proposal, which aims to assess the potential for donors to support productive diaspora investment into Africa.

BACKGROUND

Diasporas are growing: Over the last 45 years, the number of people living outside their country of origin has almost tripled, from 76 million to 215 million (IFAD 2015).  Africa has one of the largest global diasporas and one that continues to make a significant contribution to the continent’s economic development through the transfer of skills, socio-cultural influence and, not least, through the sending of remittances, which are transferred in vast volumes, largely to cover day-to-day consumption and emergency needs. The World Bank estimates that formal remittance flows to Sub-Saharan Africa, alone, will reach USD $34 billion in 2015.

Given the significant economic power of the African diaspora (with an estimated $40 billion in savings) and its strong cultural and economic links to the continent; governments, companies and community groups are increasingly turning to the diaspora as a source longer-term investment capital.

The idea of putting diaspora capital to more productive use and funding long-term economic growth at the macro level is, unsurprisingly, one welcomed by donors. Numerous initiatives, using a variety of modalities, have enjoyed the support of donors and other stakeholders in trying to harness diaspora capital, though not all could be qualified as being successful in their outcomes.

One of the challenges facing donors is in understanding where their support might most effectively be directed. To date, there has been no attempt to develop a systematic approach for understanding diaspora investment, its modalities, the viability of interventions and the best means for coordinating diaspora investment programming on a national level or between donors.  There are stark differences between African countries, both in terms of the profile of their diaspora, as well as in the in the enabling environment on the ground (from a political, regulatory and economic perspective) for attracting overseas investment and for ensuring that it can be directed towards productive use.

The R-DWG has recognised the importance of developing a systematic assessment method for informing effective programming at the national level and between donors. It is in this vein that this study proposal has been developed.