Diaspora Finance Powers Global Development

AS IT IS 2015-12-14 Diaspora Finance Powers Global Development

Luis Lopez-Ramirez, a 30-year old Honduran immigrant, makes pizza.

He has worked two jobs over 16 hours each day.

He carefully saves his money and rents a small room in Washington, DC.

He sends money back to Honduras to pay for the education of his two sons, whom he talks to every week by phone. He says he hopes to bring them to the U.S. to live with him one day.

The money he sends home also bought a small house in the village of Santa Barbara, Honduras. He will return some day, he says, and start a business.

But he left Honduras because the economy is terrible and wages are very low.

“One pizza with all the toppings is the same price as one or two weeks of pay in Honduras,” says Lopez-Ramirez. 

The money he sends back to Honduras is an example of remittances¹. Remittances help build the economies of poor countries. And it can lessen³ the burden on government aid programs.

Experts say that these remittances, or diaspora finance, can fuel growth and create jobs in the developing world.

Diasporas finance fuels global growth

Diasporas have “not only powered the development of the United States, but also hold the potential for transforming countries around the world,” reports the U.S. Agency for International Development (USAID).

That money has a huge impact on global economics. The diaspora sends 16 times more than official U.S. development assistance, or $581 billion in remittances around the world every year.

If the global diaspora were its own country, it would be the world’s fourth-largest nation, according to USAID. There are about 230 million people who live outside their country of origin, including legal as well as illegal immigrants.

Here’s an example of how diaspora finance works on the local level: Isis Salmerone, a 26-year old Salvadorean immigrant in Maryland, has lived in America for six years. She worked with the Latino Economic Development Center (LEDC) to raise $11,000 from the local Salvadorean community and other local residents.

Last month, she and a group of non-profit leaders and Salvadorean immigrants in Maryland travelled back to El Salvador and donated the money to a hospital in Morazan, El Salvador’s poorest region. 

One-third of the population is foreign-born where Salmerone lives outside of Washington, D.C. Salvadoreans represent the largest group of those immigrants, according to Maryland’s Department of Legislative⁴ Services.  

Support from the U.S. and World Bank

The U.S. State Department is promoting diaspora finance for international development. “We’ve gone from an era where power lived almost exclusively in old establishment hierarchies⁵ to an era where power lives in networks,” says Secretary of State John Kerry.

The World Bank also supports diaspora finance. Mahmoud Mohieldin is the president’s special envoy⁶ at the World Bank in Washington, D.C. Dilip Ratha is head of the World Bank Migration⁷ and Remittances Unit.

They wrote that the remittances and savings⁸ of the diaspora are an “under-exploited resource.” It could play an important role in global development, they wrote. Throughout history, people have sought opportunity in other countries. And, they send money to family and friends back home.

Those who receive the remittances spend one-third on savings and investment, such as education, buying land or starting a new business. The remainder is spent on basic daily needs. 

“The challenge is to channel this income effectively,” the authors say. They wrote that remittances tend to be larger in poor and small economies, and “often provide the main lifeline in fragile or conflict-affected countries.” Diaspora funds can pay for health care, housing and businesses. 

Remittances have reduced poverty in countries like Ghana, Bangladesh and Nepal. They are a major source of funding in many African countries, according to the International Monetary⁹ Fund (IMF). African migrants send at least $40 billion in remittances to African nations every year.

Diaspora bonds to promote development

Mohieldin and Ratha advocate the use of diaspora bonds to promote international development. The bonds could be in small amounts, such as $1,000, and carry interest rates of three percent to four percent.

To succeed, diaspora bonds must be linked to development in places “where there is sufficient trust in government,” writes the World Bank authors. They should also be available to all investors¹⁰, not just migrant savers, and be distributed widely.

That would enable large sums to be used for development at “low, stable interest rates,” they write.

Some developing countries are already using diaspora bonds. Ethiopia, Kenya, Nigeria, Rwanda and Zimbabwe have issued bonds to their diasporas, according to the IMF.

Costs prevent remittances from reaching their full potential. Kanayo Nwanze is president of the United Nations Fund for Agricultural Development. He writes that “the average cost of sending money home has come down to below eight percent from 15 percent over the last five years.”

But in parts of Africa, costs can be above 12 percent. “Reducing these costs to three percent would put more than $20 billion annually¹¹ in the pockets of migrants and their relatives,” according to Nwanze.       

India has been a leader in the use of diaspora bonds. The Indian Diaspora Investment Initiative, launched in February this year, seeks to harness the funds of more than two million people in the Indian diaspora in the United States, reported Devex. Devex is a media platform for the global development community.

The Indian Diaspora Investment Initiative is a partnership¹² between USAID and the Calvert Foundation, part of an investment firm in Maryland. Investors can purchase investment notes, sold in amounts as small as $20. Anyone can purchase the notes, although they are marketed to the Indian diaspora community.

The notes will raise up to $10 million this year. The funds will be used to buy debt from Indian financial institutions, which will then lend to businesses in socially beneficial sectors¹³ like health, food security and education.

Manpreet Anand is USAID’s deputy assistant administrator¹⁴ in the Asia Bureau. He tells Devex that the Indian initiative is the first project of its kind, and represents “a new model of development in the agency.”

If the Indian model is successful, he says, “this can pave the way” and “be a model that is utilized¹⁵ in other countries around the world.”

Words in This Story

remittance² – n. the act of sending money as a payment for something

diaspora – n.  a group of people who live outside the area in which they had lived for a long time or in which their ancestors lived

potential – n.  a quality that something has that can be developed to make it better

transforming – v. to change (something) completely and usually in a good way

migration – n.  to move from one country or place to live or work in another

exploited – v.  to get value or use from (something)

opportunity – n. a place where people have many chances to succeed, achieve things, etc.

savings – n. a bank account in which people keep money that they want to save

channel – v. to send (food, money, etc.) to someone or something

income – n.  money that is earned from work, investments, business, etc.

bonds – n. finance : an official document in which a government or company promises to pay back an amount of money that it has borrowed and to pay interest for the borrowed money

harness – v.  to use (something) for a particular purpose

1 remittances   

n.汇寄( remittance的名词复数 )；汇款，汇款额

参考例句：

• He sends regular remittances to his parents. 他定期汇款给他父母。 来自《简明英汉词典》
• Remittances sometimes account for as much as 20% of GDP. 在这些国家中，此类汇款有时会占到GDP的20%之多。 来自互联网

2 remittance   

n.汇款，寄款，汇兑

参考例句：

• Your last month's salary will be paid by remittance.最后一个月的薪水将通过汇寄的方式付给你。
• A prompt remittance would be appreciated.速寄汇款不胜感激。

3 lessen   

vt.减少，减轻；缩小

参考例句：

• Regular exercise can help to lessen the pain.经常运动有助于减轻痛感。
• They've made great effort to lessen the noise of planes.他们尽力减小飞机的噪音。

4 legislative   

n.立法机构，立法权；adj.立法的，有立法权的

参考例句：

• Congress is the legislative branch of the U.S. government.国会是美国政府的立法部门。
• Today's hearing was just the first step in the legislative process.今天的听证会只是展开立法程序的第一步。

5 hierarchies   

等级制度( hierarchy的名词复数 )； 统治集团； 领导层； 层次体系

参考例句：

• That's a trip of two hierarchies. 那是两个领导层之间的互访。
• Hierarchies of authority, spans of control, long-range plans, and budgets. 等级森严的权力机构，控制范围，长期计划，预算。 来自英汉文学 - 廊桥遗梦

6 envoy   

n.使节，使者，代表，公使

参考例句：

• Their envoy showed no sign of responding to our proposals.他们的代表对我方的提议毫无回应的迹象。
• The government has not yet appointed an envoy to the area.政府尚未向这一地区派过外交官。

7 migration   

n.迁移，移居，（鸟类等的）迁徙

参考例句：

• Swallows begin their migration south in autumn.燕子在秋季开始向南方迁移。
• He described the vernal migration of birds in detail.他详细地描述了鸟的春季移居。

8 savings   

n.存款，储蓄

参考例句：

• I can't afford the vacation,for it would eat up my savings.我度不起假，那样会把我的积蓄用光的。
• By this time he had used up all his savings.到这时，他的存款已全部用完。

9 monetary   

adj.货币的，钱的；通货的；金融的；财政的

参考例句：

• The monetary system of some countries used to be based on gold.过去有些国家的货币制度是金本位制的。
• Education in the wilderness is not a matter of monetary means.荒凉地区的教育不是钱财问题。

10 investors   

n.投资者，出资者( investor的名词复数 )

参考例句：

• a con man who bilked investors out of millions of dollars 诈取投资者几百万元的骗子
• a cash bonanza for investors 投资者的赚钱机会

11 annually   

adv.一年一次，每年

参考例句：

• Many migratory birds visit this lake annually.许多候鸟每年到这个湖上作短期逗留。
• They celebrate their wedding anniversary annually.他们每年庆祝一番结婚纪念日。

12 partnership   

n.合作关系，伙伴关系

参考例句：

• The company has gone into partnership with Swiss Bank Corporation.这家公司已经和瑞士银行公司建立合作关系。
• Martin has taken him into general partnership in his company.马丁已让他成为公司的普通合伙人。

13 sectors   

n.部门( sector的名词复数 )；领域；防御地区；扇形

参考例句：

• Berlin was divided into four sectors after the war. 战后柏林分成了4 个区。 来自《简明英汉词典》
• Industry and agriculture are the two important sectors of the national economy. 工业和农业是国民经济的两个重要部门。 来自《现代汉英综合大词典》

14 administrator   

n.经营管理者，行政官员

参考例句：

• The role of administrator absorbed much of Ben's energy.行政职务耗掉本很多精力。
• He has proved himself capable as administrator.他表现出管理才能。

15 utilized   

v.利用，使用( utilize的过去式和过去分词 )

参考例句：

• In the19th century waterpower was widely utilized to generate electricity. 在19世纪人们大规模使用水力来发电。 来自《简明英汉词典》
• The empty building can be utilized for city storage. 可以利用那栋空建筑物作城市的仓库。 来自《简明英汉词典》