Diaspora Investment in Developing and Emerging Country Capital Markets: Patterns and Prospects

  • Nov 10, 2010
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A growing body of evidence suggests that diasporas play a critical role in supporting sustainable development by transferring resources, knowledge, and ideas back to their home countries, and in integrating their countries of origin into the global economy. Financial flows from migrants and their descendants are at the heart of the relationship between migration and development.

While remittances have important effects on financial development, diasporas also hold substantial financial assets beyond their current income—for instance, in savings and retirement accounts, in property, debt, and equity. While remittances tap the incomes of migrants, this report argues that the greater challenge is to mobilize the wealth of the diaspora.

Capital markets perform precisely this function, mobilizing savings and channeling them to productive investment. Two U.S. government agencies—the U.S. Agency for International Development (USAID) and the Overseas Private Investment Corporation (OPIC)—have the potential to support diaspora investment in their countries of origin through risk reduction: USAID by focusing on lenders in the country of origin, and OPIC by focusing on diaspora investors who are U.S. citizens. This report describes five additional vehicles that have been used to mobilize diaspora wealth via capital markets and explores the potential of several additional options that could be considered in the future.

Source: By Aaron Terrazas

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